Former Fannie Mae head Tim Mayopoulos on Mortgage Rates, Future of Fintech

In this Bloomberg interview, Blend president and former Fannie Mae CEO Tim Mayopoulos covers how low rates might go, the state of fintech, and the fate of Fannie Mae and Freddie Mac. Here are key excerpts as well as video.

HOW LOW CAN RATES GO?

I wouldn’t say that there is an absolute floor for where mortgage rates can go. So if the 10-year goes to 1 percent and we see it perhaps going below that I think we could see rates continue lower.

There’s actually not a great balance in the market at the moment. And we have very low mortgage rates. We have very low supply of housing. And so that’s what’s driving housing prices up. So in many ways this affordability challenge really reflects an imbalance in the marketplace.

I wouldn’t say [fintech] lending platforms are changing the economics of refinancing from the consumer’s point of view although it doesn’t make it much easier for them to shop, so that’s a benefit. The hassle factor is way down. It’s much easier to go explore what what your alternatives are in seconds certainly or minutes as opposed to days or weeks in the past.

STARTUP LENDERS VS. BIG BANKS

There are a lot of different players in this [mortgage lending space]. There’s the pure fintechs that are actually lenders themselves who are out there using their balance sheets and trying to grow that business. But at the end of the day it’s pretty hard to compete with five to six thousand banks in the country to to say nothing of the credit unions. There’s a lot of really big balance sheets out there. And I think that the technology that’s now available to those incumbent institutions is much much better so they can actually provide a similar consumer experience. And they already have the customer relationship in many cases and they actually have the balance sheet and the credit risk taking capabilities.

MAYOPOULOS ON FINTECH AND BANK M&A

We’re going to continue to see consolidation among the more mature fintech companies. It’s not surprising that incumbents want to acquire those capabilities [like Visa acquiring Plaid, Morgan Stanley acquiring eTrade, Intuit acquiring Credit Karma].

So it’s just a matter of acquiring some very important plumbing that’s out there in the marketplace. In some cases they give them access to data that they wouldn’t have otherwise. But I think we’re really at the early stages of the whole fintech revolution. You’re going to continue to see new companies get created and they’re going to proliferate. And we’re just we’re going to see a kind of a continual evolution in that space.

Most of the innovation in the fintech space has really in been in non- balance sheet businesses. So it’s one of the reasons why payments has been a place where fintech has really made great inroads because you don’t need a balance sheet to do that well. It’s all about just making the transaction as simple and fast as possible. I think there is more reluctance by fintech companies to go into balance sheet businesses because it introduces a kind of risk that they don’t have and the pure technology space.

FATE OF FANNIE MAE & FREDDIE MAC

This administration is already very committed to having the companies exit conservatorship Fannie and Freddie. But this is a long and complicated process. This is a very very big financial transaction that’s going to be involved here. We’re talking about floating out the stock of these two companies. They’d be the biggest IPO those in the history of the world. So it’s not something you can just barrel your way through. They might take steps to try to move it down the road a little bit faster. But I think it’s unlikely that the two companies would exit conservatorship before the election .

FULL VIDEO

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– Former Fannie Mae head Tim Mayopoulos on Mortgage Rates, Future of Fintech