Carmen Bramante of cdb consultancy Speaks at the MBA National Mortgage Servicing Conference

This week the Mortgage Bankers Association (MBA) is holding its Annual National Mortgage Servicing Conference in Tampa, FL. The annual conference centers on the mortgage servicing function of mortgage lending and covers such topics as bankruptcy and foreclosure management, default management and loss mitigation, outsourcing and off-shoring, servicing specialty loan products such as reverse mortgages, agency updates from the FHA, VA, Fannie Mae and Freddie Mac, customer retention strategies, regulatory and legal issues, and efficiency strategies for internal servicing operations. For more information, visit the MBA website on the Servicing Conference.

Carmen spoke on the topic "'E' to the Rescue, Solving Real World Issues in Servicing and Loss Mitigation." This panel focused on the business challenges in today's servicing and loss mitigation environment. Current market conditions have increased the levels of loss mitigation, loan workouts, and foreclosure management. These areas of servicing have required tremendous amounts of human effort. Carmen, Kim Weaver of Fiserv eLending Solutions, and Brenda Clem of Fifth Third Mortgage talked about business process redesign and technology solutions, specifically how electronic signatures, electronic documents and other "E" solutions can solve real world business problems in servicing and loss mitigation. In his presentation, Carmen illustrated how certain documents in the loss mitigation or foreclosure process can moved to electronic document format and e-signed by the borrower or seller, in the case of an REO sale, and managed in a redesigned business process. Carmen also talked about the value to mortgage servicers of the process redesign and technology solution. Download a copy of Carmen's presentation.

cdb consultancy invites prospective clients to visit the cdb consultancy site or contact Carmen to discuss a consulting engagement or project in 2009.

In This Issue of cdb://eNews: eMortgages and the Latest Version of the Industry Standard
Carmelo D. Bramante, Managing Director, cdb consultancy LLC

The Mortgage Industry Standards Maintenance Organization (MISMO®) is winding its way through Version 3.0 of the XML data and document format standards. All segments of the mortgage industry are participating in the MISMO Version 3.0 changes: lenders, title companies and underwriters, investors, mortgage service providers, technology solution providers, document preparation firms, and county recorders. In this issue of cdb://eNews, I've asked Abdias Lira, Vice-Chair of the MISMO eMortgage Workgroup, Co-Chair of the MISMO Interface Architecture Subgroup and Member of the MISMO Residential Governance Committee, to explain the changes to the Version 3.0 standard and how the changes will benefit the industry. Please let us know if you have any questions or would like more information on Version 3.0. Also, please feel free to visit the MISMO website.

I hope you will find the following article informative and of benefit to your business. Download a PDF version of Abdias’ article.

eMortgages and the MISMO Version 3 Reference Model
by Abdias Lira, Principal Software Architect
Wolters Kluwer Financial Services


In the midst of so much bad news in recent months, some good news may have gone unnoticed. Among these, is the fact that last year was marked by a strong increase of eNote registrations, with the MERS eRegistry® numbers jumping from a few hundred a month in 2007 to an average nearing 4,000 a month in 2008. We have also seen milestone works published by *ESRA, ALTA and MISMO ("Case Closed: eNotes are Legal"); and by *ABA ("Foundations of Digital Evidence"), which reaffirmed the legal standing of eMortgages. In the meantime, and perhaps even more unnoticed, we at MISMO's eMortgage Workgroup have been busy working with other MISMO workgroups and partner organizations to ensure that the upcoming MISMO Version 3 data standards include comprehensive support for electronic documents across all mortgage process areas.

Prior to Version 3, MISMO data standards were fairly independent from each other. Each MISMO workgroup developed and maintained its own specifications with little sharing among them. As a result, MISMO 2.x standards ended up with multiple inconsistent, and sometimes conflicting, definitions for commonly-used business objects. There are approximately fourteen different XML definitions for PROPERTY, LOAN and BORROWER, just to mention a few examples. This situation created a "Tower of Babel" nightmare to anyone trying to use the MISMO standards across multiple process areas.

While these issues were well-known when MISMO started the work on Version 3 and were attacked diligently since the beginning, there was another issue that was not so obvious. Lurking around the MISMO specifications were multiple discrepant ways of representing and communicating documents, impeding system interoperability, and frustrating adoption efforts. A close look at the specifications reveals at least three different document structures:

• EMBEDDED_FILE - This XML element is used in various request/response messages to convey document images, like PDF, TIFF or XHTML. Although there is some commonality, each workgroup has its own variation of this element.
• PRIA_DOCUMENT - This XML element was developed by the Property Records Industry Associations (PRIA) for use with the eRecording messages. It accommodates the document image, signatory information, and recordation-related data.
• SMART Doc® - This specification was originally developed by Fannie Mae and then further enhanced by the MISMO eMortgage workgroup. The main focus is to support the eNote, but other uses are also possible. It allows for communicating the document image, the data, a mapping from the data to the rendered document, signature information and audit trail.

Even before thinking about the reconciliation of these three document representations, we had already realized the need for some changes in the SMART Doc® specification. First, we decided to move away from any semblance of a proprietary format and towards the reuse, without modification, of existing standards. No more foreign elements in the XHTML view. No more MISMO-specific mapping methods. Secondly, we needed a change in perception. We wanted to position our document representation as a complement to popular document formats, and not as replacement to them. The main benefit we were seeking was the ability to leverage third-party document tools as much as possible, while being able to easily access the business data in the MISMO format. These ideas aligned very well with the thinking of the other workgroups. This allowed us to consolidate all existing document containers into a single Version 3 structure, which we are now simply calling DOCUMENT. The new structure easily supports the simple use cases, such as delivering an image of a document, and is also capable of handling more elaborate use cases, where the document wrapper has to carry signature properties, audit trail, document data, and mapping information. As is the case with any Version 3 structure, all elements are optional; allowing each workgroup to define which elements should be used for each type of message.

In addition to having a common container for representing all types of documents, smart, intelligent, or otherwise, MISMO Version 3 also defines a common placement for those documents within the message structure. Every message is defined as a subset of a common model - called the Reference Model. The messages have two main nodes: DATA and DOCUMENT_SETS. Every time a message contains a document, that document is placed under the DOCUMENT_SETS branch. Anyone looking for a document (or its components) within a message can always go to the same location, regardless of the type of transaction.

Common message structure, common placement for data and documents within the messages, and common structure for all objects across all process areas: that is the beauty of MISMO Version 3. In practice, it means that Lender, Credit, MI, Document Preparation, Closing Room, Title, Investor, Land Record, and Electronic Vault systems can all work with the same overall structure for conveying data and documents, even though they may each support only a sub-set of the defined features. These systems can then evolve to communicate richer content to each other over time, without losing compatibility. One implementer can start small and build new modules upon that to support additional functionality. The XML representation of the document becomes richer at each stage of the development, but the implementer does need to change the structures created in the earlier stages. Likewise, this approach also promotes greater interoperability across systems of different capabilities. A receiving system can eliminate or ignore the features that it does not understand. In another scenario, a sender can remove the items that the receiver does not accept. In either case, the process works by simply adding or subtracting XML nodes, instead of translating between conflicting XML representations.

MISMO Version 3 is an electronic-document and eMortgage ready model. It provides a path to anyone who wants to transition from electronic paper to actual electronic documents. It will be an important tool for providing better and faster information to all players in the industry, be it a lender or a title company trying to avoid the next Matthew Cox, an investor wanting to assess the borrower's ability to pay next month's bills or any of us striving to reduce costs and survive in a shrinking economy.

*  ESRA - Electronic Signatures and Records Association (www.esignrecords.org)
    ALTA - American Land Title Association (www.alta.org)
    MISMO - Mortgage Industry Standards Maintenance Organization (www.mismo.org)
    ABA - American Bar Association (www.abanet.org)

Prospective clients may contact Carmen about cdb consultancy's services for 2009 in Strategic Planning, Market Research, Opportunity Assessment/Value Proposition Analysis, or Product Development, including "Roadmap" and "Rollout" planning.

cdb://eNews Briefs

NCCUSL Continues Work on Modernizing State Notary Law

The National Conference of Commissioners on Uniform State Laws' (NCCUSL) drafting committee working on the Uniform Law on Notarial Acts (ULONA) notary law will continue its work in Chicago on February 27 and 28. Patricia Brumfield Fry, Law Professor Emerita of the University of Missouri-Columbia Law School and Former Chair of the NCCUSL Uniform Electronic Transactions Act (UETA), is chairing the Uniform Law on Notarial Acts (ULONA). According to Professor Fry, the scope of the ULONA project is to revise a previous version of the ULONA and includes: 1) appointment and responsibilities of notaries; 2) the responsibilities of those relying on or confronting notarizations; 3) the use of electronic records and signatures; and 4) remedies for improper notarial acts. The revision of the ULONA will cover the scope of both paper and electronic notarial acts. Professor Fry said that there are three components that constitute the "heart of the matter" to revising the ULONA:

1. Is the person claiming to be a notarial officer a commissioned officer?
2. How can the notarial officer be linked to a particular transaction or document?
3. How can the relying party verify the prior two matters?

This will be the second "face-to-face" meeting of the ULONA Drafting Committee members and official observers. The first meeting occurred in October of 2008 in Chicago. The meeting at the end of February will cover notarial policy issues, such as:

• Authority to perform notarial acts
• Acceptable identification of the individual signing a document
• What constitute notarial acts
• Certificate of the notarial act
• Maintenance of the stamping device
• Notary's journal
• Notary qualifications and education
• Grounds for revoking the Notary's commission
• Certificate on an electronic record
• Regulatory authority
• Education and permission to notarize electronic records

Carmelo D. Bramante of cdb consultancy is an official observer to the NCCUSL ULONA drafting committee. Please feel free to contact Carmen with any questions you might have. The February drafts of the revised ULONA are available on NCCUSL website archives at the University of Pennsylvania Law School.

MISMO® to be Managed by MERSCORP®

On February 4, 2009, the Mortgage Bankers Association (MBA) and MERSCORP® announced the two organizations have entered into a management agreement for the Mortgage Industry Standards Maintenance Organization (MISMO®). Under the agreement, MERSCORP® will be responsible for managing the day to day operations of MISMO. The MBA will retain full control of MISMO and will maintain a permanent seat on the MISMO Board of Directors. Read more about the agreement.

cdb consultancy also 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.

cdb://eNews - Previous Issues

Volume I, Issue 5 - cdb://eNews Year-End Issue

• Thought for The New Year
      by Robert Louis Stevenson (1850-1895) from The Vailima Letters
        (1895).
• cdb://eNews Year-End Highlights
      by Carmelo Bramante, Managing Director, cdb consultancy LLC
  • October: NCCUSL Begins Work on Modernizing State Notary Law
  • November: FHA Develops eMortgage Plan
  • December: MISMO Reactivates the Servicing Default Workgroup

Volume I, Issue 4 - Completeness of Industry Standards: eMortgages

• Introduction to eMortgage Standards
      by Carmelo Bramante, Managing Director, cdb consultancy LLC
• Electronic Documents in the Mortgage Industry
      by Rachael Sokolowski, Magnolia Technologies
• On eMortgage Adoption
      by John L. Jones, Arion Zoe Corporation

Volume I, Issue 3 - eSignatures & eRecording Standards Use
                             On the Rise

• States Adopt eRecording Data Standards
      by Carmelo Bramante, Managing Director, cdb consultancy LLC
• cdb://eNews update
  • Carmelo Bramante joins MBA eMortgage Adoption Task Force
  • The Housing and Economic Recovery Act of 2008 – H.R. 3221
• Growth in Electronic Signatures and Records Usage!
      by Margo Tank and Jerry Buckley
      Partners, Law Firm of Buckley Kolar LLP
  

Volume I, Issue 2 - Striking Gold & Adopting eMortgages

• NJLTA Strikes Gold
• Major eMortgage Indicators: Moving toward Broad Adoption
      by Mark Oliphant, eMortgage Director
      Fannie Mae

Volume I, Issue 1 - I Want My eMortgage!

• cdb consultancy Launches Web Site
• MISMO and PRIA Release eRecording Requirements for eMortgages
• cdb consultancy conducts eClosing-eRecording Seminar in IL
• I Want My eMortgage!
      by Colleen Wesling, MISMO Program Director, Industry Technology
      Mortgage Bankers Association

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