Friday, June 05, 2020

How Lenders Can Optimize the Loan Process with MISMO Data Standards

By Susan Graham
March 28, 2017

Susan Graham

(Susan Graham is president and chief operating officer of Financial Industry Computer Systems Inc., Dallas, 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 president and COO, she is responsible for the overall management of the company's day-to-day operations, strategic planning, customer relations and product development. For more information, visit

In today's ever-changing mortgage industry, lenders are on the hunt for various tools and solutions to improve efficiency and maintain compliance with latest regulations from the Consumer Financial Protection Bureau. The challenge with using multiple technologies to improve business is ensuring that systems work smoothly together.

GrahamSusanAll too often, vendors build interfaces using proprietary interface specifications. The complexity of supporting these multiple data formats becomes a significant and costly challenge for lenders. These proprietary formats hinder the flexibility of selecting their preferred vendor for a specific service.

Each vendor has its own requirements for maintaining proprietary data and file formats, though not using an industrywide standard can carry a high risk for lenders. Required specifications may change over time, leaving the lender with few system and vendor options. But, by leveraging industrywide data standards, there is a better way to ensure the lender's LOS and technology providers will interface smoothly.

Benefits to Standardized Data
To improve communication between various parties and vendors in the loan process, the Mortgage Industry Standards Maintenance Organization began the process of establishing industry-wide standards in 1999 as computer-based LOS and underwriting engines began to enter the workforce. Over the years, MISMO has put into place a series of standards designed to more securely, economically and efficiently exchange loan information between different parties. More recently, this has included helping lenders establish data standards for the vast number of regulatory changes introduced by the Dodd-Frank Act and adoption of eMortgages.

Rather than continuing to abide by multiple data formats, adhering to latest MISMO standards ensure that the entire mortgage industry, as well as technology vendors, are all speaking the same data "language." Adopting these standards confers some key benefits to establishing an effective technology foundation.

A key benefit of adhering to a common data standard is the ability to effectively work and communicate with any vendor leveraging the same standards. From the standpoint of the technology provider, there should no longer be a need to support a multitude of semi-redundant formats, as vendors 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 partner with.

Charlotte, N.C.-based Charlotte Metro Federal Credit Union found flexibility in being able to work with its LOS provider, Dallas-based FICS, to select the document services provider of its choice to be especially beneficial as they began to prepare for the 2015 TRID regulations to take effect.

"Having FICS work seamlessly with ComplianceEase has been a huge help for us, particularly as we began to make the necessary preparations for TRID," said Randy Kegarise, vice president of mortgage lending for Charlotte Metro Federal Credit Union. "We all read the information and sat in on the webinars, but it was a great comfort to have two companies on our side that had the information we could use to verify what we'd seen and heard in a practical sense."

More Choices Brings 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 service providers and technology vendors, thereby spurring innovation and most importantly greater value.

Lewiston, Maine-based Rainbow Federal Credit Union found that having an LOS and a document services provider who adopted MISMO was a welcome addition to its existing loan process.

"With the ability to select the document services provider that best fit our needs, we were able to definitively identify DocMagic as the technology vendor that would help us the most," said Debra Conrad, senior loan officer for Rainbow Federal Credit Union. "Working directly with DocMagic and FICS has been a smooth process for us thus far. We've been very pleased with how both companies have worked to resolve any issues we've encountered."

Less Chance of Lock-In
Programming to any specification, an industry standard or a proprietary one, should be viewed as an investment by the software vendor. A proprietary format carries a much higher risk, as the company requiring that format could change their specifications at any time. This is why many lenders are still stuck with legacy LOS and servicing platforms using outdated technology and data fields. The cost of changing and reformatting multiple years of data is prohibitive. Industry standard formats act as a hedge against this sort of investment risk.

MISMO Streamlines LOS-Doc Provider Integrations
One of the most important partnerships a lender must leverage is the one between the loan origination software and its document services provider. While the LOS handles the core data and provides the engine for underwriting and closing, the document engine must be able to use that data to produce the disclosures and documents required by the myriad of regulations, including the new TILA-RESPA Integrated Disclosure rule.

The ease of sharing information is evident in those companies who build interfaces that specifically leverage the benefits of MISMO. For example, FICS' Document Services Interface uses MISMO version 3.3 to seamlessly transfer loan data, allowing any vendor adhering to this format to interface directly with the LOS' users.

By implementing the standards into their own systems, an LOS can collaborate with multiple third-party document services providers to offer the best options for its mutual customers. While each document service provider has its own system for capturing data elements and producing their documents, adherence to MISMO standards makes it simple to ensure no data is lost between the systems.

Along those same lines, Los Angeles-based Los Angeles Federal Credit Union noted a significant change in the speed and preparation with its document management with the help of its document service provider, DocuPrep.

"Gaining the ability to choose our own document services provider has been a major benefit for our institution as we have seen a major increase in the overall speed and efficiency with which we are able to manage our documents," said Ron Welcome, assistant vice president of lending for LAFCU. "We consistently see changes and updates being implemented into the system much faster than with our previous document provider. If we ever run into any issues, the vendors are able to easily figure them out and get back to us with an answer."

Ultimately, lenders need the freedom to select the tools that best help them be more efficient and effective for their customers. By adopting MISMO data standards from both the LOS and third-party partners, lenders can work with the tools that best help them remain compliant and deliver a quality, compliant loan to borrowers quickly, accurately, and efficiently.

(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 Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at

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