2022 DC FinTech Week Replay
good morning and welcome to Midtown Center I'm David Benson president and interim CEO of Fannie Mae Fannie Mae designed this building to Foster Innovation and collaboration they are built into almost every aspect of the architecture and design and that's one reason Chris Bremer and I thought this would be a great place to host day 2 of DC fintech what the other reason is it Fannie Mae believes Innovation and Technology are crucial for tackling America's most important housing challenges in today's housing economy affordable housing options are hard to find affordable apartments and homes are in short supply and our country has a lot more work to do and knocking down barriers to homeownership Face by black household and other underserved populations We Believe Innovation and Technology are essential to progress on all of these challenges and that's why Fannie Mae is continuously exploring how Innovation and Technology can make sustainable financing more accessible how they can make housing more fair and more Equitable and how they can make Housing Finance safer Sounder and stronger I'm proud that a number of Fannie leaders are participating in today's panels to share their insights but I'm even more proud that were able to be a convenient place for this amazing collection of world experts for myself I'm sorry I can't be with you in person but on behalf of Fannie Mae let me share my best wishes for a successful day I want to thank our co-hosts georgetown's Institute of international economic and the institute for financial markets I also want to thank everyone else who is participating or attending including representatives from the US Treasury fhfa the FBI the Federal Reserve the SEC International experts from the IMF venture capitalist diplomats technologist academic policymakers and finance leaders your work to democratize the dialogue about fintech infinite is Vidal finally let me think Chris brummer and the Georgetown University Law Center as we all know Chris is the creator of this event Chris thank you for everything once again have a great event every watch fight please welcome the host of DC fintech week 2020 to Chris brummer every year we try to change up DC pintek we want to make it special different venues different audiences over the course of the day we're going to have an amazing cast of international leaders coming from the European Union coming from the FED coming from the fhfa and there will be a very delightful mix of people from technologist to venture capitalists to crypto Engineers to housing specialist and civil rights activist mix them all together and hopefully nothing will blow up I just wanted to spend the first couple of minutes giving a shout out to a couple people who made this possible as people saw from yesterday and from the happy hour and all the other happy hour but I probably don't even know about that been happening and will be happening over the next couple days in the city I really does take a village to have this kind of conversation here as just been instrumental to to getting this work done over at the Georgetown Institute of financial markets it's a bit different today so I can get my coffee finished Ahmed from my team over to Il has been instrumental working weekends and nights literally last night I was emailing Camila you know at 3 in the morning you have a Mariana Mariano another one of our critical people from Georgetown into has been working tirelessly Chris has been working just doing amazing work putting up with very annoying questions and probably answering too many of my questions more than once I did want to have a special thanks to Fannie Mae for really rolling out the red carpet. Every year we have worked over Georgetown with major institutional players in the city from the IMF to the bank for international settlements over in Switzerland we have teamed up with programming with the treasury Department with the cftc really many agencies and institutions and it's all been for a very simple goal how can we get different kinds of people from different ways of life just talked about and to democratize information about what's happening in our financial system and to make it accessible to everyone and it's your particular we've we've been very gratified by the reception the enormous interest by the press and for those of you in TV Land who may be watching thank you very much for the economy with red large there lots of challenges challenges that you'll hear a lot about from inflation to home prices to Falling asset prices in stock in other markets and the question is where does technology play a role either in terms of increasing access to housing where does it play a role in introducing instability where does technology work and Technology play helpful role in helping people climb the economic ladder those are the kinds of questions that we ask every year over at DC fan Tech week and every year we get different answers and part reflecting different points of the economic cycle just as a quick preview for how the day will unfold we're going to start off with a couple of experts dealing with really cutting-edge issues that will increasingly have an impact on housing markets and on general questions of access to Capital and access to housing will start off with a general conversation on the economy certain kinds of interdisciplinary dialogues dealing with what exactly does fintech and housing what what do they have in common and what does the economy mean for both of those sectors are there differences are there things that they share in common will then be moving on to cutting-edge Applications things like these decentralized identity and I were to how can we figure out new kinds of tools that allow people to open up credit boxes to be able to integrate themselves into the economic system using technologies that are quickly going from being experimental into being mainstream while the slew of policymakers who are also going to be speaking with you today we will have a direct or Sagar Thomas Thompson who's going to be talking about housing and Technology we're going to be talkin with ranking member Patrick McHenry who has a deep and long-standing interest in finance and housing we will be talking to a guy named Michael bar who just became the vice chair of the fed and the most important banking regulator in the United States and end arguably the most important banking regulator in the world and all along we'll be trying to keep in touch with innovators we're very delighted that Patrick Collison will be coming as far as the co-founder of stripe and fellow Irish citizen married McGinnis who just happens to be in charge of all Financial regulation in the European Union so we're going to the IP is coming through who are going to be generating Buzz news interest sharing their thoughts and I wish you all the best of day to offend text me where you get to have an up-close personal experience with really world leaders thanks so much for doing that I guess now we're on call our next panel or pray for Superstar panel to the stage with Gary Duvall Gary can come on up and introduced to his other fellow panelists who's now a partner at katten muchin and also all right when is my fellow panelists to come this is quite a beauty pageant I'm clearly not the most beautiful but it's okay so I'm very proud to be a trustee of ifm which is one of the sponsors of this event again like Chris like to thank Fannie Mae Georgetown law school obviously internet the according to the Institute of international economics and a my panelist so immediately I've got the golden Bo who's the lead emerging fintech I'm sorry he's the chief Economist of circle next to Gordon is is is Douglas Duncan Chief Economist senior vice president of Fannie Mae and then last but not least all the way down there is Cyndi Lee Chief and overall Economist I'm sorry she's the lead emerging fintech fed Reserve San Francisco and Cindy both came from San Francisco's that's great hop right into this event and by the way I also think I have time for this is their fifth year of Co sponsoring this event so very excited about that let's let's let's start looking at the crypto at as as a macro subject of the recent f stock report basically criticize crypto saying it's only out there for speckled the purpose is go90 you doing a new paper you're thinking about this what's your view on that topic I think that is quite a misleading view of even crypto today if you think about payment stablecoin flame sensor which is what Circle issues usdc the primary use case is for payment transactions these challenges that we face today tell me for instant payment there is a need for faster better more programmable The View. Even Pokemon silver coins are being used for speculative activities while that may be true but let's think about the Benchmark here payment system over the vast majority of payment transactions occurring are for financial purposes beside wire which process over one quadrillion dollars a year in volume only 3% of it is actually GDP for six trillion dollars a day of transaction volume only 2% of the odd is transactions supporting trade in goods and services is not a hundred percent of payment activities going through crypto having to be inspected it it's not even 50% is being non-speculative which I think we are getting there would not there yet but if you look at the amount of transactions are used for cross-border purposes and the amount of adoption that are being used for web three payments on emerging Commerce on the Block three platforms I think we're getting there really really quickly unless you remember the the opportunities here for really making an impact in financial inclusion for instance average is around 6% according to World Bank globally as high as in the team's percentage-wise now if you can save me from this religion calls that could do quite a bit of good to those hundreds of millions of Migrant workers not only in the US but globally report mrs. is the incredible amount of opportunity to actually reduce stress in the financial system by I'm bundling payments from Banking and by making quite a mediation services more market-based today we talked about housing and you know you're such a big important part of supporting the housing market but mortgages trying to maybe I could speak into this has already been War come out of ties being more market-based driven rather than strictly being thanked based I think the usage of distributed Ledger that usage of Poconos car payment stablecoins that usage of blockchain only fast in the process of separating all payments from banking I even with him back in separating out the credit component from the deposit service component a few seconds to give her views on the subject I called and I made a point of letting you know Staples points and the DLT technology has potential in terms of a reducing cost and the faster in a settlement time which I think is so probably the driver that has end of line a lot of payment sector Innovation including stable ponies September of 2022 and this year for many of the players in the feedback and crypto industry so we still need to look at National stability issues and looking at you know the reason Market turbulence I look at what those new data points and a lot off a new data points for us to look at when we look at the reason for example we talk about it when we prepare prepare for this club on the lunatera collapsed right so what is the right away from this and how do we look at 1 abilities are some of this the failure of civil Point projects that happened in the past it's just the recent 2 years or 3 years of a rising interest and activities that really resent her you know attention of regulators and media into their behavior so we not learn a little bit more new understanding you data points in a new renewed concern song a potential and ability that a lot of the ongoing quality paid and actually in the financial industry as well as anyone I've got you here and we'll talk about macro topics I'm curious whether you have looked at correlations between cryptos generally and how they're behaving in this inflationary environment and its potential recessionary environment I haven't dated and actually there have been a growing body of research by The Economist and other Economist that has well established that the correlation between colitis and it's for a size 7 in a major stock market indices has been on the rise so going back to 2017 if you're looking at the correlation between bitcoin price and S&P 500 like song called that was pretty close to zero today it has really increased to the lab of 0.5 / 0.6 territory
so which foot is very close with the traditional Financial access so looking back at the previous recessions and. Of financial distress that's exactly how different asset classes including Commodities in pounds have behaved so it looks like digital ask that just based upon in a reason that I start to behave more like traditional PSS in the financial markets crypto in the Housing Industry what's what's the impact and the potential impact might I add the the essential question for households is starts with industry discussion about Title Insurance that's typical of the place that most people go they say there's a lot to be saved because of the fees in the title insurance face that may be true overtime but there's three things that have to happen why does he have to be able to perfect the ownership and so if this is Doug's personal view is view I think you'd have to in the title insurance pays you to have to have the Supreme Court say as of date certain all prior claims are extinguished now you have perfected ownership of that of that title in that time. Then you have to be able to track and convinces so for example if you have a title somebody can place a lien on that you would have to track the placement of the lead in the extinguishment of that lead and then you'd have to monitor any complexities that go along with that now that's why I'm just picked on the title insurance face cuz that's typically the first place people go when they when they talk about that I should just stop right there because you're introducing DLT to keep track of these things you have to wipe out the past in isn't the past a problem every time you Grant new insurance or or have a title transfer potentially that that's true it would certainly make it easier though if you knew with certainty it would reduce the the the risk related to that asset if you knew with certainty that you can track its entire but you could also say you're as of this day we know it's a hundred percent correct but it may be built on a foundation this week I think four households in the mortgage space I will give you a personal example I it's a very complex process closed alone about a year ago and at the closing table there was an $8,400 error in the arithmetic of related to that so in your favor or more particularly for unbanked people or low income people who don't execute on those transactions freak 11 the business so I knew how to walk through that stack of paperwork was just still this big in order to get to that I think that represents an opportunity for technology in the housing space to to reduce that pack some things that you have to read and understand thinking about the unbanked I think the most important thing for them is what are currency is used whether there's a central digital current central bank digital currency or whatever legal tender is there typically those unbank folks and Laura and kin folks typically have fewer assets if you're saving so the certainty around that is a real a real important issue s low transaction course Gordon Gordon talked about the transaction class of remittances that seems to be a place that could be attacked successfully by technology and digitization liquidity. They're in our in our prep session going you were mentioning that in fact transaction fees the argument are in transaction fees may be somewhat misleading that even today the the the check agencies are actually quite popular despite the fact that people have viable Alternatives may be just so today many users I think 75% of users of payday lenders actually do have bank accounts the problem is they prefer to use payday lending for the faster transaction for the more immediacy and part of what you do circles trying to solve the immediate payment instantaneous payment which is you how can you provide services such as the simplest smartphone that can serve the broader public for uses such as closing a home outside. One of the things that the liquidity which the payday lenders provide sort of instantaneously is one of those key he thinks that we thought you talk about stablecoin and stable values that's something I think that's very important to low-income households who have less resources totally so be able to retain the valley of those very key to them and then isn't understanding it's not hard to understand what happens at at a Payday lender in that transaction easy to deal with no piles of paperwork and brought out a couple of good points about legal tender you know it is important for payment Sable point to have immediate convertibility to fiat currency which is your phone since you had cc is convertible 24/7 with a lot of liquidity to Fiat which I think is definitely important for that thing list transaction valkyr if you require to say pay fiat currency in addition I think the point of access Wall-E based systems could I should make huge improvements for instance 75% of USB C enable wallet hold less than $100 Which is less than the minimum required amount most banks these are the areas I personally think there could be an immense progress in terms of financial inclusion in terms of supporting human house it. I'm curious
cuz I think about the subject conceptually I think about this great distributed Ledger where you can you can have used into play a smart contract where you can a Tennessee Grant mortgages you can collect through payments on on on on The Ledger your accounting is is is is easy to follow you got this immutable why are those all pluses that that that that just make you a Fannie Mae or other agencies just not want to run out and somehow figure out how to get get get the mortgage process on unblocked the mortgage industry is not known for Innovation I've heard that the mortgage has been involved in the industry which I'm not going to say how many years that is but it's a wide just has never gotten traction all the way across the industry lots of relationship management issues still a significant parts of doing business in the mortgage industry other than the Regulatory Compliance issues that have to be managed there's not a conceptual reason that shouldn't happen but there are think there's north of 25 regulations that Pac mortgage processes and coming out of the out of the 2017 nine crisis we surveyed lenders and ask them where are you investing in technology and it was all in compliance when in theory from our perspective it should be improving efficiency and passing on savings to Consumers at that time it was Regulatory Compliance we have another study coming up probably next week or so on what they're doing now because it is fascinating so in terms of those compliance challenges adults in about data privacy adults about preserving fast within the year mortgage process what were the clients measurement and verification from paper documents to electronic documents so not a whole lot of cost Savings in fact in the in the early. Of changes employees who were applying technology to substitute for people were actually making paper copies and storing them file cabinets there's been progress on that obviously but I must much to go you know it and go on your head again you mentioned you're one of the interesting aspects of a blockchain distributed Ledger crypto is it it's actually am it again against the the the too-big-to-fail potential of a big bang mean to send that again part of the potential of the blockchain being a competition and not only driving efficiency on blockchain but driving efficiency in traditional banking institutions absolutely well seeing what happened during the great financial crisis which obviously was led by banks are too big to fail. Some of them did how to get bailed out and I think there is a real opportunity here by and bundling banking I'm part of that includes finding market-based approach that are building blocks thing perhaps to support important Credit Union relation activities such as mortgage transparency that it offers with the ability the boxing offers we could actually get you support mortgage if there's proper regulatory guardrails around it and clear it is rotten in this area is it on permission blockchains or is there a possibility you could be on permissionless block James best a plain vanilla in a public permissionless blockchain so you know you know it's raining Solana as a base layer a token that has supported a lot of defy project Maybe songs that Gordon you have a refer to in the thief I wore that would introduce some of this decentralised benefit it has their own utility is that this project will need to touch up on traditional Financial system and traditional financial institutions so players like a mortgage lender and I think the inevitable question is that how do you manage all sorts of risk how do you become blind how do you been at you know I P cyber all these challenges So to that extent there is a clear Advantage off of permission public blockchain or private blockchain to sulk about those challenges that I see you have a reaction I think there is a differentiation between permission versus permissionless versus getting kyc and getting compliant from A to B e n i a male perspective you could have came out compliance in the Premier League permissionless boxing Circle launch the variety which is a decentralized identity verification system that allows you to bring identity information to see if you look at your companies are doing data analytics CRM lots of the world they're doing the immense amount of tracing and tracking with great amount of information for AML compliance letting the concept of commissioned to be able to comply and I think that's a it is not a equivalence those two are separate I'm come back to always asking this question rhetorically which is what what is a use of a Gmail if you can only email other people with Gmail account which is the same reason why I think a permission list flashing but with proper graduate else with copper kyc could actually do quite a bit of good in the world how is this is Fannie Mae fully thinking about using blockchain technology we've run a couple of experiments on it to just to prove out the concept we looked at some Securities issues they've at this point it doesn't seem that the cost-effectiveness is there yet but the technological capability exists something that will continue to work on we're also have a working group this looking at the Central Bank digital currency to try to understand how that might impact the operations of the company where in our processes or in the product space that might have an impact so yeah we're trying to be to participate in the in the market is going from your perspective and I know you have a personal interest in this Central Bank digital currency is there a place for both Central Bank digital currency in privately issued stablecoins going forward absolutely I think there could be distance between the two the dirt different types of consideration I think it would just be too much of a list for government to buy a multi-decade type of technology which is why you do for private sector to innovate constantly upgrade robloxian is probably more preferable but yeah if he comes around maybe there could be but what if you just means that somebody has to act like somebody has direct liability of the Federal Reserve in which case we already have that sort of system with fat now except it's only restricted Banks so if you can open up access to the FED balance sheet by number and perhaps couple with that now that would exactly resemble a wholesale DC that could actually support more private-sector Allied efforts such as payment stablecoins today sometime. I have any by public sector players so a lot of matters I mean golden you mentioned previously about you know you know which one is about public formation is blockchain can I use C for the purposes of identity verification I'm sure there will be no need for that I'm sure there will be developers and Builders was thinking about some of the solutions which just for me as someone who has followed crippled, but I see that as being a very interesting part of the crypto I said ecosystem so Italian matters lot of moving pieces which will eventually change your view on the on the desirability and also how you know we really impatient to be consistent with a different solution colloid cyst and I know in your unofficial non-personal capacity can CBD seeds in in in private issue stablecoins coexist because so I see a cross-border of being a area where stablecoins probably have a lot of potential but across father is not in an area where public sector players cannot provide Solutions exactly 1 minute 20 seconds some final thoughts Gordon I think understanding this whole ecosystem of decentralized Finance blockchain how I could support housing we really should consider the opportunities to reduce risk to a market-based approach in addition to the risk that are currently being considered challenges for low income in first time home buyer buyers is the cost associated with the process and so lots of potential to reduce class Cindy also Wednesday that resonated with me from yesterday Spano is that the first question should be who are you trying to serve then the next the right to to solve the challenges that will help in the past them reach their life goal old animation thank you Doug thank you Cindy it's so nice to talk to you in a while and Chris get done a great job this year as always thank you everybody welcome welcome welcome come one come all at to one of the highlights of the day I am just absolutely delighted to welcome director Sandra Thompson to the stage she is the director of the fhfa I know we have some crypto people who may not necessarily be thinking about the fhfa but she is an innovator in her own right and is vital to this conversation so welcome to the stage all right so Sandra Sandra never want to get in trouble I guess we're going to kick it off with the question that I'm sure many of us are thinking about both the homeowners as well as people depressed what is your impression right now of the housing market what's what's what's what's going on and what are your views on challenging head winds right now I think the mortgage Market is experienced experiencing a lot of volatility Rising interest rates Rising home prices although the home prices this year are slowly declining through their increasing but not as good as a hot as a higher rate and you know people are not able to afford as much in a home as they could six seven months ago we are also looking at just Edwin's inflation we're looking at the other supply chain issues were looking at a huge deficit in the supply of Residential Mortgages and so we're looking at some challenging times right now when you think about policy and it in policymaking friends that you have been bedded and how you think about policy and terms of where the economy is going and end end really the risks and opportunities associated with the housing market in determining and seeing what not to do so we look at lots of different trans we look at you no interest rates we look at home prices we look at you know home availability we look at our supply we look at unemployment we look at just a number of different factors and we keep our eye on those metrics certainly and I we had the experience in the Great Recession of dealing with lots of issues in the mortgage Market Maiden just the reverberation of throughout the world was just so impactful but I do think that we've learned some lessons from there and in terms of policy-making know a lot of changes took place after the Great Recession now the ability to repay a lot of the products that were around and you know 06-07 are no longer around people are looking at their ability to repay their looking at full amortization and it's just quite interesting and I would say though that when the pandemic to place in 20 and 21 it did provide some challenges but it also provided some opportunities especially as it relates to technology interesting Lee enough when we look at the outstanding book for Fannie and Freddie and particular do many people took advantage of the low interest rate environment to refinance and so yeah the home payment has the highest monthly payment most people have and I think people in 2021 took advantage of the refinance opportunities to lower those payments so the credit quality of our outstanding book is probably something that I were not as worried about given the interest rate will get you mentioned technology and and has made a big policy announcement you know if you're seeing a new office really devoted towards towards Innovation and you know that I think was a bit of a surprise you don't usually served traditionally Associated Technology Innovation expressly with fhfa for the motivations behind the office what what would have prompted you to really focus and Bear Down on those dishes and we think about the mortgage industry is probably one of the industries that has not moved as quickly and adopting technology when you think about the time to close on average is about 45 days we look at the cost of closing it's relatively High think it's about $9,500 depending of course on lots of different factors but no there are a number of places where we think technology can be useful to try to reduce the cost and also reduce the time improve efficiency and bring risk management to the process and we just want to look at you know where can we affect you a technology in a responsible way throughout the mortgage process and it shouldn't take that long quite frankly I find really fascinating so number one you like in a fight and you talked a little bit about the fact that maybe the technology in the space in the housing market in the mortgage Market hasn't necessarily kept up to speed or whatever I decide to whatever indication that there has been if they'd maybe it hasn't delivered maybe in ways that we would have hope that you know why do you think you know it's taken awhile to put those two things together and for people to serve a recognized technology has as a potential pain point and solution and then also you know for the fhfa itself you know it's it's taking a while to actually go created it took to get their mortgage process itself is quite long and there are a number of stakeholders from start to finish and depends on where you finish so you got it all under right there is a known officers are realtors and appraisers in closers and title companies and even after the loan is closed and it's securitize you've got investors you got to do disclosures you just lots of data but there are lots of participants in the mortgage process and so you know you can come up with the technology but are those participants going to adopt the technology and then have a beautiful eyes on a widespread basis and so we've been looking at ways to work with Phantom Freddy to look at that every part of the mortgage process and I'll give you an example this was something that came up during the pandemic you know at the onset and nobody wanted to go into people's homes and as a person who refinance myself I didn't want to let the appraiser in my house and so you know there was just all this fear and these unknown factors that really have to do with just the mortgage process and how people focus and data focus it is and so when you think about this low interest rate environment it was really through the use of technology that we were able to keep the mortgage Market move and we introduced desktop appraisal the desktop appraisal process we introduced a couple even years before that date one certainty on appraised values and we also introduced a number of asset income verification models that would take information from third-party Houston and verify it against what you or worth of our place on the application so was a really good time to incorporate technology in a way that expedited the process and also provided some good risk management because you got third-party validation in many cases so what you do why I love person talking about housing and technology is next to money housing is one thing that everybody knows about right. I can either have money or you don't have money like even if you don't have money you know what money is you know what to do either have a house or or you don't any of you know you know what it is it's a very tangible sort of tactile thing and then when you get into to the question technology and Innovation you know it it it it it provides very clear kind of questions about use cases but you know I think that when fhfa gets involved in the conversation of of innovation it's it's a little bit different from you no conversation that we've been having with the SEC or with Kevin Benham yesterday or even the I can comptroller yesterday and and and in part of it is because of your Mandate of the FHA mandate much more so than other Financial Regulatory Agencies there is a kind of financial inclusion mandate or Lisa aspiration that's embedded in the core of the agency and you don't that's why you have that and it's only other regulars just inform how you think about technology does that create some kind of advantages in terms or different perspectives or disadvantages in terms of how you you think about what technology can can can do that really in forms of my are thinking in terms of policy formation and then a subset of that would be the utilization of technology in that policy formation for example one of the things that we think is very impactful and both Fannie and Freddie are doing this and I think even sha incorporating positive rental payments into the underwriting process and it's interesting because I'm not sure why it took this long to do that is certainly no based on your bill and willingness to repay so people been paying their rent for years and they're paying them on time and so that regular payment through with the nation of that payment is not taking into consideration because it's not a dead it's an expense and in every household at least I know and there may be exceptions to this statement but the mortgage payment and pay Matt is the largest monthly payment that most people making so you know why shouldn't we incorporate positive rental payments to help assess a borrower's or potential borrowers ability or willingness to repay and so the Regulatory Agencies and I'll also include FHA and I have thought about this Fannie May certainly has made it a priority as well as Freddie Mac and also Freddie Mac actually in the multifamily business line they're asking borrowers to opt into you know the spa the rental payments for renters in the multifamily properties that they financed and so we think that you know utilization of technology is huge in this area 12 months rent. Can technology
be used to look at you know bank statements and make sure that the information is there but just looking at ways to provide more inclusive policies because when we do policy formulation we have to figure out what is the impact of the policies that we are putting in place are we impacting you know low to moderate-income individuals and households are we in impacting communities of color and if so how and so we take all of those factors into consideration in the technology can level the playing field and I'm all for it that's that's really interesting and those examples are are are great examples positive rental payment history I mean like if you can think about whether or not someone has been paying their debt for their loan why not take into consideration what people have been paying for her for their apartment for the referral for you know nobody wants to lose their dwelling has that kind of example example is in itself a kind of Big Data example you know like how do you harvest they know the information that information and then create a technology system that then can Channel it to those very productive and inclusive purposes you know we're just getting that kind of project off the ground as you said why did it take so long is there something because of the of the Mandate of the fhfa or the position of the fhfa is there are other agencies that have a toe or so into these kinds of questions but is there something special that positions the fhfa to do those kinds of things where where others are limits lower there was a huge meltdown and I think it's taken about 14 years to rebuild public confidence in the mortgage space when we look at what happened before I think you know from my perspective and I'd certainly I worked at the FDIC for 23 years we had to deal a lot with public confidence and we would really take that very seriously, especially when you talk about people's money and their bank accounts or their homes I mean it is really hard to get but it's easy to lose and I think we've done a pretty good job in the past 14 years rebuilding confidence in the mortgage for the Housing Finance system and so when we take on these initiatives whether they include technology or not got me really mindful about making sure that they work well that we understand the impact that we understand who's impact as we understand different communities we got to take investors and other stakeholders into consideration so they're just a lot of touch point that we do before we Implement any policy initiative as a we're very thoughtful we're very intentional but we are also very I think transparent and we've been really making a move to try to be more transparent especially in the area of data because data will really render some informed decision if it's data-driven fact-based then some of the statements that we make we can point to like the Fannie Mae study on closing costs or the Friday next study on appraisal bias and so you know here is the statement but here's the data and we do take our time to make sure that the things that we say in the things that we do our FAQ face and data-driven until I just think that making sure that we're using the right approach that were understanding the impact on all stakeholders before we make a policy decision whether it's Technology based or not we just think that that is so important because we were really trying to keep the confidence that I think we've built over the past 14 years and then and thank you that was in and of itself extremely interesting and having that context of you even being able to innovate requiring enough trust to build the trust necessary to to innovate when you think you mentioned a little bit of data is that where you really want to win in or are there other areas that are exciting or interesting or that you're curious about where you know technology make be useful and syrup attacking some of the pain points creepy systems are opening up more opportunities for Access to Health decisions based on the data that we have and we have quite a bit I think it's really important and then sharing that day than trying to figure out ways to deal with the other privacy issues because they let alone level is very borrow or specific and so just trying to figure out ways to use data to provide data to share data so that people can really understand the basis of our decision so that is one area I want to look into also want to lean into this cost associated with no cost to close it when you think about it especially for like a small balance Loan in these are like some policy issues that probably to be addressed someplace else but I think that I'm used to looking at the cost of clothes for small balance loan and many times the small balance loans are owned by people who can least afford to pay these high-cost I guess I shouldn't cost so I can $10,000 or close you know what 200 200 $50,000 loan when they're trying to reduce their monthly payment and so the people that you know can least afford it are paying the most for closing cost and so just leaning into you know what is the process that are there places where technology can be used if there are places you know what can be done how much is it going to cost of making sure that there is risk management so that we understand what the risks are and that we have risked mitigants because what's the point in introducing something that's extremely risky I'm so we are looking at every single place in the process to figure out where technology can be adopted but then you got you know if you figure out the technology is everybody got to use it or the things that need to be staying it is there just so many decisions that can be that need to be made well what are the series of decisions that are trying to be made here in in in Washington it involves blockchains in the application of blockchains yesterday was enormous focus on cryptocurrencies because many of the other of your of your fellow Regulators are trying to Grapple with you know how they would engage it the good bad the opportunity to risk from your sample you have any sense as to what blockchain technology could mean for the housing space any interesting areas where where where that could be helpful as we issued a request for input and we asked that very question we were not the expert and so we've asked people you know what are places in the mortgage process that y'all technology can be used call to caucus or a good time or improve efficiency and we are really looking for input from from the people that care about this so that we can try to adopt and make some of those policy changes know we asked me to ask the Enterprise has to submit some Equitable Housing Finance plans and then parts of those plans and and their public now there is reference made to certain aspects of the process that we're looking at you. The title processing of eclosings notifications re-registration and just kind of around the edges but in order the make the big impact that we'd like to see and I think we're going to need to get more information from the people that do this everyday at a really interesting which is why I was enough to try to do this year the Sara Lee talk very much together right now watching people you know doing their infrastructure and housing people and geographically located in the same spaces in the same area and trying to find a way to kind of convene or orc even push for from the average of a great incentive so I don't know what is to really engage that process the little bit off of course but have you seen this one last love all of them cuz I like from from from one side of my friends houses with new technologies come to the fore in the housing space are there you know like what do you mean like I mean you know so when you look at the industry you know and there's there's something new and shiny coming around are people to get the sense that people tend to be more competitive advantage of that and get that for everyone else or a little bit more like to upload my documents you know during a refi that's a change because it gets so you know or electronically now which was you know is that was a great Revelation to adopt technology talking about a huge asset with you no significant value and making sure that all the paperwork is right in case something goes wrong it's really important so I do understand that I totally agree with it but it's got to be better but we're still like 20 years behind in fact oh no no no saying no no no I'm I'm I'm I'm a Securities Law guy right now and then I've had the privilege of being on the board but it's really really interesting I can remember when I think at one point in time the SEC said that you know certain kinds of disclosures could like be put on Twitter or something it was like a revolution and it was already like a decade-old or something and our which way do when you buy a home in that young family moves in I can remember first time you know we we bought a house and you just look at all these documents in your like the odd I never seen that many doctors are worried about how long it takes to close that process and it's kind of like a weird regressive tax you know like how how much change people feel like that's the front and the back end of the Millennials I can't remember if it's XYZ whatever the new letter is Angel okay but people are starting to buy homes now I mean I think that some of the trauma that people experience in 2008-9 his is kind of a thing that's really a thing of the past but people are again they do have confidence and they're ready to buy by Millenia or an axe you can sit on you can sit right here and access your bank account you can get a loan for your car and probably have the car delivered to you before this conference is over and so these are this is the group of people that's the next generation of people that are going to be buying houses the process that we have now is not going to work very long for them because the attention spans are people are used to it the immediacy of decisioning and the immediacy of things happening at so we have to be more responsive and make the process easier to understand easier and faster to deliver decisions and faster to get the closing and less costly we need this now so we don't get another really important issue and one that you've already mentioned it in and that is the challenge of appraisal I mean it is prevalent far too often and it can and it really does impact the ability for so many people of color to be able to climb you know to take that first rung up the ladder to economic well what are your ideas there give a sense as to how technology May or you know be able to at least be a tool in helping to address that Talent we serve on the appraisal task force is chaired by secretary fudge and I think all of the agencies that you mentioned yesterday who are here acting comptroller sue the OCC initial Regulators serve on that committee and the appraisal bias is something that we've been looking at in this goes to my point on data so Freddie Mac published a study I think 9 months to a year ago and they looked at some of the appraisal records that they had and they noted that the cost of the home and the appraised value was lower in communities of color than it was then the cost and appraised value was in communities that were not communities of color and so data you know when you make the statement and you can talk about it cuz this is something that comes up all the time and people's conversations you read the articles in you know the USA Today or any other paper that talks about it all the whitewashing where people have to remove a specific you no pictures and just change their homes around and the appraised value changes based on what your house looks like in there is even a story a couple weeks ago about a couple couple of Maryland they had to take all their pictures down and the appraised value when they were in the house with the pictures was significantly higher it was significantly lower than it was when they took those pictures down but the data will show the information in a way that allows you to make that statement and say and try to get the hell yeah well that just the one offer that was there so I was at and they're able to say hey this is what the data show and you can address the issue that face data-driven and then try to come up with some policies to create it and I'll tell you we had previously been looking at appraised values that were higher than the cost is like way higher if you can't because of the issues of weeks. 14 years ago and we hadn't thought to think about the appraised value is lower than the sales price and so now the data is showing that this is a real issue and it needs to be addressed my dream for anybody or the innovators in the internet's world out there is that you having one day kind of even a handheld device or an app to write for the appraiser so when they're entering their data or something to work with your survey know what the course of that of those appraisals are you know to see if they're out of whack yeah it's something but it it seems like that is it's such a detrimental issue for building generational well you know it doesn't just impact the family but it impacts that families are in a b Big B big problem the other big problem or challenge right now that that the entire US government is facing is our last sorely office is the challenge of nitrous inflation but the deceleration of the economy in and that has an important impact on what agencies think about in terms of their priorities and their ability to be ambitious in all kinds of different ways know when you think about those those challenges that will be meeting with us at least for the medium-term know how do you view technology against the backdrop not just to access but also this deceleration and macroeconomic volatility no very important metrics that we've got in a little over 7 trillion and mortgage-backed securities outstanding and we care about all of the things that no impact that book of business and we are always looking at ways to get information to use technology to make observations on what's happening in a particular area across the country and in certain Pockets within our country and I think technology has allowed us to do that and just to have access to information more quickly and in a more robust way than that which existed years ago and so we're always looking for ways to assess the macroeconomic environment and also trying to take certain segments of the macroeconomic metrics that were looking at and break them down and see how they impact our book director Sandra thank you so very much thank you so so very much we know that you're very busy this has been a wonderful conversation and thanks for visiting us. we will use this then to introduce our next panel and we're just going to jump right to it I'm sorry I keeping my organization straight actually now we're taking a short break which clearly I need and some more coffee so we'll start back up at 10:15 there's no doubt that technology is giving us new ways to close the housing out even though there are millions of people out there who are making the functional equivalent of a monthly mortgage payment in their rent it's actually not showing up in their credit history at the end that's just a huge gap desktop underwriter also known as the EU is our automated underwriting tool we've automated 12 months of History Indy you we use our technology to identify those bar payments made by jackaroo by electronic means but then they were PayPal and then we we look for the 12-month payment history or pattern within the bars bank account statement which is really a great example of how pennies leverage and digital technology to really help more renters get a reason to the approved for a mortgage initially focused on the black homeownership Journey 2 this was a way for us to leverage data to see those folks and give them access where they're going to be successful in home ownership and actually grow the pie and that's really what we're trying to do we don't close the gap without growing up I approached the applied machine learning capabilities to build out the algorithms to enable us to identify the consumer I do we also work with our fintech partners to consistently pulling at 12 months of data and then lastly we educated the lenders and a loan officers I think there's still a lot that needs to happen not just with Fannie Mae but frankly across the ecosystem to turn this into something scalable that is part of the machine put it takes everybody in the chain want to solve that problem and and look for ways to really tackle the things that have stood in the way of home ownership for a long time covfefe going to our next panel you know you heard a little bit from director Thompson about a blockchain technology and we'll have a discussion about tokenization not just of mortgages but the tokenization of everything and what it can mean for the economy and finance so I am delighted to welcome our next panel right now well good morning everyone and welcome to let me start by introducing my Steve panel today so I'm going to start with Karen Newman who's the head of structured Finance at Redwood trust then we have Nick Carter who's the co-founder of Castle Island Ventures we have Rebecca Reddick who is the general counsel for Ave companies and last but not least we have Jose Fernandez de Puente who is SVP general manager of Block Chain cryptocurrency digital currencies at PayPal so and I am Ramon Richards so I'm thrilled to be with here with you all today the day is off to a good start or going to jump right into our panel so Nick we're going to start with you so we have in our audience people are the various understandings of blockchain and tokenization can you share a little bit about what is tokenization what does it mean to tokenize for Chris for the invitation in the crypto / blockchain contact has a different definition from the tokens ization they might be used to in in and talk and ask for the data security space sew ins for the blockchain world it's inserting a claim to a non-native I said and Native asset would be some crypto asset like Bitcoin or ethereum non-native asset could be anything right I am say the most popular tokenized thing on blockchains is simply dollars right up here often consider stablecoins to be part of that sort of token ization rubric on blockchain turn all they are is a claim on a commercial Bank liability basically it's just that they settle on the blockchain so you seen everything under the sun be tokenized degrees of success in the history of black jeans and there's kind of a first wave of totalization in 2017 18 I didn't work so well arguably and now we have maybe a more successful second wave of it you know so he have I think the thing that people got excited I was to Securities and putting them on Shane to take advantage of kind of the neon nice settlement assurances you got with blockchains the possible fractionalization inferior of the liquidity unlock iPod necessarily believe that the idea that maybe get more liquidity because it's on a blockchain and swear they're inherently liquid again I'm very skeptical.
And then you have tokenized non Securities like art Collectibles and Lefty's are now you know representing other third-party assets merchandise physical things so really everything you can imagine it's been tokenized the problem with the sort of security token ization is just there isn't a great a structure especially from regulatory perspective to circulate and trade Securities in the boxing contact. Thank you Jose I want to turn to you and as we think about kind of major considerations and Innovation that we have to think through when it comes to adopting a token ization strategy from the purchase it on a PayPal you share your thoughts absolutely I will chain Space Administration has been around for quite a while and actually in the payments aside the conversation has been active way before a crypto what's an abstraction when you're talkin I see what you're doing is you're getting a piece of sensitive data and your transport me that into a piece of nonsense it is that you're getting the credit card information and you're confirming that into random string of numbers that you can share an end and you going to store in payments it would we learn is that you should try to figure out what is hard and what is not hard that they know it is not heart it was but it's established trade status tested it works but it took a while for the conversation to pick up in in payments was I would say probably two things the first one is a used case why would you why should you use them what is the killer app for Kokanee station in payments on originally had nothing to do with blockchain it had to do with something for the payment nurse in the room called pci-dss which is the payment card industry data security standard which sets the requirements for merchants to store confidential information about consumers so the reason that station. Because Merchants had to comply without data security aspect and they didn't want to store personal information so that's where you go to what you have now when would you use Apple pay to tokenize your car and your device called that has started without us case the throw the dog adoption is the second thing that you need is a system is not hard but to do that transaction to use that device at a point of sale in a physical store you need to work with four manufacturers you need the point-of-sale terminal to be able to connect with a credit card system do you need the payment processor to be able to translate that token back into a credit card number that gets sent to you were a pain management provider all of that took a while and I think there are many and I will use that we are seeing now and in the blockchain space and we are seeing definitely that in the device face about how the different parts of the equation get get together I'm definitely not an expert in the housing market and I don't know which of the pieces of ecosystem that we need to add up but I believe imagine that that's going to be one of the Milestones 2 to overcome a house I want one quick bowl of time question when you say it took a while it was a ballpark time frame I would say that since the first experimental station deal would we have today that is bro that option that most of us don't realize until early today because he's obstructed from the consumer bikes for 7 years very good and you mentioned give me your answer in a good opportunity care of it turn to you we talked about tokenization what could that mean for the housing sector what type of things could be tokenize thanks for the question and thanks to Chris for the invitation to come and talk with you all today I'll pick up on a couple of points that Nick actually mentioned when he was giving an overview of tokenization as a practitioner of capital markets I found that creativity and Technology are Hallmarks of innovation inside the capital markets as pretty as take to construct products that are attractive to investors and find new ways to distribute risk for the system and for decade