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FANNIE MAE AND FREDDIE MAC JJAN.U- AFERBY. 22001188
As Congress struggles to address housing nance reform, technology advances in the space are preceding full steam ahead. Big data and arti cial intelligence (e.g., machine learning) are improving a lender’s ability to perform a credit analysis for “thin le borrowers.” The appraisal process is being automated, allowing for periodic updates of collateral properties over time. Digitization and the eventual integration of blockchain’s digital ledger technology and smart contracts will streamline the application and loan servicing process, making eMortgages nally a reality and enhancing the borrower experience.
Blockchain technology will also fundamentally change the way mortgages are sold in the secondary market. Smart contracts will streamline how Master Servicers Agreements, Investor Contracts, and Pooling and Service Agreements inform these securities, adding ef ciency and speeding up settlement times. Mortgage servicing rights will be traded more quickly—enhancing the market’s liquidity—as a result of the blockchain’s transparency.
Blockchain technology is expected to reduce the transaction time throughout the mortgage value chain by 25%—from 40 days to 30. After a national blockchain-based title registry is in place, the transaction time is expected to fall an additional 25% to 20 days. The blockchain is also projected to reduce lenders’ operational costs, fees and fraud expenses an estimated 20 basis points, according to Synechron.
Congress appears to be busy “looking in the rearview mirror” in addressing reform housing nance and ignoring the changes—and ef ciencies—that digitization is bringing to the table
for housing nance. (Federal Housing Finance Agency Perspectives on Housing Finance Reform, Jan. 16, 2018; Representative Hensarling Lays Out Principles for Housing Finance Reform, Chairman Jeb Hensarling, Dec. 6, 2017; Draft Corker Warner Bill, Version 29, with Josh Rosner comments, 01/29/18; Towards a New Secondary Mortgage Market, Milken Institute, Michael Bright and Ed DeMarco, September 2016; GSE Reform: Creating a Sustainable, More Vibrant Secondary Mortgage Market, Mortgage Bankers Association; GSE Reform Principles and Guardrails, Mortgage Bankers Association; An Open Letter to Congress on GSE Reform, Mortgage Bankers Association, 02/13/18; Towards a New Secondary Mortgage Market, Milken Institute, Michael Bright and Ed DeMarco, September 2016; A More Promising Road to GSE Reform, Urban Institute, Jim Parrott, Lewis Ranieri, Gene Sperling, Mark Zandi, and Barry Zigas, March 2016; FHFA’s Administrative Reform of Fannie Mae, Freddie Mac, and the Housing Finance System, Congressional Research Service, May 23, 2016; Normalizing the Federal Reserve’s Balance Sheet and Its Impact on the MBS Market, Urban Institute, Laurie Goodman and Bing Bai, November 2017; U.S. Housing Finance Reform: Why Fix What Isn’t Broken,
Libby Cantrill, Michael Cudzil, Danield Hyman and Kent Smith, February 2018; American Affairs Journal, Dean Barker, Volume II, Number 1, Spring 2018; Disruption Report, Can eld Press, February, 2018)
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