Welcome to this week’s episode of Optimal Insights. Jim Glennon, Alex Hebner, and James Cahill kick off the episode with a market update, breaking down recent Federal Reserve developments, inflation data, and what it all means for mortgage rates. In the second half of the show, Jim Glennon and Kevin Foley sit down with Brian Vieaux, President of MISMO, to discuss why mortgage data standards are essential to reducing friction, managing compliance, and preparing the industry for AI-driven innovation.

They share expert perspectives on how trusted data, industry collaboration, and standardization are shaping the future of mortgage lending and the broader economic landscape.

Key Points

1. Federal Reserve leadership changes and market reaction
2. Inflation trends and implications for mortgage rates
3. Why mortgage data standards reduce cost and complexity
4. The role of standardization in compliance and audits
5. Preparing mortgage lending for responsible AI adoption

Chapters

1. 00:00 – Market Update: Rates, Fed Leadership, and Inflation
2. 15:00 – Economic Signals and Mortgage Market Impacts
3. 22:00 – Why Mortgage Data Standards Matter
4. 32:30 – Compliance, Efficiency, and Cost Reduction
5. 40:30 – Data Standards and the Future of AI in Mortgages
6. 50:00 – Industry Participation and Final Takeaways

Optimal Insights Team:

1. Jim Glennon, Senior Vice President of Hedging and Trading Operations
2. Alex Hebner, Hedge Account Manager
3. James Cahill, MSF/MSR Account Manager
4. Kevin Foley, Director of Product Management

Special Guest:

1. Brian Vieaux, President of MISMO

Production Team:

1. Executive Producer: Sara Holtz
2. Producer: Matt Gilhooly

Commentary included in the podcast shall not be construed as, nor is Optimal Blue providing, any legal, trading, hedging, or financial advice.

still spend a lot of time in this industry checking the checkers along the way.

And so, you know, one of the, one of the things we think about at MISMO is the adoption at scale of standards should ultimately reduce the feeling that you need to check the checker that checks something before you, you should be able to rely on the data as it passes through the low manufacturing process.

Mm-hmm.

Welcome to Optimal Insights. I'm your host, Jim Glennon, Senior Vice President of Hedging and Trading Operations at Optimal Blue. Our clients and industry partners have long relied on Optimal Blue for trusted insights and commentary. And these podcasts are an evolution of our commitment to keeping the industry informed. Let's dive into today's episode. Welcome everybody. Today is February 2nd. I got a great show for you today. lot going on. You've probably noticed a little bit of news around the Fed. So we'll talk about that in depth here in a moment.

also do a little bit of just a general market update. Had some interesting numbers that came out last week and some stuff to look forward to this week as well. We also had a very special guest coming up. and I will be interviewing Brian View, president of MISMO. MISMO is the mortgage industry standards organization, if you're not familiar with MISMO. looking forward to a lively discussion with Brian about MISMO and what they do and...

and how they are looking to work with all of us continue improving the housing finance industry. Before we get into market update, just a little bit of data. OBMMI is still relatively low, even given the little bit of a sell-off on Friday. 6.06 is the conforming 30-year average rate that borrowers are locking in right now. tenure is up to 4.26, so still feeling a little bit of the pain of the Warsh appointment or nomination, I should say.

lead the Fed. And again, we'll talk about that more in a minute. But that spread between treasuries and mortgages still continuing to shrink 1.81 as of the most recent reading on Friday. So that's good. Anything below two has been great over the past couple of years. And as we get closer to 1.7, 1.6, good news for mortgages, even as we see treasuries bounce a little bit and get closer to 4.3, still seeing mortgages close to that five handle.

So we'll talk a little bit more about that. Let's go check in with James and Alex, see what's going on in the market.

Okay, let us get right into it and talk about the elephant in the room. So the long-awaited, not surprising nomination has been announced for the next chairman of the Fed. So, Market obviously reacted. We'll get to that here in a minute. A lot of history between the president and Warsh's family, which is interesting.

going back to college, Anyway, I don't know where to start, but I'll start with Alex. What are your thoughts and just what's the general take from the markets right now nomination?

Yeah, So Kevin Warsh was the winner on ⁓ the nominee for federal reserve chairman. He beat Hassett and Reeder. ⁓ And he seems to be, think Kevin Foley has been on the podcast a few times, it pretty well. He's kind of being perceived as the safe in particular, one of the other candidates was seen as

at the, during like the depths of the crisis. And from my readings, know, Ben Bernanke, who was the head of the Federal Reserve at the time, he and Warsh got along pretty well. And then ⁓ as the presidential administration's transferred over from George W. Bush into Obama, Warsh was kind of the first to start raising red flags around. I think the Federal Reserve has done enough at this point. ⁓ The economy seems to be on

Mm-hmm.

Like I said, he was on good terms with Bernanke, who was head at the time, entered academia and all that. That's where he spent the rest of his time, really, just on boards and in academia and the interim period. And again, he was known as a hawk during all this time. In 2010, when the inflation rate was 10%, he was worried about inflation when the unemployment rate was 10%, is what pretty much no one else was looking at at the time.

Yeah.

forward to 2024, know, the political winds are maybe changing a little bit as Trump is looking to win the presidency for second time. And his tune seems to have changed a little bit. And I think this is what gives some people a little bit of pause in regards to Warsh. to be pretty hawkish when a Democrat is in power. then he, at least with what he's been saying with the last 12 to 18 months, he seems to be a little bit more dovish and open to cutting rates.

Mm-hmm. ⁓

Did that help

him get the job? I mean, I don't think anyone that went into that job interview saying they were going to be hawkish going to get the job. So I do think that there's a little bit of that there. at the same time, you got to like read between the lines and like, Warsh has always been against quantitative easing. He's not necessarily against cutting of a large diversity of opinion out there right now about him. But at the end of the day, I do think he was the safe pick.

And the markets might now be pricing expectations for a higher rate path if he does stay on that global financial with for some more rate cuts. But again, he's not like the Hassett who was going to be in Trump's pocket and was going to call for rate cuts immediately.

Right. It's so interesting, like not unexpected, but still out of the three, maybe the least expected, right? When you say safe pick, you could also say on paper, like the least likely or the maybe for what we think policy, we think the White House wants in terms of policy, probably the wrong pick, but also, it could be part of the strategy to say, you know, with gold and silver rising and, and some of the, some of the worries out there of, of, ⁓

the trade, trading away from America, that the independence of the Fed seemed to be slipping. And I think that the White House firmly knew that that was going to be a concern. Bringing in Warsh, think turns that attitude a little bit or turns that perception, right? That's why we saw precious metals sell off on Friday and saw kind of this odd, I don't know, capitulation in the market because this pick is on paper. Again, it looks more hawkish than the other.

possible picks, but at the same time, you said, Warsh has moved with the tides a little bit and he still will likely based on his history with the president and his ties to the Trump family will probably do the bidding of the White House. Maybe not to the extent that Myron would or some others who have called for kind of ridiculous, deep rate cuts, but it's likely he's going to be more aggressive maybe than, than chairman Powell.

He's also looking for a smaller Fed, which is an interesting thing. You mentioned, QE, he was on board with QE1 and that was pretty much it. Then he said, we went way too far to get into the many trillions. And there's good articles that are written about his stance on wanting a smaller Fed. Nobody has great plans to actually execute on that, but still it's maybe something that goes along with the Republican stance on monetary policy that the Fed.

Probably is way too bloated and we need something a bit smaller. Anyway, I want to hear from you too, James. I think you have some opinions on this nomination and whether it'll even go through too. We should talk about that here in a minute.

Yeah.

He's definitely, he's an interesting double edged sword in that he's been critical of the Fed for years, right? So getting picked, getting in there, he comes and he's like, you've been doing this wrong. We need to cut rates. That doesn't actually swing out of tune, right? You could look at that and be like, that might be some of the administration, but it also, well, he's been critical for a long time of the way we've been doing things. So it lines up with him. He also though has been very critical of quantitative easing. so with Fannie and Freddie now going to buy.

bonds out of the market, that is something that he probably wouldn't be for. So, hey, are we going to turn that hose back would probably push against that, and that would not be as liquid for the administration. So it's kind an interesting pick there. He does face a challenge in the Senate the banking committee. He needs to be confirmed.

Tillis, one of the senators has said, I will not approve of any nomination until what is going on with Powell and Misa Cook is kind of sorted out. We don't like seeing a hand stepping into the Fed so heavily. So we have to figure this out before we can do the nomination or the actual approval. Now that he's on the short list or the pick list, it's kind of anyone's...

Mm-hmm.

game as to whether he'll make it. and I were all talking beforehand. I think, I don't think he will drop out anytime soon, although there was a little bit of speculation around that just because of the market. Gold and silver kind of reacted poorly. But looking at it, you know, give it a weeks, months we have until May. May with Powell leaving or set to leave. Kick it a few months, see what...

goes on with the DOJ, and then I think he'll get approved.

Gotcha. So the note is, yeah, I've heard the same speculation if rates continue climbing, because there was a rate reaction on Friday too, if you see the treasury rate get up to, you know, start nearing four and a half percent, that the, just that mood of the market might, might cause him to drop out. And that might again, be part of the strategy. Like there's, there's a little bit of a speculation that, that he's a sacrificial lamb, which I wouldn't think he would do.

intentionally or consciously, but possibly that's part of the strategy as well. he, this nomination gets blocked. There's more back and forth between White House, Congress and the DOJ. You have to think eventually if those threats hold that these charges get dropped, which President Trump could do with the wag of a pen, right? But again, there's this, they're each kind of taking a page out of each other's books with these threats to basically go nuclear

in state policy, that's, that's more preferential to the white house or to get someone nominated or not nominated. So it's been interesting to just to see that back and forth. interesting times. And we will see how it plays out here over the next few months, as you said, because once we get towards may, Powell should leave if there's a new chairperson, but if there's not a new chairperson, Powell continues to be.

the seat and as you can tell from the rhetoric in the social media, like that's the last thing that in our industry that Bill Pulte wants, it's the last thing that Donald Trump and the rest of the administration want because it does feel like the Fed is standing in the way of their policy needs. Even though it's seemingly unlikely that no matter who gets confirmed that there's going to be much of a change in the direction of the Fed funds rate.

I think Kevin Foley put it, put it best. I don't know. I've quoted him twice now, but, you know, this pick over the other two, the other two being far more dovish picks, you know, this one was one to appease those worried about Fed independence. Um, and we might see worse used as a punching bag for lack of a better by the Trump administration, in similar ways that that pal has been, you know, there, there, there'll be a little bit of friction between the but as,

Trump said he's straight out of central casting and I'm sure he'll play his role well.

And between him and Powell, did think it was an interesting anecdote that if we cut back to 2018, we look at who was the final two picks for Fed chair, it was Powell and it was Warsh. So, you know, if, if at first you don't succeed, right, try and try again, it's a story of success for him. He might finally make this cut, but they're, they're not too similar. They're not too different.

Right. And again, deep ties personally, which is an interesting thing to keep in mind. I mean, none of It's all very public that their families go way back and Donald Trump himself and, and, and Kevin Warsh go back quite a bit. So we will see how that works out. But yeah, it is likely that once he gets in that seat and realizes the, that what you already know is the gravity of that position, he will need to push back a little bit versus

play dovish card and risk again having that trade come on or that worry in the entire globe that the Fed has been compromised in terms of its independence from politics.

A lot to think about. keep your eye on that story gang. mean, nothing different to do, I would say in terms of strategy. mean, whether you're hedging or you're, you know, your originator lock and loans, mortgage rates have not reacted huge to this news, but certainly could. ⁓ but it doesn't, doesn't feel like, again, feels like this is somewhat calculated. There's still some stability here that'll work itself out over the next couple of weeks, but we'll keep you, keep you apprised and we'll have a special episode if something really gets out of hand, but.

I'd look for, you know, I'd watch the 10 years, especially you see that 10 year continue to drift up. I'm not sure if that was part of the strategy. So there might, there might be a reaction there.

So kind of dwarfed by that conversation are there are some other things going on. There was a Fed meeting last week. Anything notable from that meeting that you gentlemen would would bring to this discussion?

Nothing massive. think the market as a whole was far more focused on other realms, what Trump was going to do with his nomination and didn't know, there was no rate change there. Maybe the biggest change was, mean, Powell in the press briefing, kind of said the economy's on solid footing, mainly on the back of business earnings and the AI boom. And then we saw ⁓ Myron in particular, he kind of softened his stance.

He's been voting for 50 basis points as we know, he's kind of been a loner doing that. this time around, he voted for a 25 basis point cut along with Waller. Waller did the same back in ⁓ for the last meeting last year as well. it maybe shows a bit of a softening in this Dove's position that maybe we aren't, economy isn't in the the doldrums that Myron said it was when he first came in. On the topic of Myron, his official posting

ended January 31st, again, he was just coming into cover the remainder of Kugler's term. But there's still no word on his replacement. ⁓ And from what I can tell, he will stay in that position until much like Powell, until a successor is confirmed. So I was thinking maybe Trump might do a double nomination. You know, he might say Warsh and someone else to replace Myron, but for the time being, it just seems like Myron is going to stay in that role. Again, indefinitely until a replacement is found.

But that's really all there was from this particular meeting.

Okay, good. Yeah, as you said, jobs market is not broken yet. The economy does seem like it is again, just resilient. Just seems invincible compared to some, you know, against some of the headwinds right now and but also seeing some inflation, which kind of goes against, you know, some of those votes as well. Like PPI was a little bit hot last week, wasn't it?

Yeah.

Correct. Yeah, it came in, was supposed to be 0.2, 0.3%, I believe, and it came in at 0.5 % month over month. That dragged the year over year reading up to 3%. That's the first time we've had a 3 % reading on an inflation metric in a number of months And the core number was 3.5 % for year over year. And just remember that PPI is the prices that producers are paying. So it kind of to front run the prices that consumers will see when...

when producers, they choose to pass those prices on, them on to consumer, which they're probably apt to do. So we could see a spike in CPI coming down the pipeline here. not a huge indication of what particularly spiked the PPI this time around. Although I have been seeing analysis that those warehouses that were very full this time last year that were front running tariffs are pretty empty. so obviously imports have to continue.

So we might be seeing some delay to those tariffs as we've drawn down the inventory we had domestically that was acquired prior to the tariffs. And now we're maybe beginning to see those price of tariffs. But keep an eye on that. Again, it's just one reading and it was just slightly hot. But again, 3 % is not where we would like to be.

Right. It does match up with some of the narrative we've had on this podcast. And James, I think you've mentioned this more than once that, you know, if we don't see a corresponding number in the CPI, meaning we don't see a corresponding bump in prices for the consumer, we continue to see a little bit of just margin tightening, right? That the producers are kind of eating the effects of tariffs, which again, on paper are not turning out to be anywhere near the actual notional rates of these tariffs, right? 10, 20, 30%. We're talking about slightly

slightly high inflation, right? Finally seeing a three handle on the number, but three and a half with core, meaning something's coming through the pipe that's increasing prices and it likely is related to tariffs that are a little bit delayed because of inventory drawdown. But so far, the consumers is paying a lot less of that, right? We're seeing CPI between two and a half and three.

Yeah, I definitely think that this is kind of a sign of that. was digging into PPI earlier week and it's mostly services. Goods was actually flat month to month. So services is what kicked us up throughout the course of December to January. It was, you know, food and alcohol, health and beauty, those kind of luxury products. So I, you another theme that we talk about on this podcast a lot has been that K shaped economy that

Mm-hmm.

Food is of course everyone, but these services that might be a little bit more luxury, a little bit more, you don't have to spend on it. That is seeing some upward pressure. it's not quite all the goods are coming up as the tariffs like wind down the warehouses, but it is the producers who are eating costs as we continue to see.

Mm-hmm.

All right. That's a good pull. Yeah. The luxury item issue, maybe there's a little more willingness to pay more there. There's a little less pressure downward on prices and it does, it does support the narrative of a K-shaped recovery where, yeah, you kind of unfortunately have the haves, know, doing a bit better, quite a bit better than the have-nots in terms of just mainly based on assets, right? And just have a bunch of asset appreciation there's been over the last five years or so with the liquidity that was dumped into the

into the markets.

All right. I think that's about it, gang. Very good discussion. Everybody out there definitely pay more, you know, continue paying attention to what happens with this nomination and any potential drama around it as it relates to some of the threats around the DOJ and confirmation and, votes. Otherwise keep your eyes on the numbers as always and some geopolitics as well. Obviously a little bit of drama around Iran this week.

us look for headlines on that. And we'll talk to you again soon. Thanks a lot, Alex. Thank you, James.

Thank you.

Thank

All right, welcome back everybody. We have a rare event today. We have a special guest two weeks in a row. may need no introduction to those in the mortgage industry, but just in case, Kevin and I are here with Brian Vieaux. Brian is president of MISMO. MISMO is the mortgage industry standards organization. MISMO's mission is fairly straightforward and extremely valuable and important, I'd say.

It's to make the entire housing finance ecosystem more efficient, more transparent and connected. That's certainly a concept that's near and dear to us at Optimal Blue. I think we can all agree that the cost to produce a loan has soared over the years and companies like Mismo and Optimal Blue have similar goals in terms of pushing back on those increases by creating better tech, better processes. So we're super excited and curious to have Brian here today. Welcome, welcome Brian Vieaux.

Thanks guys. Glad to be here. I'm really excited to be with Optimal Blue. I want to talk a little bit about my history with the platform because I think you guys, you are one of the groundbreaking technologies in the mortgage ecosystem. truly, when I think about the consumer benefit from all the tech that we consume as lenders, first version of Optimal Blue, which

Yeah, welcome.

drawing a blank on the first product name, blew something, right? was the, what was the, well, wasn't there like a founding product name ⁓ in the early, early days? But yes, there you go. So I go all the way back, all the way back to the solid days. And when I think about the impact of pricing transparency and granularity, yes, it benefits,

It was optimal blue.

lenders from a margin management perspective, but ultimately I do truly believe it's led lower costs and rates for consumers at the street level. So big fan Optimal Blue all the way back to the early solid days and again excited to be here with you guys.

That's awesome. No, would totally agree with you there, Brian. think transparency on that accuracy gives you just that opportunity to find the exact right product and price for a borrower. So I appreciate you acknowledging that. And just for our listeners now may not be familiar with MISMO, can you share a little bit about the MISMO system and what the organization does more specifically for our industry?

For sure,

for sure. And I'm four months in and my team will, you know, they scold me every time I say it, but you know, I'll use the new guy card every now and again. learning, you know, still four months, four plus months into this, every day I'm uncovering new things for me that happen inside of the MISMO community. use the word community intentionally. know, Kevin and I met at...

a summit before I was officially onboarded last summer. was kind of what led to Optimal Blue becoming a member of MISMO and as well as a sponsor, you guys really stepped up and have helped the MISMO community by being a summit series sponsor. So we truly appreciate the partnership, the membership and the relationship, but MISMO serves the entire mortgage ecosystem.

Right? So there's not a place in our ecosystem where MISMO is not having impact. the Mortgage Industry Standards Maintenance Organization, as you said, Jim, a year ago, I knew like two of the letters in that acronym. And so I think I my experience is not too dissimilar from many in the industry. lot of people are familiar with

You

the name of Mismo, but very few people frankly understand the breadth and depth of what happens in the community. So at any given time, the inside the Mismo there's 30 ish work streams that are happening. And those work streams are not managed by Mismo employees. There's only six of us, by the way, in Mismo proper.

No, no kidding.

those work streams are managed by the community, the industry. So we have hundreds of matter experts across all facets of the mortgage ecosystem that come together and form these work groups. And these work groups get formed when somebody in the industry brings a problem statement to MISMO. And they say something like, hey, wouldn't it be great if

So.

we could standardize this data set in order to better connect these technologies in the tech stack, right? Or to improve the quality of a loan as it goes through the manufacturing process by having a standard set of data and definitions and labels that stay consistent through that entire loan cycle. So the work that gets done comes from the industry in the form of a problem statement. And then the work group kind of assembles around that problem statement.

and spends months, sometimes years, to create what becomes a standard. And for 26 years, MISMO has been doing this work. There's somewhere in the magnitude of 200-ish standards that have been created and are maintained in some state through the MISMO model. So yeah, are, sadly at times, we're the best kept secret in...

Mm-hmm.

Opportunities

like this on your podcast really help us raise awareness for the value that MISMO creates. So thank you again.

Thank

Of course, that was very succinct, kind of explanation of what the MISMO community can do and obviously a super ⁓ efficient business on its own being only six people within MISMO proper.

Yeah.

Yeah.

absolutely. you know, Brian, I've been familiar with Mismo a while and use Mismo and in a lot of ways in a product management capacity in the But you know, was having a conversation with someone I think last year, who's in real estate tech. there is no Mismo of real estate transactions in the same way you know that there is

for mortgage. it got me thinking about these background processes or this background infrastructure that helps keep things moving and helps improve or allow us to take advantage of the way things are today. would point out another ⁓ similarity, which would be

the conventional mortgage in the US, which we've talked a lot about in this podcast and helping with MBS liquidity, which helps keep rates down and it really powers the whole ecosystem. put MISMO really right up there that because what you guys are doing helps decrease the friction between transactions as loans move between multiple, sometimes even dozens of counterparties

Yep, I'm going to come back to that something that I think is a good double click for the audience. So when you talk about the conventional loan, the Fannie Mae, Freddie Mac, the Fannie Freddie kind of loan set, if you will, Just about everybody, you guys for sure, are familiar with the U's, right? All the uniform ba-ba-ba-ba-bas that exist within Fannie and Freddie, right? So you have the ERLA, the Uniform Residential Loan Application,

Mm-hmm.

the UAD, the Universal Uniform Appraisal Dataset, the UCD, the Closing Dataset, all those U's are built on the MISMO model. So like, there is no, you know, is no fungibility between Fannie and Freddie without those U's, right? And so you talk about margin management, best execution. There's no better example than what happens with, you know, loans that you can, you know,

Mm-hmm.

best acts and Freddie. And a big reason why that works so efficiently is because of those use. I think there's a dozen standards within the uniform mortgage data program, UMDP. I'm learning all these acronyms like on the fly. you know, that's a great, great example of like real life every single day. You know, every

Yeah.

every capital markets desk, every trader is touching Mismo one way or the other, whether they know it or not. ⁓ So that's that I want to make sure we hit on that.

Yep. Yeah.

Yeah, that's a huge light bulb. That was a huge light bulb for me. You know, the GSEs have operated separately for many, many years, even though they've been under conservatorship. So it makes sense, especially when they moved to a unified security. And even before that, this is a good example of, like you said earlier, the industry comes to MISMO and says, listen, this has to be easier. two entities are separate and they're slightly different.

but what we are delivering to them is fungible. It's exactly the same thing. How can we make it simpler our own organization to not have to have two different work streams to deliver loans and have them guaranteed by these two agencies?

And then before I get to the real you'll get that a lot in this podcast, guys. I'm like chasing squirrels here. ⁓ Kevin, you probably saw at the summit in Boston, Fannie and Freddie had representatives on stage at one point the main, you know, the session, the day of sessions. they, at every summit, they provide updates on what's going on with the U's and that our most recent summit a couple of weeks back,

I love it, I love it.

That

was great.

Down in Florida, they talked a lot about updates and probably one of the more exciting updates coming out of the is around universal appraisal data set, the 3.6 version, which really is set, was built to set up the modernization of the entire appraisal framework built around all the data that goes into an appraisal.

Yeah.

focused on. There's 30 plus work groups. I've said that a couple times and they're all important. We're not diminishing the importance of any of the work groups, but from a broad industry perspective, there's two initiatives that are really focal point here as we kind of plow our way through Q1. The mortgage compliance data set, MCD, is the newest

Standard that's been published 2.0 was published in December the mortgage compliance data set is a an example of a standard That has been created it took almost three years for this standard to get published because there's a whole governance process Around standards starting when the work order or the work request comes in There's a there's vetting that that happens through governance to determine

Is there a there there as they say, right? then there's all kinds of steps through the process before standard becomes the standard. Sounds like the former Steelers coach. think he said to put it in perspective, the mortgage compliance data set is going to significantly help mortgage lenders specifically in their legal compliance departments.

better manage how they produce data for the auditors, for the regulators. In particular, this is gonna benefit mostly the state regulated non-bank IMBs, if you will. And so imagine a 40 state IMB. Today, they could potentially have 40 unique data requests that come in when each state's preparing for their audit.

and the CSBS, the Conference of State Bank Supervisors, which is the trade association for all of the state regulators. The CSBS, based on feedback from their members, the states, to MISMO three plus years ago with this problem statement that the states want to come up with a standard that can be shared across states, which will help

technologists invest in building a tool that's not a one-off 50 times over, but rather a single tool that all states can participate in. And potentially there's a bigger play longer term within the CSBS to kind of advance their mission company, one exam. So multi-state.

lenders could rely on one exam maybe from their home state and then the results can be shared with other states. All of this is really, it was something that I saw right away when I came in as like massive value for a lender. so connecting the dots between why MISMO matters to a lender and why they should participate both within the work groups but also economically why lenders should participate economically.

through the innovation investment fee, which is how lenders become members of MISMO. This was like the tangible standard that I think every lender can kind of say, I spend X dollars in legal and compliance. And, you know, some subset of those dollars are spent assembling and tracking down data as requests come in from the various states. We've had lenders tell us that, you know, based on their size and the number of states they're audited in that

once this is fully adopted, you know, at scale across the states, this could allow them to reallocate either a full FTE or maybe a third of an FTE and put those resources on like real risk mitigation exercises versus data collection. So real tangible ROI. So MCD has been like the talk of summits, the last few summits, and we're really making a lot of progress there.

Wow.

Thank

And then I'll say the other talk across the MISMO community is AI. think everybody's talking about AI. And if you think about, you know, AI, machine learning, any model, it's only as good as the data that goes into it. Right. And so, you know, as we, as our industry, you know, I think we're still in the first inning as it, as, as it relates to AI in our industry. Some would say that the national Anthem hasn't even been played yet.

Mm-hmm.

⁓ But we're still very early and MISMO is playing a key role in partnership with the Mortgage Bankers Association, specifically the Residential Board of Governors, RESBAC, to help design framework for the industry around responsible use of AI in lending. And we'll use the same model that we use to create a standard where we bring all the cohorts to the table.

Mm-hmm.

know, lenders, legal experts, obviously technology experts as we talk about AI, but also the regulator community and kind of construct this framework that we can all kind of manage to so that we can advance the adoption of AI responsibly safely from a risk management perspective. So those are kind of the two big themes you'll hear a lot about from MISMO.

Yeah, that's huge.

mean, we've never, you know, the mortgage industry typically isn't known for early adoption, but the fact that we're, sounds like, know, industry wide a little bit ahead of the game. know it'll be, we certainly a ton of features around AI, but for the whole industry to coalesce around some standards, I think makes a ton of sense and where there's entire, governments that haven't even broached that subject yet, but it needs to be kind of covered before.

This exponential growth that we've been warned about in AI happens and it gets a little bit out of control in terms of being able to make it more efficient and actually work for us. But then when you've got the first thing you bringing together standardizations across states, I feel like that was an issue after the great financial crisis that made it difficult for some mortgage businesses to even stick around because the legal fees and compliance were one of the things that ballooned after Dodd-Frank and all the...

the extra regulation that came from, know, some of it, rightfully so, from the causes of the great financial crisis. And now we're probably overdue to get to the point where, yeah, it shouldn't matter how many states you do business in, there should be a standardized group of guidelines to help you answer regulators.

Yeah, I think one of the things that excited me about joining MISMO, you know, I'm a career mortgage banker, 36 years, we'll just say, long time. I sat on the lender side for a lot, you know, a lot of those years, almost 30 years. And then I spent six years on the FinTech partner vendor side before joining MISMO. know, what's been a...

Yeah.

amazing and frustrating to watch happen is the cost of manufacturing alone has actually gone up as more technology has been introduced into our ecosystem. and Jim, you kind of hit on it. A lot of it is the cost of compliance, right? The cost of risk management. And we still, I think we still spend a lot of time in this industry checking the checkers along the way.

And so, you know, one of the, one of the things we think about at MISMO is the adoption at scale of standards should ultimately reduce feeling that you need to check the checker that checks something before you, you should be able to rely on the data as it passes through the low manufacturing process. So I think that's kind of like that North star that we, we, we think about is, as the standards are adopted at scale.

Mm-hmm.

Ultimately, need the whoever is the end decision maker, let's just say an investor downstream. We need we need them to get so comfortable with the data that they're seeing when it hits their their desk, if you will, they rely on the standards that the data kind of has been built to. And we're pushing towards that with every standard we create. But we still have standards that have been around for a while that that we need to drive even more adoption. And so

Mm-hmm.

You'll hear a lot about adoption, and alignment coming from the team at MISMO. And this is an opportunity to build awareness. And hopefully that awareness leads to some adoption as well.

Yeah.

Right. Full adoption. Just to

get away from some of that redundancy, Like redundancies to me is one of the biggest wastes of time in any industry.

a great point. tie both of those points together too. follow a lot of the discourse around AI and, you know, some of the latest things that are being released and the things that people are talking about. And there's been a good amount of discussion of 2026 sort of being the year of vertical AI where you were talking about AI deployed for specific use cases across specific industries.

and starting to become more effective. We've seen a lot of that already with coding. has gotten so much better at coding. one of the key components I've seen that help facilitate this vertical AI is the standards adoption. Do you have a set of data that can be fed into a model where it understands the relationships between data points and

know, having that framework there is actually going to put the mortgage industry ahead of, you know, other industries that don't have that, you know, that, capability. So, obviously there, there's a whole question around how much do we hand off to AI and how much do we leave in the hands of humans? And that's, we're still, still going to work through that. But I do think that we're much better positioned to realize some of those gains because of some of the things that you're talking about. even beyond that, you know,

2025, there's a huge conversation around the 50 state regulator, regulator, boogeyman, right? You know, the CFPB pulling back, what is this going to look like? And I'm sure there's real concern about that amongst a number of lenders. so the fact that you all are working on this, you mentioned the reception that you've seen folks who can redeploy FTEs.

Yeah.

I just think that's going to be very, very much in line with the sentiment of the industry in 2026. So I think that's super exciting.

Yeah, a great ⁓ example that I would encourage the audience to go look at. Go to Penny Mac's website. don't know offhand exactly where it is, but they have some case studies how ⁓ they've built their internal data model at Penny Mac on top of the foundation is the MISMO standards, the MISMO model.

if I think about like the companies who are best poised to leverage AI, it'll be those companies that have taken a very intentional approach about building a sound foundation for how they manage data. because they're, they're going to be able to fast track and test, but test and fail faster than others because they're already, they've already, they're already confident in their data model, their data structure. and I don't think that's limited.

to the big companies like PennyMac. think a $500 million a year small IMB could take the same approach. It's just going to look a lot different at that scale. But I think that's a, if you want to leverage AI efficiently and use it as part of your workflow management, you just have to have a handle around the data that's ultimately going into

% spot on there. what you're saying about whether it's a large lender or whether it's a small lender, the same opportunity is there, but it needs the data structure, the clean, segmented, labeled, all of that needs to be there in order to take advantage of that.

I was on a call yesterday and somebody was describing borrower name, that field, borrower name and how many different derivations could exist with borrower name, Customer, consumer, first name, name first, last name, borrow, you all the stuff, co-borrower. And that's like a...

I see. Yep. Middle and additional. Yeah.

Yeah. Yeah.

Every loan has that field, right? That information. So that's an example of a subset of a data standard, right? In the MISMO model, we've defined that borrower name, what it should be labeled everywhere across your tech stack from pre-point of sale, call it CRM, into point of sale, into LOS, into your pricing and product engine, into closing service, all the way through.

You know, that's the discipline you need to have as a data manager around how you look at all of the data components that ultimately are in your shop. And that's the power of what this community's done for 26 years is taking the time to create those definitions and refine them and maintain them over time.

Right. And just helped the industry operationalize them across all the different, the growing list of tech platforms that we're all using. Right. So we've, we've talked about a ton of, of good initiatives here and things that MISMO is focused on. And we talked a little bit about your recent conference a couple of weeks ago at Amelia Island, which is a gorgeous venue, by the way. I feel like there's, there's a lot of conferences there and growing. Were there other themes either at the conference or just that you're

Right.

thinking about going into 26 that are going to be super important for, for MISMO, but also just for our industry. Like what are, what are people focused on? What should we be watching out for preparing for?

Yeah, I veer off from a product or a program or a problem statement for a minute and really talk about we believe and what our community believes needs to happen more. And that is we need more participation from industry in this MISMO community. I've seen that our industry employs somewhere around 350,000 humans.

right across the entire ecosystem. Yet at any given time, there might be 600 of those humans focused on within the MISMO community on big problems for industry. if we truly want to be better for the consumers that we all serve, we need to have more than 600 of us humans involved in this.

this constant state of improvement through MISMO. you know, I'll use this as ⁓ a to action for the community and the community is everybody, right? It's wherever you sit inside of a lender, you you have some subject matter expertise that we would love to have at our table helping us solve problems. If you're certainly on the tech and partner vendor side, you have another set of unique ⁓ expertise that

Mm-hmm.

could be and is invaluable to the community. I've said it, there's six of us in MISMO proper. None of us, none of the six of us are active in these work groups. We're not the subject matter experts on capital markets, loan servicing, know, compliance and legal. We help manage the process to bring these groups together. So we need the human capital participation.

And we need economic participation, right? So again, shout out Optimal Blue. You all are active members and sponsors of MISMO, which means you're more than a sponsor, sponsor of MISMO. You are a direct sponsor of the entire ecosystem by being involved the way you are. And that greatly appreciated. We need lenders to understand the importance and value.

that they receive and they benefit from every day in their shop from MISMO. mid February, every lender will start to an innovation investment fee invoice, IIF, from MISMO. MERS is our billing partner and they do some of the administrative work to deliver that invoice, but the IIF...

is a MISMO invoice. Every dollar through that IIF goes into MISMO and allows us to fund the work that happens in those 30 plus work groups and also allows us to prepare for the next set of work that's coming down the pipe. So for lenders, when you get those invoices, if you have any questions, reach out to us at MISMO.

You can hit me up on LinkedIn. Amy Moses is on LinkedIn. can go to our mismo.org website. would love to hear from you if you have any questions when you get that invoice. This is a big year for the industry as we, again, move from that first inning in the AI game into the middle part of the game. And we need everybody participating.

That's how we're going to really advance this thing and ultimately best serve consumers and get to a place where we can actually lower the cost to manufacture alone, which is good for everybody in the ecosystem.

That's a great, call to action. Great kind of, thing for people to walk away with, I think, and think through. And as they do, you know, if I'm a lender, like, where do I start? Where I, how do I get involved?

Yeah.

Right. The best way to get involved go to MISMO.org and navigate to, I think that even says get involved or involvement. And there's a snapshot of the active work groups that exist today. Anybody can join a work group. open to the entire industry. We have some communities of practice that they're not quite working on a specific problem yet.

Perfect.

Like the AI community of practice is this growing group of professionals that are having really meaty discussions around AI. that's going to ultimately, there'll be some work groups that come out of that community of practice. the best way to get involved is to get involved. Find something that you're passionate about in your day to day.

work, you'll see it, it's going to be there in that, in the website, in our Life of Loan model. And just get involved, join that work group. It's a once a month, maybe an hour a month of your time to contribute.

Wonderful.

Yeah,

that's awesome. think that that's a great message. you know, the industry is always changing, right? There's always things that are coming up and that we're going to need to solve for in the same way. talked about in this podcast, the rise of non the past year and all of types of non QM because you non QM is really an umbrella term that has a lot of, you know, nuance underneath it.

Right.

these things need to be solved for and it takes folks stepping up and committing. Sometime, like you said, an hour a month to join a work group that helped move it forward. think that's a great message. I certainly love what you guys are doing. To bring it back to my original point, if we didn't have the standards, we didn't have conventional mortgage, we'd have our Texas

30 year fix or California 30 year fix, right? They'd all be, and the rates would all be higher, you know, that, and that's, that's, you know, that's, that's part of why having this, this centralized, you know, standards organization for the industry, centralized loan products, you know, all of this is, you know, helps us and is a lot, you know, day to day, maybe in the background a bit, but it's really underpinning everything that we're doing and a lot of the value that we can, we can bring to the consumer.

Yeah, right.

Love it, for sure.

Beautiful. think we've, we've grilled you pretty hard today, Brian, and, and, so much appreciate you being generous with your time. This has been a great discussion for me. I mean, I had some light bulbs go off just doing research for this interview, but, I think if just four months in you're, very, knowledgeable and eloquent about how you explain what Ms. Mo is doing. And again, appreciate you being on the pod today and spending time with us and dropping some wisdom on our listeners.

Yeah.

Mm-hmm

Appreciate it guys. Again, thanks for all the support from Optimal Blue. We really appreciate the partnership.

Same to you, this was a great partner of ours and we appreciate everything you guys are doing.

Absolutely.

All right, thanks again, Brian. Thanks, Kevin. Great conversation.

All right, let's close this thing out. Thanks so much, everybody. Really good conversations today, a lot going on. Hopefully you're able to stick around for the whole podcast. Thanks, James and Alex for talking through the recent Fed nomination and some of the market dynamics around that. Kevin, thank you for the interview with Brian and Brian View, of course. Thank you so much for joining us. Really good interview. I had a lot of fun talking with you. That's it for today.

Join us next week for another episode of Optimal Insights, where we'll continue to provide you with the latest market analysis and insights to help you stay ahead. Check out our full videos on YouTube. You can also find each episode on all major podcast platforms. Thanks again for tuning in to Optimal Insights.