I want to continue our conversation from last month and discuss the true drivers of automation in the mortgage space today. First, we have the issue of fraud.
Data is the driver behind each real estate finance transaction. Looking at a purchase transaction. Nearly 70% of the data elements populated on the Universial Residential Loan Application (Form 1003) are collected either when the property is listed for sale or when the purchase and sales agreement is executed. In a purchase transaction the data between those data sources need to be combined and transferred to the lenders origination system electronically. Obviously a refinance tranasaction is working with a more abbreviated data set, but the utility and process are the same.
The real estate finance industry has compiled a comprehensive data dictionary with the development and revision of the MISMO data set. This standard is the vehicle to share and transfer common data elements through out the loan process. Unfortunately the standardization of data elements and attributes is not currently available from the multitude of listing services used by the real estate industry. In a perfect world the data elements in a purchase transaction would be directed from the Realtor® to the lender, eliminating rekeying of the data into a website or the loan origination system. The present process of delivering a paper copy, minus the listing data to the lender, generates friction in the transaction and potentially opens a window for fraud. Everyone acknowledges best practice moving data electronically is faster, more efficent and elements errors.
Traditional data delivery does not look beyond their own vertical silo. The real estate finance and real estate industries understand the benefits of communication and collaboration to close a transaction. However, they are reading from two different books. Both of these industries continue down the same process happy path that has worked the last forty plus years. This is expensive, inefficent, inaccurate and easy to fraud. The fork in the road of traditional data aggregation and management is coming, and while the players may not surprise you, they likely won’t be your traditional technology solution providers.
Touch points need to be reduced to improve data integrity, speed up delivery and drive down the cost of the process. In essence much of the groundwork is done, the data set needs to be more robust and delivered in a standard format (MISMO), providing accurate, verifiable and auditable data file.
This data set follows the life cycle of the loan rendering, (view) when needed, in the appropriate document. Once the data is compiled it can be parsed to render the appropriate data fields for the particular document in a browser. Indeed the basic premise of the SMART doc® is data that appears in a browser as it would if you were completing a paper document. Changes to the data are date & time stamped, tracked and logged in a history file. As the transaction moves through the process certain fields become locked, and once the loan is eSigned and closed the transaction is then securely locked down and wrapped with a tamper evident seal to prevent further changes.
Funding generates the data file necessary to deliver the collateral to the investor, at a minimum the e-Note. Since nothing is printed to paper it can’t be altered or lost. Based on the users credentials anyone who is authorized to view any part of the transaction renders the document in a secure browser.
About The Author
Alan Harris is the founder of IRIS Corporation and is a designated Certified Mortgage Banker, (CMB), with 25+ years’ experience in the real estate finance industry. He started in loan origination, servicing operations and system administration. Subsequently moving to Change Management, Process Re-engineering, System Integration and ‘e’ Implementation. Alan has ‘backend’ and/or User Interface ‘hands-on’ experience with the many Loan Origination and leading Servicing systems, managing integration or implementation of those platforms.