Modernization can be boiled down to an equation. The more data and automation available to improve the overall mortgage origination process, the more the overall cost to originate the loan goes down.

In fact, one of the industry’s largest organizations, the Mortgage Industry Standards Maintenance Organization (MISMO), is working steadily to streamline the mortgage origination process by replacing paper forms with digital processes.

In this episode, host Maiclaire Bolton Smith sits down with Sage Nichols, an executive for client success at CoreLogic, to talk about how standards, best practices and property data can pave the way for modernizing the mortgage industry.

In This Episode:

• 0:45 –Why is digitizing data the No. 1 priority for customers?
• 1:50 – How do standards around property data contribute to affordability? High cost to originate
• 2:55 – What are the challenges surrounding the adoption of these standards?
• 5:34 – The Natural Disaster Digest with Erika Stanley
• 6:32 – How is MISMO blazing the path to simplify the mortgage closing process (hint: e-closings are important)
• 9:09 – How exactly does accurate and reliable property data reduce the likelihood of fraud?
• 10:33 – What’s next for MISMO?

Up Next: Appraising PropTech Innovation: Do Short-Term Changes Have Long-Term Effects?

Find full episodes with all our guests in our podcast archive here: https://clgx.co/3zqhBZt

Sage Nichols:

Affordability is complex and it's multifaceted and a combination of several factors like interest rates and inventory and prices, but also the numbers you mentioned earlier continue to show the high cost to originate the mortgage for both the lender and the borrower.

Erika Stanley:

Welcome back to part two of our mini-series on MISMO standards. If you missed part one, I do recommend going back and catching up on last week's episode. To recap, we introduced our guest, Sage Nichols, and talked about how MISMO, the Mortgage Industry Standards Maintenance Organization, is instrumental for both industry professionals and homeowners looking to streamline the mortgage process. Let's jump into it.

Maiclaire Bolton Smith:

And you mentioned consumers. Are we talking homeowners there? Can you talk about what this means for homeowners? I think that's probably one thing that's going to be important to a lot of people.

SN:

Yeah. Yes. Yeah. The most important really here, I mean, that's what this is all here for. So the homeowner, the consumer trying to purchase a home, the digitization of the mortgage process through data standards is a huge win for that consumer.

MBS:

Yeah. Yeah.

SN:

And I think that's true from several angles. You mentioned earlier the process you've experienced going through. So first of all, it's frustrating. There's extended times. There's a lot of complexity. What is all this paperwork? What's the transparency? Where are things in the process? And so if you just think about it from a friction perspective, how do you remove the friction from the process and make for a more pleasant experience? Consumers really have an expectation of a more streamlined and frictionless experience today because of how we do things in our lives. And this really moves that mark to meet the expectations of the consumer. And then there's also an affordability factor here.

And affordability is complex and it's multifaceted and a combination of several factors like interest rates and inventory and prices. But also the numbers you mentioned earlier, continue to show the high cost to originate the mortgage for both the lender and the borrower. So, this impacts affordability. There is an aspect of affordability that I think is really important here. And the more data and automation that we have to improve this overall process makes that cost to originate go down.

ES:

MBS:

Oh. Interesting. Yeah. So ultimately is potentially helping the homebuyer and streamlining some processes for some mortgage originators out there.

SN:

Yes. Absolutely.

MBS:

So these are standards that are being proposed by MISMO that you're talking about here. And I imagine it's not just: Here you go, implement these standards, everybody checks the box, and they're done. There must be challenges getting them to be adopted. Can you talk a little about are there any challenges? What are the concerns that we have? And is there a timeline also of which people should be starting to use these MISMO new recommendations?

SN:

You are correct. It is a challenge. And I would look at it like any big technology initiative. Whether that's at an organization or it's within an industry, adoption is always the biggest challenge. Very seldom is it about the technology itself. It's about the adoption and the technology adoption curve. And certainly, MISMO has faced, I think, the same adoption challenges that you see elsewhere when it comes to technology initiatives of this magnitude. And then those challenges are heightened when it involves thousands of organizations and multiple constituents. And you're in a highly complex and highly regulated environment.

So to combat this and to continue to make progress and to increase adoption, MISMO's done a couple of things. First and foremost, and I think this is by far the most important, they've stayed the course. They've stayed on mission. This organization's been around over 20 years. It's made steady progress. It continues to grow adoption, continues to release new standards, continues to engage the market. And the objective and the mission of MISMO has remained constant through that. And I think that's really important, especially when you think about all the changes that the industry has gone through.

MBS:

Sure. Yeah.

SN:

Yeah. And the other piece of it is: very proactive engagement of all of the stakeholders. And when I say that, I mean you can't just put technology out there and kind of assume everybody's going to magically see the benefit. There's a concerted effort to engage all of the different constituents who need to be involved here. And that may be advisors to MISMO. It's board members. There's a workgroup process involved in MISMO that's very active. And when you look at those different areas, there's a lot of industry players represented. There's great diversity in the types of organizations that are participating, and that generates great involvement and engagement, which is really important.

ES:

MBS:

Yeah. I can absolutely see that. So, okay, I want to talk a little bit more about the homeowner side of things. We did talk about the stacks of papers and just the cumbersome effort that it is if you're a homeowner getting a mortgage. And I guess when it comes to this more digital ecosystem that we're moving towards, I remember when we bought our house a few years ago, I'm like can I buy my house on Amazon? Can I just click the button and do this and be done? And just to not have to go through the cumbersome process. And I feel like that was five years ago when we were buying a home that was kind of a pipe dream, and now it's kind of almost what you can do. So can we talk a little bit about from the homeowner's perspective? And where do you see MISMO really driving progress to simplify things for the homeowner, the consumer?

SN:

I think there's a few areas to highlight when it comes to progress in digital transformation and where we're already seeing a positive impact for the homebuyer. And one I think that we should highlight here is around e-closings, because that's something where there's been a lot of progress in recent years. And MISMO is really active in progressing the initiative here. So MISMO has RON standards, and "RON" stands for Remote Online Notarization. And so the RON standards and the SMART Doc standards for e-notes have wide adoption, and MISMO has certifications to determine if RON platforms, because there are RON platforms out there that help facilitate this, meet the standards in the e-closing space.

And then there's also the MISMO e-eligibility exchange, which is in partnership with Snapdocs that provides a central source of information for digital closing information. And we're in the process of building eVault interoperability standards. So all of this is being done to help industry scale and to really scale the utilization of digital technology within the mortgage industry. And while it sounds very industry-specific and technical, and I know I just used a lot of terms there that are specific to the industry, it has a very direct impact to the customer in the closing process, which has been one of the more painful processes historically.

MBS:

Okay. Okay. No. That's really helpful. You know, one thing you mentioned earlier on was insurance as well as when people are going through getting a mortgage. And in the Episode 40, we talked to Garrett Gray about streamlining the insurance process, and he suggested that reducing the number of touch points and the number of parties involved in a claim not only reduce the cost, but also chances of fraud. Is this something that we're seeing in the mortgage industry as well?

ES:

SN:

Absolutely. And it's a very parallel analogy there, because the accuracy of data, the reliability of data is naturally going to decrease the potential for fraud.

MBS:

Gotcha.

SN:

It's going to decrease the ability for things to happen, whether intentional or not, within the process. And, as you said, when it doesn't have to touch as many things or go through as many manual places where things can be adjusted, then you're going to have a result of either less potential for, and then probably also better ability to catch anything in the process because you're using the data more effectively.

MBS:

Sure. That totally makes sense. Okay. One last thing, just to close on, Sage, I think this is a really good place for MISMO to start. What do you think is next for MISMO? Where do you think that they may expand or if they haven't already started thinking about what's next?

SN:

Okay. So I did mention this earlier in the conversation, but I think it's worth bringing up here as well because it's such an emerging area of focus and that's better execution in the secondary market.

MBS:

Okay.

SN:

And, you know, we talked about how that is an area that is coming back to life, and we're going to see continue to grow into the future in terms of the parties involved there and the activity in involved. And MISMO has built a new private label, RMBS data exchange. That's "residential mortgage-backed security" data exchange.

MBS:

Thank you.

SN:

To connect originators with credit rating agencies and third-party due diligence firms.

MBS:

Okay.

SN:

Yeah. So that is a small segment of the market right now, but as it scales and this exchange continues to expand, there's real potential there to impact that secondary market as it comes back. And right now, that due diligence process is very manual due to the non-standardization of data. So lastly, we're also working to define what data points are indicative of ESG factors and ESG stands for "Environmental and Social Governance."

MBS:

Yeah. Okay.

SN:

So those factors in the mortgage industry in order to support future ESG compliance, investor requirements, and pricing in the secondary markets. And some of my peers at CoreLogic are very involved in the workgroup that's focused on this, actually.

MBS:

Yeah. And we've actually talked a little bit about that with George Gallagher as well specifically those impacts. So this has been so great, Sage. Thank you so much for giving us this perspective. MISMO is so lucky to have you as part of their board. So thank you for joining us today on Core Conversations: A CoreLogic Podcast.

SN:

Thank you for having me, Maiclaire.

MBS:

And thank you for listening. I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released.

And thanks to the team for helping bring this podcast to life, producer, Jessi Devenyns; editor and sound engineer, Romie Aromin; our facts guru, Erika Stanley; and social media duo, Sarah Buck and Makaila Brooks. Tune in next time for another Core Conversation.