A new federal office was just established to regulate proptech
The proptech buzz has died down amid unstable macroeconomic conditions. A new federal office is using the time to reevaluate.
The Federal Housing Finance Agency, the federal agency that supervises and regulates many home loan providers, announced Tuesday the creation of the Office of Financial Technology. The new office is tasked with collecting information on emerging risks in financial technology innovation, relevant to home ownership.
“When used responsibly, fintech has the potential to improve borrowers’ experiences with the mortgage process by reducing barriers, increasing efficiencies, and lowering costs,” said director Sandra L. Thompson. President Biden appointed the director last summer; she worked in the FDIC for 23 years before joining the agency in 2013.
IBuying is the area of proptech that has received the most regulatory scrutiny in recent years, as companies like Opendoor, Offerpad and Zillow bought up about 2% of the American real estate market by the second half of 2021. The companies, however, found their success just as available homes were in short supply and prices rose, disrupting the traditional ecosystem of brokers, developers, realtors and banks that had remained relatively stable for over a decade. Later in the year, Zillow’s bet on iBuying went south after the company over-bought amid a market downturn, and the business model — which other companies, like Opendoor, still say they’re confident in — was put under additional scrutiny.
The office may eventually provide some suggestions for regulation that builds some trust back for iBuying. But other proptechs and fintechs interfacing with the real estate industry may eventually receive guidance, too. Home buying is a tedious process, and innovation around expediting mortgage approvals, providing more flexible financing options for developers, reducing insurance costs and streamlining the housing search are in high demand. Venture Capital invested $4 billion in proptech in Q1 2022, up 41% from Q4 2021.
But it will be some time before any regulation is drafted for the industry. Currently, the agency is soliciting public input from the industry through Oct, 16. Interested parties can submit comments online or via mail.
Protocol link: https://www.protocol.com/bulletins/federal-office-proptech