Housing turns hip: Fannie Mae’s Jonathan Lawless talks innovation at SXSW
You know that housing issues are top of mind when Fannie Mae is asked to take part in the SXSW Conference–an event well-known for those cool and in-the-know.
At this year’s SXSW, held March 9 in Austin, Texas, Fannie Mae Product Development and Affordable Housing Vice President Jonathan Lawless took part in a panel discussion, The Case for Innovation in US Housing. Other panelists included Sean Dobson, CEO and Chairman of Amherst Holdings; Jay Hartzell, dean of the McCombs School of Business at The University of Texas at Austin; and Nela Richardson, chief economist at Redfin.com.
Lawless spoke to Fannie Mae’s driving innovation in the mortgage industry to expand access to credit and affordable housing across the country through programs designed to benefit renters, homebuyers, and the industry.
He focused on the company’s development of test-and-learn initiatives to address changing market needs as well as developing other creative solutions to support lenders and servicers.
“The pilots being tested by Fannie Mae reflect the changing demographics and evolving financial needs of America’s families now and in the years to come,” said Lawless.
“Today’s households and those of tomorrow will be very different from previous generations – demographically and financially. Our pilot programs recognize that, beyond their bank accounts and hurdles such as student debt, the lifestyles, tastes, and preferences of today’s new households reflect the on-demand, consumer-centered world in which they came of age.”
What’s Holding Housing Back?
Lawless noted the many factors impacting the housing industry.
Today’s existing home stock is causing costs to rise and stock in some neighborhoods is beginning to deteriorate. The mismatch in housing to today’s demographics makes the supply challenge even more complicated. Consider these facts: 28 percent of today’s households are single adults; but only 12 percent of housing units are either one-bedroom or studios. On the other hand, 40 percent of the housing stock is the traditional three-bedroom home, perfect for that average family with 2.5 kids. But today, that ‘traditional’ family now makes up less than 20 percent of households.
Even where there is supply it is the wrong supply for the America of today. The solution? Renovation! As homebuyers’ options become more limited, renovation financing puts older homes that may need some repairs or energy efficiencies added, into consideration. By bundling renovation funds into a borrower’s mortgage under one loan application, programs such as Fannie Mae’s HomeStyle Renovation® and HomeStyle Energy®, will allow a homebuyer to get the “move in ready” home that they want, sooner.
There’s also a lack of education around down payment and credit score requirements. “There are a lot of myths out there when it comes to access to credit. For example, you no longer need to put 20 percent down. It’s also really important to know your credit score, and how that impacts your options,” he said. “Plus many buyers are also unaware that there are new ways to source funding for a down payment,” Lawless added.
Innovation in Motion
One of the Fannie Mae pilots Lawless discussed enables homebuyers to count the Airbnb income from their primary residence in the underwriting of loans sold to agencies. In addition, Loftium, a Seattle-based company, fronts up to $50,000 for a down payment if buyers are willing to rent out an extra room for one to three years. A portion of this income goes to Loftium to pay back the down payment.
Fannie Mae is also working to build support for alternatives such as modular homes and educates buyers on some new tech-based options such as crowdsourcing.
On the technology side, the focus was on making the mortgage process simpler for all parties. “We are considering use of drones, Bitcoin for payment, and thumbprints for closing,” said Lawless. “New data sources are also allowing us to get a better handle on credit by viewing payment history directly through bank accounts. It’s a smarter way to do business, and will lower costs for everyone,” he continued.
“There are a lot of creative options out there – we’re just scratching the surface.”