How federal housing agencies are utilizing emerging technologies

Achieving digital optimization is a main priority for federal housing agencies, and it’s happening at a time when incorporating technology is becoming a crucial part of the entire industry. 

The U.S. Department of Agriculture (USDA), for example, is transforming the mortgage process by moving into the realm of the platform as a service, Dean Daetwyler, director of the systems implementation and management division of the single-family housing guaranteed loan division at the USDA, said.  

Daetwyler spoke on the topic of innovation at the housing agencies during the Mortgage Bankers Association’s (MBA) Technology Solutions Conference & Expo in San Jose, California on Tuesday.

“We’ve centralized our program so we can be more efficient. We just replatformed our underwriting system  (..) then we’re going to expand that capability with our interface going forward,” Daetwyler said.  

The goal of incorporating emerging technologies is to make it cheaper for lenders and customers that do business with the USDA — and utilizing the Mortgage Industry Standards Maintenance Organization (MISMO) standards was part of that effort, Daetwyler noted.

For the U.S. Department of Veterans Affairs, accepting desktop appraisals has been the most notable use of tech, John Bell III, executive director of the VA, said. 

The VA announced in August that it would allow desktop and exterior-only appraisals for some transactions, a move that happened in response to high demand for appraisal services and limited availability of appraisers in certain market areas.

Following the announcement, the U.S. House of Representatives passed a bill in September that streamlines the appraisal process for VA mortgage loans. The legislation is an important first step toward broad modernization of the VA appraisal process and could make veterans’ home purchase offers more viable, the MBA said. 

“We put a lot of protocols in place to understand objectivity versus subjectivity in the appraisal process. We believe that’s going to help us mitigate a lot of those issues you hear about in the industry,” Bell said. 

It goes back to the access to data when making informed, data-driven decisions, Bell noted. The VA is also using data to increase outreach to Native American veterans. 

“Our Native Americans that are having access issues (…). We want to make sure we are out in front (…). We’ve seen a 16 to 18% increase in Native Americans utilizing the loan guaranty program (…) so [we’re] continuing to build that model out,” Bell said. 

Ginnie Mae‘s use of tech is aimed at broadening housing finance availability to underserved borrowers, Barbara Cooper-Jones, senior vice president of the office of enterprise data and technology solutions at Ginnie Mae, emphasized. 

The agency has invested in artificial intelligence (AI) and leveraged that tech to help understand the data that it received from its subservicers. 

“We leveraged that tech to help us understand some of the quality challenges of data that we received from our subservicers. In our compliance area, we’re using the low-code no-code solution,” Cooper-Jones said. 

While emerging technology, such as AI, could modernize the appraisal and mortgage process at housing agencies, funding, recruiting talent remains a challenge. 

“For us (USDA), one of the biggest challenges is funding (…). We have great ideas; through our customers we know the direction we need to go (…). Once we move, things change, [and] we have got to be agile as we move forward,” Daetwyler said.

While all indications point to automation becoming key in making financial decisions – including mortgages – determining which areas to automate, and how, will be an important discussion.

“If you look at what studies are coming out, those studies are telling you millennials aren’t buying it. They’re wanting that relationship on the other end of that phone or in-person (…). I caution you that as you go down this road of automation, you have to also look at what the end user experience is, what human-centered design is telling you,” Bell said.