The state of e-mortgages is now poised to take a quantum leap forward by leveraging the increased capabilities and advanced technology features embedded in the MISMO Version 3 Reference Model.
As many of you know, the MISMO data standards were leveraged by the Federal Housing Finance Authority, in their mandate for Fannie Mae and Freddie Mac to collaborate and create the Uniform Mortgage Data Program, which included loan delivery and property valuation datasets built around the MISMO standards. The UMDP is now being extended into servicing data, with the new Uniform Mortgage Servicing Dataset currently being developed from the MISMO V3 Reference Model.
To date, industry implementation of e-mortgages has relied on the SMART Doc Version 1.02 specification for the e-note, and typically on Adobe PDF for the rest of the closing package. With Fannie and Freddie both accepting SMART Doc e-notes, this infrastructure has enabled increased efficiencies and velocity in the origination and investor delivery process, yet has fallen short of realizing the full potential value of e-mortgages, because only the e-note is a truly “intelligent” e-document (human-readable View plus machine-readable XML data all in a single e-document file).
I have long maintained that the holy grail of e-mortgages will be reached when we have an industrywide, consistent, standardized and interoperable electronic document format, where every document includes an electronic view but also the underlying XML data, usable for downstream processing.
In the V3 Reference Model, MISMO not only addressed the limitations of the original SMART Doc specification, but also embedded it fully within the Reference Model (as the document structure, part of the overall XML Schema “tree” of data elements and enumerations in V3). This means that there is no longer a separate SMART Doc specification—the V3 SMART Doc is now completely integrated within the Reference Model.
MISMO is now developing specific implementation guidance for this new SMART Doc structure, including PDF and XHTML versions with full XML data payloads. SMART Doc V3 is much more flexible than Version 1.02, and these Implementation Guides will help the industry create consistent, interoperable documents throughout the mortgage process.
What’s next? Right now it’s a bit of a chicken-and-egg situation, because Fannie, Freddie and other investors don’t yet feel a business need to support SMART Doc V3. Yet originators can’t move to the new structure until they can deliver them to investors. MISMO has identified a few key documents to focus on first (the Note, Deed of Trust, and HUD-1, for example) in order to help facilitate the movement toward V3.
Key staff at MBA, working with MISMO volunteers, have also facilitated a steady outreach to the regulators in order to educate them on the value of the data standards (for reporting requirements) and especially on the importance of considering e-documents when developing any new forms for the mortgage industry. We have encouraged them not to think of forms as just paper-based, but rather as a collection of important data to be utilized downstream, and to consider the difficulty level of electronic formatting when designing new form layouts. To their credit, the FHFA, the CFPB (Consumer Finance Protection Bureau), the IRS and other agencies have been very receptive and open to this education and outreach.
With all parties working toward a common goal on the horizon of industrywide standardized interoperable intelligent electronic documents, we will finally reap the full value proposition of e-mortgages, end to end.