Ask any lender if he or she would like to increase loan volume while reducing the resources necessary to do so and you will always get the same answer. Improvements in the area of efficiency are always needed and one important place for this is in the tools that are necessary for performing their specific tasks. Software vendors delivering these high-importance tools, ranging from client applications to various niche services, must continue to focus on solving this problem for their customers. Demand for innovative technology required to optimize the processes involved in originating and servicing loans is at an all-time high.
One of the challenges lenders face, while working with numerous vendors, is that many of these vendors require data to be communicated in proprietary formats. As the amount of data transferred increases while lending regulations continue to change, this problem of supporting many different data formats is a real and costly challenge.
Standardizing the Data
To support greater communication between various parties and vendors involved in the loan process, the Mortgage Industry Standards Maintenance Organization (MISMO) has put into place a series of standards designed to more securely, economically and efficiently exchange loan information between different parties.
Rather than continuing to abide by multiple data formats, adhering to the latest MISMO standards ensure that the entire mortgage industry, as well as technology vendors, are all speaking the same data “language.” The data and technology standards put in place by MISMO have been around for more than 10 years. With the move toward electronic loan files and the constant new industry regulations, the benefits to the mortgage industry of MISMO standards become more apparent in 2015.
A key benefit of adhering to data and technology standards is the simplified exchange of information between disparate applications and companies. From the standpoint of the technology vendor, there should no longer be a need to support a multitude of semi-redundant formats, as any vendor adhering to the standard format will be able to communicate seamlessly with other systems doing the same. For the mortgage industry, this eliminates the added time and money needed to translate incoming data into a specific format or building custom integrations with every vendor that you wish to work with.
More Choices, More Innovation
A byproduct of an open industry standard is an increased number of choices, in both vendors and technologies. Lenders and servicers will have the opportunity to select from a much larger pool of companies with which to do business, resulting in increased competition among technology vendors, thereby spurring innovation and most importantly greater value.
Less Chance of Lock-In
Programming to any specification, be it an industry standard or a proprietary one, should be viewed as an investment by the software vendor. A proprietary format carries a higher risk, as the company requiring that format could change their specifications at any time, or worse cease operating entirely. This is why many lenders are still stuck with legacy loan origination systems and servicing platforms using outdated technology and data fields. The cost of changing and reformatting years – or decades – of data is prohibitive. Industry standard formats will act as a hedge against this sort of investment risk.
While practices and standards may vary from company to company, the overarching goal across the mortgage industry when it comes to technology is relatively consistent. Overall, technology initiatives should be focused on getting data in and out as easily and cost-effectively as possible. Not only do data and technology standards support this notion, but they additionally promote increased productivity and profitability for those that choose to adhere to the set standards.
About The Author
Aaron Lynch is Vice President of Technical Services and Chief Technology Officer of Financial Industry Computer Systems, Inc. (FICS), a mortgage technology specialist that provides cost-effective, in-house mortgage loan origination, residential mortgage servicing and commercial mortgage servicing technology to mortgage lenders, mid-sized banks and credit unions. As vice president and chief technology officer, responsible for technical research and strategic analysis, the development and maintenance of all FICS software applications in accordance with programming standards, as well as the technical support department.