MISMO XML - The Language of Lending
In many recent articles and conference presentations, we have heard that lenders need to adapt to a more data-driven model to keep a competitive advantage. That sounds great, but how does this "model" actually work. Today I would like to dive into the Language of this model, MISMO XML. There are more acronyms involved here than some Federal agencies, but I hope to show you what MISMO XML is, how it works, and why it's important to you.
It's not your old Fannie 3.2 file
Remember the first time you had to import or export a loan to / from your lending platform? You probably used a Fannie Mae 3.2 file. This was the standard method of letting different lending systems talk to each other. It was great for the machines to communicate with, but if something went sideways, it was pretty hard for humans to decipher where the error was.
Here is what a piece of a 3.2 file looks like:
YUK .......
Here is what a part of a file looks like in MISMO XML:
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Now it's not War and Peace, but you can actually read what your machine is reading.
MISMO XML
MISMO (http://www.mismo.org) stands for the Mortgage Industry Standards Maintenance Organization. It is a subsidiary of the Mortgage Bankers Association. MISMO was established in 1999 with the mission of creating
standards for electronic commerce in the mortgage industry. MISMO membership is comprised of lenders, regulators, technology providers, and others with interests in the mortgage industry. The goal in developing these standards is to increase efficiencies and accuracy in the loan manufacturing process while reducing costs.
XML stands for EXtensible Markup Language. It is a structured language, meaning data must be delivered in a specific format. It is similar to HTML (HyperText Markup Language, which is how web pages are designed), but XML is better for transmitting, receiving, and storing data. XML also allows designers to make up a vocabulary of how a specific type of file should be formatted. MISMO has done an incredible job of designing this new language of lending. It is an ongoing process, but the industry is reaping the benefits.
After the meltdown in 2007 and the receivership of Fannie and Freddie, the agencies were directed by the FHFA to adopt common standards for the collection of loan level data from lenders. Leveraging the potential of the MISMO XML model, they jointly introduced the Uniform Mortgage Data Program (UMDP). The UMDP mission was to come up with a set of data standards to enhance the amount and accuracy of loan data delivered. We are currently using two of the UMDP specifications, for Loan Delivery and Appraisals:
Loan Delivery
For several years now, you have been delivering data to the Agencies in a MISMO XML format. The Uniform Loan Delivery Dataset (ULDD) replaced the old MORNET and MIDANET file formats (these were about as readable as the 3.2 file above).
Appraisals
Back in 2011, we had to start getting appraisal data to send on with our loan data. This specification is the Uniform Appraisal Dataset (UAD). The file you receive from the appraiser contains all of the data about the appraisal, plus a printable (.pdf) copy of the appraisal embedded in the file.
The next two, coming in the next several months, are for Closing and the Loan Application:
Closing
Beginning in September 2017, all lenders delivering to the Agencies need to send closing disclosure information with the existing ULDD delivery data. The Uniform Closing Dataset (UCD) contains all of the data points in the Closing Disclosure delivered in a standard format. Every lender and lending system must deliver the data in the same exact way.
Loan Application
Starting January 1, 2018, lenders may start using the new Uniform Residential Loan Application. The new application also comes with its own data standard, the Uniform Loan Application Dataset (ULAD).
There are also 2 other standards on the horizon. The new HMDA file for 2018 will be in a MISMO XML format. A loan servicing standard, the Uniform Mortgage Servicing Dataset (UMSD), is also on the horizon.
I said there would be more acronyms than a government agency. Now, what as lenders, and not technologists, do you need to do?
Talk with your vendors. Ask your technology providers where they are with their initiatives to adhere to current standards, timelines to deliver the new
requirements on time, and give you ample time to test. Ask if they are a member of MISMO. If they are not, ask how they keep up with the MISMO standards. I would also recommend adding data standards questions to your vendor management program.
Keep current on what is happening at MISMO. You do not have to be a member of MISMO to keep current on their activities. You can always follow what is going on by joining their mailing list http://www.mismo.org/get-involved/follow-mismo . For larger organizations, membership might be a prudent business decision.
Follow announcements from the agencies on the UMDP program. The agencies send out a lot of information on a lot of subjects, but make sure someone in your organization is keeping current on UMDP, and the associated specifications.
Adaptation and implementation of the MISMO XML model has been transforming the technology side of the mortgage industry for some time, and the pace of change is rapidly accelerating. Most of these changes have been thrust upon lenders, but the use of these industry standard data specifications across the lending process presents many opportunities for innovation in addition to increasing accuracy and efficiencies, and cutting costs.
Please feel free to reach out. I can be reached at pbates@scapartnering.com
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