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cdb consultancy offers consulting in areas of business strategy development, technology assessment and selection, business process analysis, and industry relationship management. Specialization » eMortgage Education & Training » eMortgage "Roadmap" Development: - Market & Strategy - Product & Technology » Implementation Planning for eNote Registration & Investor eDelivery » eMortgage Channel Development Strategy » eClosing, eRecording & eNotarization Implementation » eServicing, including Default Management & Loss Mitigation |
A Message from Carmen
In Fannie Mae's industry-wide market research, "eMortgages: Research Findings on the State of Industry Adoption," released early last year, it found that eMortgage adoption to be growing slowly but steadily. (eNotes registered with the MERS® eRegistry have grown from a little over 1,000 from the time of Fannie Mae's publication of its research findings to well over 30,000 earlier this month.) The lenders surveyed however identified seven perceived friction points that might be stymieing eMortgage adoption. The seven perceived friction points are: eRecording; Security and Privacy; eSignature Laws and Regulations; Market Readiness; Consumer Acceptance; Completeness of Industry Standards; and Higher Priority for other Initiatives.  This issue of cdb://eNews focuses on the sixth perceived friction point: Completeness of Industry Standards. Over the last eight years, the industry's standards setting body, MISMO (Mortgage Industry Standards Maintenance Organization), has developed and is maintaining a specific eMortgage standard that includes eXtensible Markup Language (XML) data elements and an electronic document format called SMART Doc®, with the idea that one industry-standard file format used between and among trading partners would facilitate the adoption of eMortgages and provide interoperability between and among the trading partners' systems. Nonetheless, the Fannie Mae research found that 25 percent of the lenders responding to its survey indicated a perception that "industry standards are in flux." During the time the survey was conducted, MISMO had proposed "a new document standard (eSigned PDF), giving the perception that the technology standards are not stable and are still evolving. Some lenders don't want to implement too early because they are concerned about additional costs required when the standards stabilize."
Certainly lenders have a number of other considerations when implementing eMortgages into their business operations as evidenced by Fannie Mae's research findings; technological standards however seem to be a significant factor lenders consider in their overall plan. For this issue I've asked two leading industry experts to provide us with their thoughts and perspectives on standards, particularly the current and future state of electronic document formats in the mortgage industry. Rachael Sokolowski of Magnolia Technologies is an experienced technologist with specialization in the mortgage banking, health care, and print publishing industries. Ms. Sokolowski is a leading expert in XML and electronic signature technologies. A major contributor to MISMO, Ms. Sokolowski is chair of the Interface Architecture workgroup and is one of the leading authors of the use of SOAP in the mortgage banking industry and designed many of the eMortgage specifications: the SMART Document, the eMortgage package and the XML architecture for the MERS eRegistry. In March of 2006, the Mortgage Banking Magazine designated Ms. Sokolowski a "MISMO All-Star". John Jones has over thirty years experience in land title and real estate related industries. In 1993 he founded Arion Zoe Corp., a strategic consulting firm currently involved with projects that are components of the electronic real estate transaction - document formats, electronic and digital signatures, electronic notarial functions, data recognition and exchange, and electronic recordings. Mr. Jones is involved in standards development work with the Property Records Industry Association (PRIA), the MBA's Mortgage Industry Standards Maintenance Organization (MISMO) and LegalXML. He is an active member of the American Land Title Association, and holds the professional designation of a Certified Land Searcher (CLS) recognizing proficiency and expertise in the title matters. Carmelo D. Bramante Managing Director CDB Consultancy LLC cdb consultancy invites prospective clients to visit the cdb consultancy site or contact Carmen to discuss an engagement or project.
Electronic Documents in the Mortgage Industry
By Rachael Sokolowski Magnolia Technologies  With the advent of the Internet, HTML web pages, HyperText Markup Language, became a new promising form of an electronic document. Web pages are easily displayed on any computer system, be it Windows or a Macintosh PC. Web pages may be printed to paper. It does not matter physically where the web page is located -- it can be anywhere in the world.
Why not just use the web pages to realize the full potential of electronic documents? Web pages have limitations, which become obvious when you try to search for information. More often than not, a search will generate links to irrelevant web pages and imprecise information. In a way, we can think of the internet as a fancy fax machine of web pages; that is, something that transmits static pieces of paper from one location to another without much context to its contents. eXtensible Markup Language (XML) is the next generation of Web pages. Just like HTML, XML can define how pages appear in Web browsers. But XML does much more than that--it provides a context for information. While HTML tells the browser what a page should look like, XML defines what the piece of information actually means. Both HTML and XML are markup languages; that is, they insert markup, or additional information, into text. The markup is known as a "tag". For example, HTML marks up text on a page by inserting a <b> tag when the text should be bolded. But the HTML tags leave no way to distinguish between a borrower's name and the lender's loan number. Both might be bold on a form and are both tagged with <b> for bold in HTML. XML, on the other hand, marks each item with more specific tags that enable computers to distinguish them. With XML, humans and computers can tell the difference between a <BORROWER> tag and <LOAN_FEATURES> or a <LenderLoanNumber> from a <Phone.Number>. MISMO defines content standards for the XML tags such as the loan amount in the logical data dictionary. When I say "Loan Amount" how do you know that I am talking about the base loan amount, not the original amount requested by the borrower? You will know if you use MISMO standards. Individual data points are defined for both. MISMO also defines the SMART Document specification - an XML electronic document that includes information about the document as a whole (for instance is the document an Appraisal or a Deed of Trust?), a data section (so that the Loan Amount can be easily determined) and a view of document which may be in a variety of representations for electronic documents such as HTML and PDF. Additionally, SMART Documents include the capability to include a digital signature. The digital signature provides the ability to investigate whether the document has been tampered with in anyway after a human has singed the document. Electronic documents in XML allow rapid, easy information access reduce cost and improve efficiency. But why are mortgage documents still mostly created by technology but then printed on paper? It all comes down to choices. It is difficult to agree to one thing when several exist. I may choose to represent my view of the document in HTML. "Less filling" I say. You choose PDF because it "tastes great!" These are two very different electronic documents. How can we exchange information? Let's go back to paper isn't it easier? Soon, the element of choice will be removed. There are two XML standards to create and save documents in word processors. One is called Open Office XML (OOXML) and the other is Open Document Format (ODF). These are XML formats that word processors can read. All word processors. If the view of the SMART document is in a standard XML format for a word processor then the element of choice is removed. All representations of electronic documents are in XML. The power of the MISMO framework for electronic documents -- standardized data representation, the determination of document type and the integrity of the document contents - can be fully realized. Instead of allowing choice in the view, this could be limited to one or the other or both. But that requires industry agreement. Why can't we get there? We are. The use of XML use by major word processors and open source applications is the best of both worlds - tastes great and is less filling at the same time. Download PDF of the complete article. cdb consultancy thanks Rachael Sokolowski and Magnolia Technologies for contributing this article. cdb consultancy invites prospective clients to visit the cdb consultancy site or contact Carmen to discuss developing an "eRecording for eMortgages" Implementation Plan or conducting a workshop or seminar on eMortgages, eClosing, eRecording or eNotarization.
On eMortgage Adoption
By John L. Jones Arion Zoe Corporation  Technology adoption is not uniform. We know that sometimes other things need to happen before it can take off. Other times it never takes off. E-Mortgages and the SMART Document® format have not taken off... yet. It was only a dozen years ago that lenders began delivering electronic document packages. MISMO (Mortgage Industry Standards Maintenance Organization) itself is only 9 years old and the SMART Document® format slightly under that. The primary enabling legislation, the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act (ESIGN), are about the same age, though UETA adoption by individual states took several years to become ubiquitous.
On the down side the total market for the mortgage and real estate industries' technology is considerably smaller than for PDF. Failure to implement an industry specific standard within a single vertical market does not bode well for industry adoption. Slow implementation, on the other hand, may be due to barriers that take time to overcome. BARRIERS So what is impeding our adoption of eMortgages? One barrier is the lack of enterprise infrastructure needed to support electronic transactions. Without scanning, electronic document management systems (EDMS) and transaction processing systems in place, eMortgages have no value to our respective businesses. Implementing and integrating these applications into large enterprises requires both strategies and tactics, especially in an industry that has consolidated market share by aggregating local and regional businesses into a few major players in a short period. Adding to the difficulty is the fact that much of the infrastructure needed to be built while the enterprises were at or near peak capacities. The complexity of the mortgage transaction is another barrier. The number of participants within a single loan distribution channel in your lender's distribution network may regularly include more than a dozen industry players, from abstract companies to vendor management organizations. While MISMO is producing data standards to simplify creation and consumption of documents and data streams, technology vendors in each group of our respective sub-industries has to update existing systems to perform the actual creation and consumption. In some cases, such as the eNote Registry and closing platforms, legacy systems had not been invented. Adding to the complexity is that we have not yet figured out the business models that will drive the new platforms. Who will control the touch points among us? Since no overarching entity controls the end-to-end transaction in spite of great influence by the very large players, the participants have little consistent guidance. Fannie Mae and Freddie Mac, the Government Sponsored Enterprises or GSEs, Seller/Servicer Guidelines greatly influence the marketplace, but the Guidelines do not address enough to help the industries to know what kinds of implementations will result in salable eMortgages. Without assurance from investors will we invest in the systems necessary to support an eMortgage ecology? Is it helpful to make standards version changes faster than we adopt them, especially where version compatibility is affected? Given the time between application version updates (18 to 24 months on average) and their acceptance and roll out among the user populations the life cycle cost may be seen as overly expensive by management. Then we have the current economic climate. Today's problems may eclipse the savings and loan debacle of the 1990s when 700 S&Ls disappeared at a cost to the US Treasury of $125 billion (in 1990s dollars). Do you know anyone who isn't cutting back? A PREMISE What if we work with the file formats for which our internal applications are already capable and push our vendors to provide transmogrification capabilities for incoming and outgoing documents. That will allow documents to go through their life cycles in a format evolution. Like the egg, caterpillar (larva), cocoon (pupa) and adult stages of the moth a document goes through format changes based on the needs and capabilities of our trading partners. We have lots of examples of things that already work for our respective trading partners. Besides the SMART Document® format many of us are using other XHTML solutions, PDF, TIFF, and even Microsoft Word and Excel. If we want to move eMortgage adoption we have to get beyond a one-size-fits-all file format. We should move forward with what works now and plan to evolve. The law supports transmogrification. Let's recognize that we are already doing it. Free eMortgages! Download PDF of the complete article. cdb consultancy thanks John Jones and Arion Zoe Corporation for contributing this article. cdb consultancy invites prospective clients to contact Carmen to discuss an engagement or project.
cdb://eNews - Previous Issues
Volume I, Issue 1 - I Want My eMortgage!
The views and opinions expressed by the authors of the articles in this newsletter are those of the authors or the organizations they represent and not necessarily those of cdb consultancy. Readers of this newsletter should not infer endorsement of cdb consultancy by these organizations, nor does cdb consultancy make any endorsement of the contributors or their organizations.
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