What's smart about SMART Docs®
We have grown accustomed to all of the smart things in our life. We have smart cars, smart phones, and even smart watches. My dog Daisy is one of the smartest dogs I have ever had, but I try not to let her know it. In the mortgage world, we also have SMART Docs®, which have been developed thanks to the smart (pun intended) folks at the Mortgage Industry Standard Maintenance Organization (MISMO). SMART Docs® are going to help us revolutionize the closing and delivery process. Pretty smart, don't you think?
SMART Docs® were initially conceptualized by Fannie Mae 15 years ago. Fannie was looking for a way to have borrowers digitally sign closing documents, and then let lenders deliver the appropriate documents electronically. Fannie worked with the recently formed MISMO organization to develop standards for electronic commerce in the mortgage industry.
Considering that Desktop Underwriter and Loan Prospector were still in their relative infancy, there was a tremendous amount of innovation happening in a short amount of time back then. Fannie and MISMO were definitely on the right track, but a little ahead of their time. Fast forward to today, and the concept has become a workable reality for lenders.
The SMART in SMART Docs® is actually an acronym (Mortgage people love acronyms). SMART stands for Securable, Manageable, Archivable, Retrievable, and Transferrable.
Securable - The document and data are tamper-resistant
Manageable - The document and data are easily managed by systems
Archivable - The document and data can be stored and comply with records retention standards and regulations
Retrievable - The document and data are easily retrieved for review
Transferrable - The document and data are easily transferred between parties
SMART Docs® are designed using MISMO XML standards, creating documents that are readable both by humans and machines. They contain both the document in a human readable format (usually an embedded PDF file), and machine (and human) readable data from the document. We currently use an electronic document with similar properties - the Appraisal. The electronic report you receive from the appraiser is an XML file that contains all of the data about the appraisal, plus the appraisal itself in a PDF format. This lets recipients like Fannie Mae analyze the data received, and print out a hardcopy of the appraisal as warranted. Very slick.
The current version of the SMART Docs® standard (Version 3.0) defines 3 distinct versions or Profiles of documents:
Basic Profile documents allows the recipient to review the document, and see information relating to signatures (if signed) and the type of document
Retrievable Profile documents allow the recipient to view the document and the data
Verifiable Profile documents allow the recipient to view the document, view the data, and verify the data against what is displayed on the document
All well and good, but how is this going to be used?
One of the fist required uses of SMART Docs® is just around the corner. Starting September 27, 2017, lenders who deliver loans to Fannie and Freddie will have to deliver the Uniform Closing Dataset (UCD), which contains all of the information from the Closing Disclosure. This can be delivered with both the UCD data and a scanned copy of the Closing Disclosure, or a SMART Docs® complaint version of the CD, with a signed copy of the document embedded in the file. This version of the CD must comply with the standard using the Retrievable profile. If given the choice, I would use the latter option. It's one less step in the loan manufacturing process.
Some of the more exiting uses of SMART Docs® will be in the general acceptance and practice of using eNotes, eMortgages, and eClosings. Lenders will be able to have electronically signed documents that are secure, and provide an industry accepted electronic file format. This is going to allow for an enhanced customer experience. Borrowers will be able to electronically sign their closing documents instead of wet signing page after page, which should speed up the closing process. (I have heard from some industry studies where this was greatly appreciated by older borrowers, who can be challenged physically by having to sign over and over again. After hearing this, I thought of watching my elderly mother-in-law signing her name, and the light went on - electronic signatures are a blessing as we get older).
Another advantage will be in the eClosing process. Borrowers will not have to physically be at the closing table. A few months ago I saw a demonstration of the use of an eNotary and came away very impressed. As lenders, using eNotes and eMortgages will also speed up the delivery and funding process with our investors. We might be able to claw back some of the time we lost to TRID requirements, which could benefit the rates we can offer to borrowers.
Pretty smart, don't you think?
SMART Docs® is a registered trademark of the Mortgage Bankers Association
Please feel free to reach out. I can be reached at pbates@scapartnering.com
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