FHFA Velocity TechSprint Explores How to Build a More Inclusive and Efficient Mortgage Ecosystem Through Technology

Mortgage fintech SMEs from First American and Docutech^® join the roster of participants who brainstormed innovative concepts that could revolutionize mortgage finance.

The Federal Housing Finance Agency’s (FHFA) 2023 Velocity TechSprint brought together fintech experts and other SMEs from throughout the mortgage finance industry to brainstorm innovative solutions for some of the industry’s most common challenges. Read our conversation with four First American and Docutech team members who shared their knowledge and experience to ideate technological solutions capable of transforming the mortgage process, shaping risk mitigation, and driving innovation in product offerings.

Q:  FHFA brought together experts and practitioners from the technology and mortgage finance sectors to take part in proposing solutions for reducing mortgage costs and delivery times while creating a more inclusive and transparent process. Describe the variety of backgrounds that the participants in your group brought to the table. How do you think the makeup of your group influenced your solution or discovery process?

Janelle: The group that I was assigned was made up mostly of individuals with a product background, but also someone who represented a very small lender, and someone who had years of experience in a big lender shop. We did not have a technology/development resource. As a result, our concept was less technical and more product-driven, although there was a strong tech and data use component.

Kenny: I knew that coming into this, I was going to learn a lot from all of these people because, from our technology perspective, we’re not interacting with people using the product daily. We see bits and pieces of what we’re trying to solve, but we rarely see the whole picture. What I took away from this was that if we from the technology team can sit with the user to understand their experience better, we can supply a better solution. As for our group, I think it gave us a lot more context for the problem we were trying to solve.

Parker: We definitely had a wide variety of backgrounds in our group, which really helped evolve our ideas and concept. There was a woman on our team who had created a company that takes data from the mortgage industry and applies machine learning to it for use in the industry. Some of the data she had available showed how many people applied for mortgages and how many were denied. This data ended up being what we built our case from.

Q:  How did the organizers frame up the jumping-off point of this project for you?

Brian: We were provided multiple personas for borrowers and several types of lending institutions, as well as five different problem statements to help spark our discovery process. They dealt a lot with data and how data is used and sometimes misused. Although the problem statements were meant to start us thinking, we were also encouraged to open our conversations up and consider the challenges we see and experience as experts in the industry.

Janelle: We also started off the week with John Hope Bryant, CEO and Chairman of Project Hope, as the keynote speaker, who was phenomenal and so enlightening and inspiring. He talked about the ways in which disparities exist in our current mortgage system, and how that affects lenders and their borrowers. For example, as new technologies emerge, they’re not always accessible to smaller lending organizations, which impacts the underserved populations who largely rely on these smaller institutions. When those lenders have limited access to certain technologies, it ultimately limits those potential borrowers as well.

For our group, the keynote address really planted the seed for the solution we ultimately presented.

Q:  Tell us about your group’s presentation. What were you trying to achieve with your idea?

Brian: It was interesting to see how pervasive a lack of trust towards data is in this industry. Our group determined that data gathered upfront for a particular borrower was verified and reverified through every step of the process. Even when you get into the secondary market and the buying and selling of that loan, data is reverified again and again. Even after the loan is complete as far as the borrower is concerned, we're still losing money on the back end because we're reverifying the data that should have been verified confidently upfront and then trusted all the way through the process.

So, we brought forward a solution that would be a secure repository for borrower data that could be trusted and reused throughout the life cycle of a loan, thereby eliminating the cost associated with reverifying the data over and over again. Mechanisms would be put in place to verify the data up front, without relying on the loan officer or an LOS (Loan Origination System) to get the data correct. Then the data would be sealed in our repository with a seal verifying that the data could be trusted.

Janelle: Our concept was a new take on renovation lending programs. With the housing supply shortage across the U.S., many borrowers are looking to build new or renovate existing homes that are not up to modern standards. The problem with current renovation programs is that often the people who need them most don’t know they exist, and the process can be overwhelming.

We created a renovation portal that brings all the pieces for the borrower in one place. First, they can search for properties that meet the guidelines for current renovation programs. Once a property is selected, they can indicate what projects they want to tackle, and get estimated costs. From there, the portal provides an output of purchase price, renovation cost, total investment, estimated after-renovation value, and estimated monthly payment.

Once the property is identified and the project list is dialed in, the borrower can connect with HUD-approved contractors, lenders who offer renovation programs, and a search engine for grants and down payment assistance programs, all via the portal.

Kenny: Funds for first-time buyers' down payment pose a major challenge due to a lack of awareness about available assistance programs and complexities in the application process. Additionally, program availability and lender qualification hurdles hinder borrowers' access to funds.

Our solution addressed these obstacles. We proposed an exchange that consolidates program information, simplifies applications, and ensures real-time visibility into fund availability. Borrowers can enter their details to discover qualifying programs, while lenders can verify their eligibility. Integration with awarding organizations streamlines the process. Once a borrower applies, funds are reserved pending approval.

This exchange would also proactively engage users on platforms like Zillow and Redfin. For instance, a firefighter searching for homes could receive a prompt, "You qualify for assistance programs in X county. Interested?"

Importantly, our concept has the potential to expand beyond mortgages to support various assistance programs.

Parker: So, we headed down a completely different route for the majority of the first day, but then we started looking at the data our team member brought in. That’s when we came up with this concept of how we can help people who were denied a mortgage so that they can ultimately reapply and get approved.

Currently, when you're denied a mortgage application, you’re sent an adverse actions letter that tells you why you were denied in a very cryptic form. In its current form, it’s not a very helpful letter.

Our idea was that in addition to sending the adverse actions letter, lenders would also provide information to help the borrower remediate the issues that led to their denied application.

Q:  Parker, your group received the FAST award. Congratulations on that honor! What do you think stood out to the judges about your solution?

Parker: I think it was the fact that we tied directly into a process that is already in place today. The adverse action letter is something that lenders are already required by law to send to everybody they deny. The mechanism by which we would get our information out there already exists, so really all that would be needed is to create the website, which we knew we could do quickly. All that would be required of the lenders is to include a link or URL that directs the applicants to our website.

And the letter doesn’t necessarily need to direct applicants specifically to our website. If the lender provides more information than they’re currently sending, that would achieve the goal. We just felt that the solution would be more easily implemented if all the lender had to do was direct the applicant to a site that we built.

Q:  What do you think was your strong point? What did you bring to the table that you thought was unique to your experience?

Parker: My impression was this was going to be a hackathon, so with my IT background I thought I was going to bring all kinds of value. In hindsight, it was less of a hackathon and more of a creative brainstorming. I thought I wouldn’t have as much value to bring to the table because of that, but instead, I think my biggest contribution was just continually asking questions. Like, “What do you mean by that” and “What is this” and “How can that help us?”

I think that helped get everybody on the same page because we were constantly making sure we were all talking about the same thing. Basically, if they were able to explain it to me then, that meant everybody else in our group would be able to understand it. I was in the best position to speak up and ask for clarification, which I think ultimately benefited the whole group.

Q:  Did you go into this experience with a particular goal or mindset – were there any shifts during/after?

Janelle: I expected to have a great opportunity to interact and collaborate with smart people on emerging technology in the mortgage space and was not disappointed. What I didn’t expect, and which became my biggest takeaway, was the challenge to “do good work” in the mortgage industry. The opening keynote of John Hope Bryant really set the tone, and the passion of the entire room after hearing his remarks was palpable.

I had a greater appreciation of the needs of the “invisible,” individuals who are not represented in common data sets. I understood how demographics that are different than my own struggle with financial literacy. It opened my eyes to how owning a home is a critical component to accumulating wealth in the U.S., and how some people have greater hurdles to overcome to achieve that. I have already started looking at ways to incorporate that fire that I walked away with into my day-to-day work.

Q:  Final thoughts?

Kenny: I would encourage anyone who’s interested in getting out of their comfort zone to apply for this TechSprint. I came in as the only tech person in my group, not knowing anything that my teammates were talking about. But ultimately, I came away with so much knowledge about this one product, and all in just a couple of days. It's a great learning opportunity and an eye-opening experience.