Fannie Mae, Freddie Mac data should be public, trade groups say

Stakeholders in the mortgage industry have started weighing in on the Federal Housing Finance Agency's request for information on fintech in the housing industry.

Thus far, the Mortgage Bankers Association, the Community Home Lenders of America and the Housing Policy Council have made their commentary public, presenting lofty demands from the FHFA. While the CHLA emphasized concerns over the potential Black Knight-ICE merger, the other two organizations advocated for the open sharing of data from the government-sponsored enterprises. 

The Mortgage Bankers Association in its letter  to FHFA's Director Sandra Thompson argues that Fannie Mae and Freddie Mac, two entities that the FHFA oversees, should make its data, including appraisal data, available for public viewing when building out its Office of Financial Technology.

The letter notes that the "analyses of this rich appraisal data have provided the GSEs with insights" and that "recent initiatives around appraisal waivers and desktop appraisals are based on insights gleaned from evaluation of these large datasets."

The MBA questions whether "greater innovation may have occurred had other organizations been permitted to analyze the appraisal data that is currently restricted to the GSEs."

"Further innovation will be greatly constrained without access to the data held by the GSEs." the letter said. "Too often the GSEs have used concerns about the release of personally identifiable information" as a reason not to release data.

The Housing Policy Council, which represents large mortgage lenders, voiced similar concerns in its letter, calling for the agency to "democratize" data held by the GSEs.

By doing so, private stakeholders can use the data to "build models and perform analytics to enhance and expand credit and operational risk capabilities" resulting in "reduced risks across the marketplace [and would] lower the cost of capital," HPC's letter said.

Additionally, the MBA said in its commentary letter that the agency "should be mindful of not inadvertently hindering innovation through choices made by its regulated entities."

Both the MBA and HPC noted in their letters that the GSEs play an important role in technology implementation in the mortgage industry, but that the enterprises need to work collaboratively with the industry " to ensure that solutions work beyond GSE-specific use cases."

Meanwhile, the CHLA, which represents small and mid-sized lenders, highlighted in a commentary letter its worries about a potential ICE Mortgage Technology and Black Knight merger, noting that it would negatively impact its members.

The CHLA pointed to click fees and "tying," a practice of mortgage service providers strongly pressuring a lender to purchase optional services, as harmful tactics that might be used more often if the merger goes through. The group called on the FHFA to ban both practices.

"Borrowers pay the price for practices like click fees and tying, which unnecessarily add to the cost of mortgage origination," CHLA's letter said. "The ICE/Black Knight transaction would enhance the ability of these entities to engage in such practices, because competitive alternatives would be significantly diminished."

In June, the CHLA called on the Justice Department to undertake a comprehensive antitrust review of the Intercontinental Exchange-Black Knight deal, looking for divestitures or even a denial of the transaction. No decision has been made thus far.

FHFA announced on July 18, 2022, the formation of the Office of Financial Technology and that it was requesting input on fintech in housing finance. The input period was originally set to close on October 16, but the FHFA announced last Friday that it is being extended to October 31.

Per a press release published by the agency, the extension will give stakeholders more time to provide feedback about the "current landscape of innovation throughout the mortgage lifecycle" and to identify challenges in implementing fintech in the housing finance ecosystem.