Jan. 29, 2015--Mackey, Mark email@example.com
(Mark Mackey is CEO of International Document Services Inc., Salt Lake City, Utah, a mortgage document preparation vendor for initial disclosures and closing documents. The company’s website is www.idsdoc.com.)
It’s no surprise that the TILA-RESPA Integrated Disclosure--TRID--is THE change that lenders are most concerned about in 2015--and with good reason. Not only will lenders have to grapple with the new form, but they will also have to reassess their internal operations to ensure the timely capture of the required information to complete it.
TRID represents a sea change in the origination process by introducing an unprecedented level of standardization in disclosures. That sea change is built into the timelines governing the delivery of the Loan Estimate. In fact, when you consider TRID rules along with those of the Qualified Mortgage and Qualified Residential Mortgage, standardization has emerged as the byword for all agency transactions.
With a tip of the cap to the TRID regulations, 2015 marks the year that a standard mortgage origination process will extend to lender communication with the borrower.
With this emphasis on standardization, the dataset each loan is built upon becomes even critically important. That’s because the dataset is where regulators and investors will uncover any material loan defects and assess a loan’s potential performance. In conjunction with TRID, the GSEs have made clear their intent for all approved sellers to adopt the Uniform Closing Dataset, a standard substantially similar to the MISMO 3.3 standard and to submit that dataset with the corresponding loan documents.
The utilitarian reason for standardized datasets enable the GSEs to automate their whole loan purchase review activities. However, in its Pool Deliver Dataset Implementation Guide, Ginnie Mae outlines other reasons for requiring its issuers to adopt MISMO 3.3:
The use of MISMO standards to exchange data will enable Ginnie Mae to better capture consistent and accurate data for loan information submitted for pooling by:
• Providing clearly defined data elements and requirements for loan and pool submission;
• Creating a baseline dataset with consistent naming conventions for Issuers to utilize for reporting purposes;
• Allowing Ginnie Mae to capture additional data elements to increase the granularity and value of the information captured; and
• Enabling Ginnie Mae to easily increase the dataset in the future to match growing business needs.
Intriguing words here: “consistent and accurate;” “clearly defined data elements;” and “naming conventions.” This explanation is interesting because it underscores a shift in thinking as to which loan elements an investor considers most important. The one word missing in this explanation is “documents.”
Once upon a time, documents themselves were considered the most critical element of the loan package. It almost didn’t matter what was actually on the documents--they just needed to be in the stack. Now, the script has flipped, so to speak, so that data trumps docs in the eyes of investors and regulators alike. Of course, docs still matter, but it is the elements used to build those docs (i.e., data) that are drawing the most attention because of the ability to assess loan quality using that information.
Mandated adoption of the MISMO 3.3 data standard may not sit well with everyone, but the benefits are indisputable. Heretofore, even with MISMO standards, every system handled the format a bit differently, resulting in issues with system-to-system data transfer and data integrity. Now, lenders are required to adhere to Fannie Mae and Freddie Mac’s Uniform Closing Dataset and/or Ginnie Mae’s PDD, meaning disparate systems cannot tinker with how they handle the MISMO 3.3 standard. In turn, data transfers between systems should become much more seamless.
The trailing effect of this is that eventually the GSEs are going to become incredibly specific about each field’s data format, an added level of granularity appreciated by anyone who has recently conducted their MERS annual data reconciliation. Human input error will be minimized, and additional benefits will most likely trickle down into other areas, such as Home Mortgage Disclosure Act reporting.
While TRID’s August implementation date seems far away this side of the holidays, now is the time to put those changes in motion. Although not a requirement, it would behoove lenders to begin migrating over to the MISMO 3.3 standard in preparation for it becoming a requirement in 2016.
(Note: Additional data points required by the GSEs creates a much larger file than lenders usually transmit, so by moving to the 3.3 standard early, lenders can identify the issues that need to be fixed well in advance of TRID.
Ultimately, the next six to seven months should be spent fine-tuning data import/export processes and testing the new combined disclosure. By the time TRID does roll around, those lenders that have prepared well should have their data transfer process down pat…perhaps even standardized.
(The views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor does it connote an endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions; articles and/or Q/A inquiries should be sent to Mike Sorohan, editor, at firstname.lastname@example.org.)