Predictive Methods: MISMO’s Role In The Mortgage Industry

*MISMO’s Role in the Mortgage Industry*
**By William E. King**

***The Mortgage Industry Standards Maintenance Organization (MISMO) has had a significant impact on the way data is stored and shared since the collapse of the housing market in 2008. MISMO is transparent by design, uses a single business vocabulary and is available across the entire mortgage finance industry. Adoption of MISMO standards represent the most significant opportunity for professionals to meet industry demands for increased transparency, access to complete data sets and more supported analysis across the rapidly evolving mortgage finance landscape.

****In 1999, MISMO was formed as an independent affiliate of the Mortgage Bankers Association with a goal to “coordinate the development and maintenance of internet-based Extensible Markup Language (XML) real estate finance specifications.” Incorporated as a 501(c)6 not-for-profit corporation staffed with volunteer participants, MISMO seeks to provide a common vocabulary and definitions  in the exchange of data in the mortgage industry to enable clear and consistent communications among professionals.

****The guidelines that MISMO’s chief architect Greg Alvord leaned on the most during its creation, and still today, is a focus on eliminating redundancy and multiple meanings. At Veros’ 2012 Predictive Methods Conference this past June, Alvord highlighted his mantra, the four points outlined below, as the essence of what MISMO does in allowing for the flow and communication of standardized mortgage data:
>> Things with the same name are the same.

****>> Things with different names are different.

****>> Be conservative in what you send and liberal in what you accept.

****>> Send what you have, I will take what I need.

****Historically, mortgage information has been provided in Word or PDF documents, making the data difficult to extract, transfer or analyze. Electronic data standards should be software-agnostic allowing different systems to “talk” to each other in a common language. In this format, data can be integrated into a wide variety of internal systems for analysis and retrieval. Many proprietary languages have been developed, but typically require purchase and maintenance of specific software and hardware. This is not inherently bad, but it adds a layer of complexity. For example, there are many types of word processing programs available in the market, but in most cases, if your computer doesn’t have the same software or the same version, users won’t be able to interact with each other.

****MISMO creates effective data standardization and communication tools in the mortgage industry by promoting transparency, accuracy and efficiency. Just as the mortgage industry continues to evolve and move toward greater sustainability, MISMO continues to change to accommodate new industry regulations and continues to play a critical role in the success of industry-wide initiatives like the Uniform Mortgage Data Program.

****The MISMO platform is experiencing a series of upgrades that are being utilized by industry participants in their systems. In my next column I will explore why more organizations in the industry need to start implementing the upgraded MISMO platform, and provide guidance on best practices for adopting the latest version.

Predictive Methods: UMDP Post Mandate

*UMDP Post Mandate: Signals for Current and Projected Industry Change*
**By William E. King**

***The 2008 financial and housing market crash exacerbated the need for greater accountability and transparency in gauging the risk inherent in a property, and cautioned investors not to limit focus to consumer risk alone. As the economy grappled with the ramifications of the crash, there is no doubt that significant change was necessary for the U.S. finance and housing system to effectively recover.

****A major change came in the form of the Uniform Mortgage Data Program (UMDP) and its core initiatives UCDP, UAD and ULDD. UMDP was created by the government-sponsored enterprises Fannie Mae and Freddie Mac (GSEs) under the direction of their regulator, FHFA, to enable the GSEs to capture consistent data, drive improved loan quality and manage risk effectively. It does so by developing and implementing uniform appraisal and loan delivery data standards, and a joint appraisal data delivery system allowing the GSEs to evaluate clear and meaningful data about the property pre-delivery, which had not been previously available.

****This initiative marks the first time in recent history that an effort of this magnitude has been implemented to reform the U.S. housing finance system. The scope of UMDP marks a cornerstone for success in continuing to positively evolve the U.S. finance and housing markets. It calls to mind such noticeable housing system shifts as the creation of the GSEs themselves or the subsequent creation of the mortgage-backed securities market.

****March 19, 2012 marked a significant milestone as UCDP was effectively implemented, requiring all lenders to electronically submit UAD-compliant appraisal reports for conventional mortgages delivered to the GSEs. This effort took just 22 months from introduction to mandate, which equates to moving mountains in the mortgage world in a relatively short timeframe, especially when one considers the vast and fundamental changes which had to first take root. Beginning with the process of information gathering and working with appraisal software providers and educating appraisers and lenders alike, it is clear the change was significant and one can only assume has come with a unique set of challenges.

****The current discussion is centered on how this change, now fully implemented, will evolve within the GSEs and how the lenders and other affected appraiser/appraisal service providers will adapt their business to maximize the benefits intended under UMDP. Questions remain such as, “As the industry moves toward total adoption of XML, will PDFs continue to be relevant;” and “How will the availability of standardized data in such greater quantity impact the way the mortgage industry moves toward recovery”? These questions and others prevailing in the industry all seek to encourage the further understanding of UMDP and its core initiatives as the industry forges ahead. Join us at the 2012 Predictive Methods Conference June 4-6 in Southern California to discuss UMDP’s implementation and projected evolution in greater detail.

Technology Spotlight: Eyeing The Right Appraisal Solution

*Eyeing The Right Appraisal Solution*
**Fidelity Bank**

***The GSE guidelines around appraisal delivery are cause for concern. Everyone is looking t ensure compliance. To this end, Fidelity Bank, one of Atlanta’s largest community banks providing personal and corporate financial services, has selected MountainSeed, a provider of appraisal management services, to provide appraisal and compliance services for its real estate portfolio. Here’s why:

****Fidelity Bank manages large portfolios of retail mortgages and does business in the secondary market while offering additional services in consumer, commercial and construction lending. The bank proactively addressed its need to comply with the latest interagency guidelines concerning appraisal independence issues and in doing so, made the decision to work with MountainSeed Appraisal Management.  “MountainSeed allows us to successfully manage our portfolios as well as our appraisal needs while complying with the interagency guidelines and FDIC regulations,” said Matt Horsman, appraisal manager at Fidelity Bank. ”By working with them, we are able to successfully hit all of the technical points while still maintaining control.”

****“Fidelity Bank is an integral part of this community and has a great reputation in providing service to its customers,” said Carl Streck, principal of MountainSeed Appraisal Management. “By partnering with them, we are able to assist in their real estate appraisal process, by providing them the opportunity to dedicate their full focus to serving the retail banking and lending needs of the community.”

****Atlanta-based MountainSeed is full-service appraisal management outsourcing firm with a refined skill-set in working directly with community and regional financial institutions to help them more profitably manage their commercial and residential real estate portfolios. MountainSeed Appraisal Management has developed a reputation within the industry as a player in helping financial institutions evaluate and value their real estate portfolios, particularly those involved in loss-share transactions.

Technology Spotlight: Sifting Through New Appraisal Rules

*Sifting Through New Appraisal Rules*
**Clarity Appraisal Management Company Profiled**

***Tired of all the appraisal changes? No worries, that’s where technology comes in. For example, ValuLink, a provider of appraisal management software solutions for banks, lenders and appraisal management companies (AMCs), was selected by Clarity Appraisal Management Company to be its appraisal management software platform. Clarity AMC is a Nashville, TN-based AMC doing business in 29 states.

****“We chose ValuLink for its ability to change the way we do business through its automation,” said Jason Bennett, co-owner of Clarity Appraisal Management. “The software platform has already made us much more productive, letting us do more business with the same amount of employees. Now if we grow by 5,000 additional orders, we will not have to add another person. We expect that kind of growth at our company this year.”

****Clarity AMC required a customized software platform built for its own business processes to automate all of its manual tasks. This will allow Clarity AMC to expand its appraisal ordering client base without adding additional employees and expenses.

****“ValuLink is a true business partner,” Bennett added. “They came in to our offices and we explained what features we needed and they put it together for us. The system through automation does all the things we used to do manually. ValuLink’s customer service is second to none, too. They followed up quickly and thoroughly to every inquiry we made.”

****ValuLink delivers a fully functional portal to a new client on the first day of doing business, which enabled Clarity to speed up its migration process to the new platform. The software platform is integrated with major loan origination systems, allowing lenders and banks to seamlessly and quickly order appraisals as mortgages are originated. ValuLink’s appraisal management platform includes intuitive features for vendor enrollment, appraisal order placement and storage, no set-up costs, and full accounting features. The platform includes a UAD Preview engine for client compliance with Fannie Mae and Freddie Mac’s new appraisal dataset and full Uniform Collateral Data Profile (UCDP) connectivity.

****The ValuLink platform makes it easy for Clarity’s clients to place orders and access appraisal reports, logging in only once to enter the system instead of three or four times under Clarity’s old appraisal management software. Plus, ValuLink equips Clarity AMC with a mobile smart phone application that lets appraisers accept or decline an order while in the field. Today when every minute counts in the industry, the mobile app increases productivity and speeds up the appraisal process from start to finish.

****Scott Schneider, executive vice president of ValuLink, said, “Clarity AMC relies on accurate, compliant, and timely reports to keep their crucial high growth clients happy. As AMCs expand into more states and state registration fees take a larger bite out of profits, they need next generation technology that increases efficiency and accuracy while simultaneously helping them maintain profitability. The ValuLink platform is helping Clarity AMC better serve its existing clients and grow its business by simplifying process management with a design that is easy to use for the AMC, their customers and appraisers.”

Understanding The News: A New Imaging Tool Hits The Market

*New Imaging Solution Hits The Market*
**Taking Paperless Further**

***As we talk more and more about UMDP, the idea of being more data driven arises. Investors are literally forcing lenders to get with the program and embrace the data. The fact is that during this transitional period lenders will rely on imaging for now. As a result, vendors have to come up with imaging tools that can help lenders more toward a data-centric process. For example, PROGRESS in Lending has learned that Blueberry Systems LLC has enhanced its enterprise-scale document imaging solution, Manifest, to include an advanced package viewer, providing users with a more dynamic solution to further automate image-enabled workflow.

****Manifest enables users to easily capture documents and store them as part of the core loan record. The solution can function as a stand-alone service or be integrated into the production workflow. The package viewer was developed to work with Manifest to enhance the viewer’s experience, ensuring images are dynamic and easy to navigate and utilize.

****Blueberry Systems’ package viewer allows users to define specific sets of documents within a loan and easily determine who views particular documents, the order in which the documents are viewed and ensure the most relevant documents are presented to each person in the workflow. In addition, business rules can be set to determine the documents that are required in a package and which documents have to be approved in order for the loan to continue forward. This customizable document presentation solution enables Blueberry Systems to provide a more natural, human approach to the way people work with imaged documents.

****“This package viewer presents indexed documents that can be streamlined directly into the workflow,” said Lloyd Booth, president and COO of Blueberry Systems. “We can dynamically create pre-sorted components at any number of points in the process, ensuring that validated, critical docs are included. Manifest automates the packaging, delivery and presentation.”

Market Analysis: Are You Confused?

*Are You Confused?*
**By Tony Garritano**

***I have been pleasantly surprised at to how well the industry has responded to the new appraisal rules. I remember the issues with RESPA. And loan officer compensation was tough for most to comply with when it hit earlier this year, too. I think the ease of compliance this time is due in part to how vendors have responded with quality educational pieces. For example, Global DMS did a great white paper. If you’re still confused, here’s how they describe all the changes:

****“UAD stands for Uniform Appraisal Dataset, and is a component of the Uniform Mortgage Data Program (UMDP). UCDP is the Uniform Collateral Data Portal, and is also a component of the UMDP. While these programs will work in conjunction with each other, there are distinct differences in the programs and the requirements.

****“The GSEs define the UAD program as:

****“All fields required for an appraisal submission for specific appraisal forms and standardizes definitions and responses for a key subset of fields. The UAD-compliant file can be delivered in either a PDF or an XML file. However the UAD program DOES NOT need to be delivered in an XML format. The MISMO 2.6 XML file is required for the UCDP, although you can submit a PDF file to the portal and the information can be extracted into an XML file for a fee.

****“The GSEs define UCDP as:

****“A single portal for the electronic submission of appraisal data files. Lenders will be required to use the UCDP to submit electronic appraisal data files that conform to all GSE requirements, including the Uniform Appraisal Dataset (UAD) when applicable, before the delivery date of the mortgage to Fannie Mae and Freddie Mac. The general UAD process will be driven by the appraisers. The appraiser will be responsible for delivering the appraisal file in the required UAD format. The delivery to the portal will be driven by the lender. The lender can deliver the file to the GSEs, or have an Appraisal Management Company (Agent) deliver the file on their behalf.”

****It was a great white paper. To read more go to the Global DMS website or the PROGRESS in Lending iPad app. It’s a great read!

Technology Spotlight: UAD Help In Demand

*Appraisal Assistance Needed*
**NREIS Profiled**

***Let’s face it, the appraisal space is changing. As the industry moves toward a more data-centric approach, lenders and others are looking for an automated approach. For example, PROGRESS in Lending has learned that National Real Estate Information Services (NREIS) is in production with, an appraiser-facing portal that scrutinizes appraisal reports for completeness, correctness, consistency, and compliance.

****“We were impressed with the capabilities of which include seamless integration with our existing vendor website, ensuring an automated process and providing compliance with the MISMO XML and Uniform Appraisal Dataset (UAD) protocol that Fannie Mae and Freddie Mac created,” said Chris Behning, CIO of NREIS. “We also wanted to ensure that it’s reliable and flawless in its execution. Given our history in working with ACI, we were very confident in their ability to deliver.”

****“NREIS recognized that could satisfy the delivery requirements of the investors, speed the process, and trim costs,” said George Opelka, senior vice president for sales and marketing at ACI. “ACI offers enterprise-level solutions that allow clients to receive and review appraisal reports, comply with regulations, and deliver appraisals directly to the Uniform Collateral Data Portal (UCDP).”

****ACI has been providing software solutions for the valuation industry for thirty years. ACI offers desktop, tablet, and browser-based industry-standard applications, as well as custom-developed solutions, reaching beyond the foray of the valuation and mortgage services industries to real estate, insurance, and corporate and franchise inspection communities. Headquartered in Palm Coast, Florida, ACI is a division of Verisk Analytics. Verisk Analytics is a provider of risk assessment solutions to professionals in insurance, healthcare, mortgage lending, government, risk management, and human resources.

Video Insights: Ensure UAD Compliance

*Ensure UAD Compliance*

***As a public service, PROGRESS in Lending wants to alert you to a new solution that can solve your UAD issues. Specifically, UAD Reader is a free application that lets anyone work with any appraisal sent in the newly required “UAD” MISMO 2.6 XML format. The GSEs are requiring appraisals in MISMO 2.6 XML format as a part of their Uniform Appraisal Dataset (UAD), but you won’t be able to open, read, or verify the contents of the appraisal without a way to open and read the files. UAD Reader is a free application put out by a la mode that solves this industry problem.