September 18, 2023
I have a very special guest today. Jason Cave is Deputy Director of the U.S. Federal Housing Finance Agency, leading its Division of Conservatorship Oversight and Readiness and serving as Chief Fintech Officer. In the latter role, he oversees its Office of Financial Technology, or OFT. We at AIR have had the opportunity to work with Jason and his team over the past year, culminating in July with the convening of the first-ever FHFA TechSprint. That event tackled the enormous question of how technology could improve the mortgage process for borrowers and lenders alike.
Mortgage lending is the most heavily regulated aspect of consumer finance, because for most people, a mortgage is both the largest and most complicated financial undertaking they will make. It’s the one in which people typically have the most at stake, and in which the most serious things can go wrong.
It’s also the consumer loan that can be most transformative, for families pursuing the fabled “American dream” of owning their own home. Over the decades, the United States has built a massive array of programs and infrastructure to promote homeownership and to protect homebuyers, including federal loan guarantees and mortgage insurance, loan subsidies, barriers against discrimination, regulation of numerous types of market participants, affirmative encouragement of mortgage lending by banks, and the creation of a government-sponsored secondary mortgage market.
The FHFA regulates that secondary market, overseeing Fannie Mae and Freddie Mac, which are the two huge Government Sponsored Enterprises, or GSEs, that dominate it. Both institutions were placed into conservatorship under the FHFA in 2008. As the regulator of both enterprises, and also of the 11 member Federal Home Loan Bank system, the FHFA plays an enormous role in shaping America’s mortgage market. No one is better positioned to explore new ways to make that marketplace work better.
FHFA Director Sandra Thompson created the Office of Financial Technology last year to do just that. Nearly its first order of business was to plan the TechSprint that came together in July. For listeners who may not know, a TechSprint is basically a regulatory version of a hackathon, bringing together regulators and subject experts with technologists to identify difficult problems and identify potential technology-enabled solutions. We at AIR have put on about 20 of them in our four years of operation, and were able to support the FHFA on its Velocity sprint this summer.
Jason and I had an opportunity to sit down and talk about it, and more broadly about the Office of Financial Technology, a few weeks later. In our conversation, he describes the goals of the OFT, how it’s organized and staffed, and the work it has undertaken to date. He also talks about the TechSprint — the problem statement we tackled, the kinds of people who came together, the formation of competing teams, some of the exciting learnings, and next steps. He shares highlights of some of the events that surrounded the TechSprint week, which included hearing from distinguished speakers like FHFA Director Thompson and Operation Hope president John Hope Bryant. And he talks about the outcomes, including the three winning teams selected by the sprint’s distinguished panel of judges. Those judges were: Chris Brummer, Professor at Georgetown Law; David Coleman, President of Mortgage Industry Standards Maintenance Organization (MISMO); Delicia Hand, Director of Financial Fairness Advocacy at Consumer Reports; Melissa Koide, CEO of FinRegLab; Steve Majerus, CEO of Synergy One; Faith Schwartz, Founder and CEO of Housing Finance Strategies. Our own David Ehrich, AIR’s Co-founder and Executive Director, served as moderator.
As Jason explains, the mortgage market is ripe for tech modernization. The little overview of the ecosystem that I mentioned above gives only a miniscule sense of its complexity. I could have written a whole book about the huge range of lenders and lender types, loan brokers, loan types, securitization activities, federal and state financial regulatory bodies, federal and state housing agencies, trade associations, financial counseling agencies, and related entities and professions like real estate agents, title companies, property insurers, and appraisers, not even to mention the GSEs and the Federal Home Loan Banks. It's a system that has grown up over decades and, I think nearly everyone agrees, is full of processes and technologies that are anachronistic in the digital age. Take a quick moment to watch this video that was made for the TechSprint, which outlines some of the challenges. It takes too long to close a loan. It’s too expensive — loan origination costs have doubled. America’s racial homeownership gap is still where it was 50 years ago. That, in turn, is a barrier to intergenerational wealth-building for people of color. Many creditworthy people have trouble getting loans. The whole system is still paper centric, which means slow and expensive. As the video puts it, the mortgage world is “stuck in the past.” We can do better.
Jason Cave is Deputy Director, Division of Conservatorship Oversight and Readiness/Chief Fintech Officer at the U.S. Federal Housing Finance Agency. He joined FHFA in November 2020 and leads activities related to the agency’s conservatorship of Fannie Mae and Freddie Mac, as well as FHFA’s Strategic Plan, He also leads its Office of Financial Technology.
Previously Cave served in various roles at the Federal Deposit Insurance Corporation (FDIC) over 27 years, including as Senior Advisor to the Chairman and most recently as Senior Advisor to the Director of the Division of Complex Institution Supervision and Resolution. Cave helped establish the precursor to that Division, the Office of Complex Financial Institutions, which was created to administer new systemic resolution authorities including living wills.
Cave has been an active participant in international policy and supervision initiatives and has been a member of the Basel Committee on Banking Supervision, where he negotiated the post-crisis reform package known as Basel III. He also served as Chairman of the Basel Committee’s Task Force on Simplicity and Comparability, which introduced key safeguards into international capital standards.
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