FHFA, GSEs Rebooting Servicing Data Standards Project

The lack of servicing data standards has recently been a source of criticism by regulators.

The Federal Housing Finance Agency is launching a "Servicing Data and Technology Initiative" with Fannie Mae and Freddie Mac this week to identify gaps and inadequacies in servicing data standards.

In anticipation of this new effort, the government-sponsored enterprises earlier this year suspended work on the Uniform Mortgage Servicing Dataset, an XML-based data file that was being developed to support a common data standard and new servicing form as a component of the Uniform Mortgage Data Program.

"UMSD will likely fold into this Servicing Data and Technology Initiative," said Sam Oliver, Freddie Mac's vice president of single-family business transformation management, during a panel discussion Wednesday at a Mortgage Bankers Association technology conference in Los Angeles. "The good work there will not be lost."

The lack of servicing data standards has recently been a source of criticism by regulators, particularly aimed at nonbank servicers that are acquiring loan portfolios from numerous disparate sources. New York's banking regulator, Benjamin Lawsky, recently made specific references to servicers' difficulty in handling the transfer of documents and dealing with distressed borrowers.

"We see electronic loan files strewn around the globe with no one who knows how to pull them together," Lawsky told bankers in New York last month. "We see a virtual potpourri of computer systems containing critical borrower information, but no one who knows how to extract that information at the right time and for the right purpose."

Staffs from both GSEs have been working with volunteer members of the Mortgage Industry Standards Maintenance Organization, the MBA-backed industry data standards body, to create more than 1,000 servicing-related changes or additions to the MISMO reference model.

The new effort is being described as a fact-finding exercise and the FHFA and GSEs began reaching out to industry participants this week at the conference to solicit their participation. The FHFA team responsible for the project will eventually report their findings to FHFA executives and make recommendations for how to move forward.

MISMO standards for servicing technology have historically lagged the quite robust development of the MISMO Reference Model in the origination side of the mortgage industry. This is because there are many more types of software that need to communicate and exchange data during the origination process (including loan origination systems, doc prep software, verification services and others) than on the servicing side. Most nondefault servicing operations are managed by servicing systems of record a technology segment dominated by Black Knight Financial Services' Mortgage Servicing Package, which enjoys a market share of about 50% of U.S. mortgages measured by dollar volume.

The work already done on the UMSD "really built out the servicing components of MISMO reference model," Oliver said, but after receiving feedback on that work and taking into account other changes in the servicing industry, the "FHFA chose to take a step back," and take a broader look at servicing data technology needs, Oliver explains.

But as that work was being done, GSE and FHFA officials realized that while the UMSD was sufficient to support their data reporting needs, it failed to address other areas of the servicing business, such as transfers of servicing rights.

Rather than continuing to proceed with creating data standards that would be limited to Fannie and Freddie's needs, the FHFA decided to identify additional data elements that could be incorporated into the industry standards.

"This might be a way for a broader industry solution to be developed in support of servicing technology," Oliver said.

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