GSEs Answer Call To Standardize Data
Both Fannie Mae and Freddie Mac have answered the Federal Housing Finance Agency's call for a more transparent process by standardizing around datasets developed by the Mortgage Industry Standards Maintenance Organization and mandating that loan data and appraisal data be delivered to them using MISMO Version 3.0, a move that technology experts say will broaden the required use of the standards and help return more liquidity to the mortgage market.
Tim Anderson, president of SigniaDocs and a former member of the MISMO governance committee, characterizes this move by the GSEs as a "key step" toward mortgage market recovery.
"The only way we're going to get adoption of standards is when you have major players see the advantage and use them. GSE sponsorship is key. This means the major investors see advantages to creating data standards. Another important element is that they have endorsed Version 3.0. Why is that important? That will speed up adoption of the new standard faster then in the past. Look how long it took for SMART Doc Version 1.0 to get adoption. It was just a standard without the incentive to adopt. The incentive here is that the GSEs have both published an open directive and it's mandated. "There's a date out there and when that date passes they won't accept the old ways," he continued. "As a result of all this, the lender is going to mandate that their vendors be compliant by that date. So, you'll see more vendors and lenders involved in MISMO because they have to be."
The new initiative is aimed at improving the consistency and quality of data for appraisals and other loan information, said the government entity on its website. It is designed to improve the depth of collateral, borrower and loan data submitted to the enterprises. The Uniform Mortgage Data Program is a long-term, joint effort to create improved and uniform data standards and collection processes. The GSEs have worked with industry participants to develop the uniform standards.
"FHFA directed the enterprises to undertake the development of the standards to provide greater uniformity in the data they collect," said FHFA acting director Edward DeMarco.
"This initiative is a major step toward meeting industry requests for uniformity in appraisal and loan data. Improvements in data quality will benefit all mortgage market participants and strengthen the housing finance system."
The GSEs have now gone forward to standardize mortgage lending using MISMO as the backbone of all loan delivery to both GSEs. Specifically, Freddie Mac and Fannie Mae have developed the Uniform Loan Delivery Data Specification, which defines the Uniform Loan Delivery Dataset and the common GSE approach to single-family loan delivery data requirements for all mortgages that will be delivered to either GSE on or after Sept. 1, 2011.
Publishing the delivery specification is the first key milestone of the Uniform Mortgage Data Program that was set in motion in May. The delivery specification provides the necessary details for industry participants to understand the scope of the loan delivery data requirements and to begin assessing their implementation needs and resources.
A common framework will increase efficiency for lenders while enabling the GSEs to manage risk more effectively. The common data standards will provide uniformity for appraisers, mortgage lenders, servicers and other information providers in their data submissions to the GSEs. This data standards program will be deployed by the GSEs in phases, through a common platform, and provides for continued stakeholder input.
Fannie Mae spokesperson Janis Smith and Freddie Mac spokesperson Brad German said, "These joint delivery specifications-and their use of MISMO Version 3.0-represent a big step forward for the industry and for achieving the goals of the Uniform Mortgage Data Program. We believe this collaboration will help reduce the time and cost of preparing and submitting loan delivery data to the GSEs."
Both GSEs say this will both "increase market confidence" and "enable the industry to respond more quickly to changes in the market."
In FAQs released to the mortgage industry by both GSEs, the industry value of standardizing around MISMO Version 3.0 was justified by Fannie and Freddie in that both entities believe a commonly understood dataset and format will reduce ambiguities in the type and definition of data points required for selling loans to the GSEs. By collecting additional data at a more granular level, market participants will have an increased, common understanding of loan data. Also, over time, lenders will be able to move away from providing proprietary processing codes that can be misinterpreted or incorrectly mapped to delivering root data that can be accepted by both GSEs.
Anderson said the benefit of Version 3.0 "is that once you go to this specification it's easily adaptable to any mortgage transaction. It's not just a standard for an e-note. Version 3.0 is flexible. It can handle all the document types and formats."
Both GSEs explain that they have chosen MISMO Version 3.0 to standardize around because the MISMO XML format provides greater flexibility than the existing formats that either GSE has in place today (Fannie Mae's 2000-Character Loan Delivery File Format and Freddie Mac's Form 11, Mortgage Submission Schedule, and Form 13SF, Mortgage Submission Voucher).
Using MISMO as the basis for the ULDD allows for easier collection of new data in the future, and supports current technology that is widely used in the mortgage industry. Use of MISMO Version 3.0 will also allow a greater level of specificity in the data that lenders provide to Fannie Mae or Freddie Mac, and that can be easily used by lenders for other purposes throughout the loan life cycle, according to the GSEs.