The recent uproar over the new Goldman Sachs issued Apple card has thrown some shade on algorithms. What decisioning criteria was used to discriminate against women? So far, Goldman has not been able to respond in a way that makes sense. Apparently, they will only allow you to apply with your husband in the future. Is that a solution? Shame on you, Goldman.
I have a confession to make. I just got my Apple card last week. Typically, Apple doesn’t let me down. What impresses me most about Apple is their ecosystem – It just works.
Ironically, Apple hasn’t fared as well in its applications of artificial intelligence. Siri disappoints, sometimes in comical ways. Has Siri developed a sense of humor?
Why has Apple lagged behind Amazon, Facebook, and Google in AI applications? It’s simple. They decided long ago not to share your data. With Apple as the exception, you have no data privacy. It’s long gone. The big question going forward is how do we safeguard our rights?
Every day, the housing finance ecosystem processes millions of data points about you, your loans, and the real estate you own. Technology is a great thing that brings efficiency and allows the wheels of capitalism to churn. No longer do we need to saddle a horse and ride to the local courthouse to register our deed. However, we need to find a balance – Something that isn’t easy to do.
There is tremendous pressure on the valuation side of the mortgage process to digitize, hence all of the discussion around finding alternative work forces to supplant appraisers. Or better yet, use an algorithm for an “easy button” appraisal. I, for one, love the fact that Google knows what I want. It’s a trade- off. Do I believe they live by their mission of “do no evil?” Not for a minute.
That finally brings me to my point. Let’s take a look at the mission of FHFA, taken from their website (and abbreviated):
Our Mission- ensure that the housing government sponsored enterprises operate in a safe and sound manner.
Our Vision- A reliable, stable, and liquid housing finance system.
Our Values- Respect, Excellence, Diversity and Integrity.
FHFA is entering a whole new world where oversight needs to keep up with the times. The oversight processes need to be reconsidered. Should the GSEs be in control of the appraisal process? The data? The black box algorithms? Is it time to set it free in an independent entity? Should the data in UCDP be “democratized” and set up in a public utility?
The GSEs are launching pilots that impact a vast number of loans. What is the right balance to test new processes without undermining the ecosystem? What transparency should be available for results of the pilots? Do borrowers know they are part of a pilot and what the liabilities are? Are lenders receiving reps and warrant relief to participate?
As UAD redesign is underway, what “guardrails” have been placed upon the GSEs for rights to data? Can they acquire the data and sell it to third parties? Does FHFA have a team examining the integrity of the data in UCDP? Have the automated underwriting systems algorithms been assessed to ensure they are safe, sound, and do not discriminate? These are weighty issues for the FHFA to consider for a modern housing finance system.
We all know that transparency is a great disinfectant. Let’s continue to have open dialogue and respect the gravity of the impact that proper regulation and oversight has upon homeownership.
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