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In a recent piece published by DS News, Gate House Digital CEO/President Dain Ehring discusses the role of Artificail Intelligence (AI) in mortgage lending decisions.
Amidst significant momentum for the technology, Dain shares his insights on its increased usage within the mortgage market and opines that the “genie is out of the bottle.” Rather than looking backward, he argues it is time to push forward, albeit deliberately, in the name of expanding credit to qualified unbanked applicants, fair lending, and common sense.
While acknowledging a need for sound guardrails, Ehring strikes a cautious note against government’s preference for ambiguity in the guidance, a trend that stifles innovation and product development in the private sector, and often leads to capitulation to the legal risks of their ingenuity, and ultimately, producing “increased fees, fewer services, and diminished access to affordable credit for aspiring homeowners.”
“Without a thorough and prudent understanding of their appropriate role for the agencies, they could produce harmful unintended consequences,” Dain writes. “…Washington, D.C., must be careful not to wield a rusty axe, when a surgeon’s knife is more warranted.”
Dain warns that our oversight agencies need “not become a drag on the very thing most of our policymakers and government leaders want: mortgage financing available to families in need of affordable, quality housing, thereby creating more equitable homeownership.”
In a note of optimism for AI’s future in mortgage lending, Dain explains that “artificial neural networks” are helping to overcome the objections of its skeptics and critics. Can AI be “be free of bias” as the top regulator suggests, Dain asks: “Compared to what?”
In their recent article for Reverse Mortgage Daily, Gate House Founding Partners Brian Montgomery, Keith Becker and Dror Oppenheimer discuss the implications of the first positive capital ratio for the HECM program in six years.
The Gate House team, who worked together at the Federal Housing Administration managing the HECM program, provided their unique perspective and explained that important policy changes, and most certainly strong home price appreciation, have contributed to the substantial improvement in the HECM capital ratio.
Nevertheless, they argued, the results do not “provide a reason for complacency or assurance of future (positive) results” and therefore continued vigilance to ensure the program “is not continuously subsidized by the premiums … in the forward book, will be vital for the HECM program to continue to serve its mission.”
Montgomery is the only person to have served as FHA Commissioner twice under three presidents. Becker served as the Deputy Assistant Secretary and Chief Risk Officer for FHA. Oppenheimer served as a Senior Advisor to the Commissioner of FHA.
Gate House Chairman Brian Montgomery and CEO Keith Becker recently opined in the M Report on the favorable condition of the FHA Mutual Mortgage Insurance Fund.
In their article, Montgomery and Becker argue that FHA must be prepared to weather adverse events in the future similar to the wake of the Financial Crisis in 2008 or the COVID-19 pandemic. As pressure mounts to reduce mortgage insurance premiums (MIP), continued commitment to FHA’s countercyclical role would dictate caution. FHA must work, they wrote, “to put itself in a position to best serve low- to moderate-income borrowers who will be most affected should private markets constrict (which history has shown sometimes do).”
In urging caution on mortgage insurance premiums, they cite the Annual Report’s acknowledgment that the assumptions underlying the financial position of the fund can “change materially and quickly with changes in both actual and projected home values.”
Montgomery and Becker caution that unintended effects of MIP changes could occur, and FHA would be wise to keep available “all options that help to expand opportunities for low- to moderate-income homebuyers by deploying some of the excess capital into new programs, products, or underwriting policies.”
Gate House Chairman Brian Montgomery recently spoke with Chris Clow of Reverse Mortgage Daily to discuss HUD’s reverse mortgage (Home Equity Conversion Mortgage or “HECM”) program and the impact of that program in the recent budget request. The growth in the Secretary-held HECM portfolio which has been significant in recent years, and the challenges presented to servicing that portfolio, likely contribute to the Biden Administration requesting an additional $50 million in its budget request.
“Due to the structure of the program,” Montgomery said, “the Secretary-held portfolio has grown significantly in the last 5 years (approximately 150,000 loans), and it keeps growing.”
Montgomery, who led FHA twice under three presidents and recently served as Deputy Secretary of HUD, added that “This process requires a highly competent Servicer to handle a highly complex product for one of HUD’s key constituents — seniors.”
Happy Friday. After completing a remarkable first two weeks for Gate House Strategies, I wanted to take this opportunity to thank everyone with whom we’ve had the pleasure of engaging and many others who have been in touch.
Already, the firm has forged meaningful partnerships with longtime colleagues in the housing market and beyond, rekindled relationships that we believe will help the industry resolve critical and timely policy challenges (some age-old and others arising out of the pandemic), and been contacted by numerous others whose unique goals and enterprises portend well for future relationships with our firm.
We are hard at work discovering paths forward, finding new avenues for success – merging the unique expertise and perspective within the industry with our knowledge, experience, and relationships, forming coalitions of key allies, and leveraging it all to achieve results.
Now while that’s a mouthful after just two-and-a-half weeks, as we tried to convey at the launch we are on a mission to assist our clients’ efforts to build, to innovate, and to grow — to add to the long tradition and commitment to a strong and vibrant financial services and housing market that serves the interest of all Americans.
A few days after announcing this venture, I was on a plane to Jacksonville, FL to attend the Mortgage Bankers Association of Georgia (MBAG) annual conference, the first in-person event I have attended in over 14 months and one rescheduled twice last year (and I suspect the same for the other attendees).
Suffice it to say we were all incredibly excited to come together once again like real, non-virtual people, to see one another, and to begin to share ideas again amidst a sure sign that things are starting to get back to normal. The excitement was palpable and it warmed the heart to see close friends and colleagues see each other face-to-face for the first time in many, many months.
The next morning, Rob Chrisman and I conducted a panel together, and we could feel the readiness to look ahead and to build upon what was an extraordinary year in housing. Just before we walked on stage Rob turned to me and whispered, “I have the hiccups!”
Perhaps it was the perfect metaphor for involuntary, seemingly inexplicable contractions of the COVID-19 era that require creative, innovative solutions in front of a live audience.
Without missing a beat, our moderator (upon hearing a hiccup) declared she had a sure-fire cure that never fails. She rose up and walked over to Rob imploring him to stand up and raise his arms high above his head. She asked for a glass of water but saw one on the podium (Note: it was mine from the previous session which I did sip from (sorry Rob)). The moderator then held the glass and told Rob to tilt his head back and keep drinking but to wave his hands when he had enough. I immediately thought of waterboarding but Rob kept chugging before giving the audience his version of “jazz hands.” And it worked much to the audiences laughter!
We had a great session and can’t wait to do it again soon. (And thank you, Rob, for the shout-out on your unmatched-in-influence blog about Gate House as “the new kid on the block.”)
But getting back to business, we are hearing from a lot of people, new and old, who are seeing the challenges we are seeing and who are looking for the best solutions, working to position themselves to both take advantage of new opportunities this year has in store and looking beyond the pandemic to strategies that will achieve the mission.
Again, we are looking forward to it all and can’t wait to help our partners navigate this journey ahead.
–Brian Montgomery, Chairman and Founding Partner, Gate House Strategies