On July 18, the Federal Housing Finance Company (“FHFA”) introduced the launch of a brand new Workplace of Monetary Know-how with the objective of advancing efficient threat administration because it evaluates fintech developments within the housing finance house.  The FHFA additionally issued a request for info (“RFI”) searching for public enter on how you can facilitate accountable innovation, determine boundaries or challenges to implementing fintech into housing finance, help fairness for owners and renters, and improve effectivity and effectiveness within the compliance and regulatory processes.  Within the introduction to the RFI, the FHFA famous President Biden’s March 2022 govt order.  Whereas the chief order targeted on cryptocurrency and digital belongings, it additionally extra broadly directed businesses to take concrete steps to review and help technological advances and promote equitable entry to protected and reasonably priced monetary companies. 

Comparable monetary expertise workplaces have been established by different monetary regulators, together with the Workplace of the Comptroller of the Forex, Federal Deposit Insurance coverage Company, and Shopper Monetary Safety Bureau.  The FHFA indicated that its new Workplace of Monetary Know-how will:

• Help the Company in creating methods for FHFA’s regulated entities to advance housing finance fintech and innovation in a protected and sound, accountable, and equitable method;
• Interact with market individuals, trade, nonprofits, shopper teams, and academia to facilitate the sharing of finest practices of housing finance fintech and innovation;
• Set up ongoing outreach by way of the regulated entities, selling consciousness and understanding of housing finance fintech and innovation;
• Facilitate interagency collaboration with different regulators to allow info sharing and partnership alternatives; and
• Function an Company useful resource for improvements, normal developments, and rising dangers in housing finance fintech.

Within the RFI, the FHFA famous the dramatic progress of fintech throughout the mortgage trade, and recognized technological advances, together with synthetic intelligence (“AI”) and machine studying, distributed ledger expertise, and good contracts which might be altering housing finance in each the first and secondary markets. 

The RFI focuses on 4 areas:  (i) the function of fintech within the ecosystem during which residential mortgages are originated (or “mortgage tech”), (ii) the function of fintech within the secondary market, (iii) the dangers related  with the usage of fintech, and (iv) the appliance of fintech to compliance and regulatory actions (or “regtech”).  It additionally solicits suggestions on how you can maximize stakeholder engagement.  The FHFA seems to share the CFPB’s considerations that the usage of expertise within the mortgage trade could current honest lending threat.  Within the RFI, the FHFA states that “[t]he opaque nature of some fintech strategies similar to synthetic intelligence and machine studying highlights the necessity to guarantee applicable compliance measures are taken to mitigate the danger of violating honest lending legal guidelines.” 

The institution of the Workplace of Monetary Innovation and the RFI seem to current a chance to interact with the FHFA on the technological developments which might be driving the trade.  Within the RFI, the FHFA confirms the regulatory considerations concerning the usage of AI and identifies a number of classes of threat, together with insufficient regulation of the fintech sector.  Nonetheless, the FHFA additionally acknowledges the efficiencies and developments fintech gives in mortgage origination, servicing, and capital market actions and the transparency that expertise can deliver to the client expertise.  (A current dialogue of the usage of AI in underwriting shopper loans on the Shopper Finance Monitor Podcast could be discovered right here.)

The deadline to submit feedback in response to the RFI is October 16, 2022.

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