MISMO Lays Foundation for Stronger Mortgage Industry Infrastructure
Despite the large volume of data generated throughout the life of a loan, the mortgage industry has traditionally lacked a robust, standardized method by which to track and store individual data elements. With the repercussions of the burst of the housing bubble still being felt almost a full decade later, lenders have had to adapt to a series of stricter regulatory guidelines, while, under the watch of the FHFA, the GSEs have undergone significant business, operational and technological changes. The common theme among these changes is a desire to create more transparency within the mortgage industry in order to prevent a second housing crisis. By adopting and maintaining the MISMO data standard, organizations are able to simultaneously mitigate concerns around data transparency while also enabling more efficient communication within the industry. MISMO developed a common language for exchanging information for the mortgage finance industry. Today, MISMO standards are accepted and deployed by every type of entity involved in creating mortgages, and they are required by most regulators, housing agencies and the GSEs that participate in the industry.
The changes undergone by Fannie Mae and Freddie Mac since being placed under conservatorship have included a series of programs under a parent initiative called the Uniform Mortgage Data Program. Leveraging the MISMO framework as a base, UMDP seeks to create a standard means by which both GSEs will consume loan level data. The first initiative that went live in 2011 focused on the collection of appraisal data, with a second initiative following in 2012 containing the set of data elements needed for the delivery of single family loans. While both of these initiatives have focused on loan data in the primary market, analysis on an initiative related to the collection of servicing data is currently underway. Market players who adopt and maintain alignment with MISMO will surely find themselves in a better position to comply with any changes required by the GSEs under UMDP.
Additionally, the foundation laid by UMDP has already allowed Fannie Mae and Freddie Mac to return tangible benefits to the market. In January 2015, Fannie Mae delivered the Collateral Underwriter tool, designed to help lenders more easily assess risk on a given appraisal. Furthermore, Freddie Mac has rolled out a pilot version of its Loan Advisor Suite, which aims to help lenders avoid mortgage repurchases through loan and property data validation, as well as automatically monitor when lenders are released from their rep and warrant obligations. Utilizing a standard method of communication has allowed for easier vendor integration with these tools.
Work on two long-term FHFA directed standardization initiatives is currently underway between the GSEs. The first is the Common Securitization Platform, a platform both GSEs would leverage to issue and maintain their securities. Secondly, the FHFA has directed the Fannie Mae and Freddie Mac to begin analysis on a single security, which would involve issuing a security backed by a mix of loans from both portfolios. Ensuring a common data standard is utilized across both enterprises is key to enabling them to plug into a shared technology platform, creating a uniform security with loans owned by both organizations and ultimately ensuring the integrity and consistency of information disclosed to the final investor.
While the secondary market has been undergoing changes brought on through conservatorship, the primary market has been dealing with the effects of a period of major regulatory change. Last fall's TRID implementation required lenders throughout the United States to conduct a major overhaul of their processes and procedures. To help industry participants align with the new regulation, MISMO produced an upgraded TRID-compliant schema. Read More Here.