9 ways mortgage industry will benefit from standards in 2022

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As the real estate finance industry transitions from the highs and lows of the COVID era into the new normal of 2022, industry standards will continue to play a key role in helping us solve ongoing business challenges, regardless of the market environment.

MBA forecasts that total mortgage originations will fall next year to $2.6 trillion from an expected $3.9 trillion in originations in 2021. Fluctuating mortgage rates, a shift from refinances to purchase transactions, a strong interest in servicing, a competitive housing market, and labor shortages present opportunities for the real estate finance industry to leverage standards to streamline processes and procedures in order to better serve borrowers.

Combine those opportunities with the growing number of prospective millennial homebuyers who have a digital-first preference for purchases, including real estate transactions, and 2022 could very well be a pivotal year in the mortgage industry’s quest to rid itself of stacks of paper and, instead, fully embrace technology, innovation, and interoperability as the mechanisms to grow and retain market share.

MISMO, the industry’s standards organization, is built for this very moment. The MISMO community, which includes lenders, servicers, issuers, technology companies, service providers, mortgage insurers, government sponsored enterprises, government agencies and regulators, and many others, is working to enable an end to end digital mortgage process among a number of other key priorities.

Here are a few examples of how industry standards are helping build the future of real estate finance:

MISMO SMART Docs, which are Securable, Management, Archivable, Retrievable, and Transferable, support the industry’s evolution from document images to truly electronic records. MISMO’s updated SMART Doc® standard, which is under development, will be verifiable and available in PDF format and will enable further automation and lights out processing.

Our remote online notarization (RON) standards, which include credential analysis, borrower identification, audio and video requirements, record storage, and audit trails among other specifications and have been used to implement RON laws in many jurisdictions, are being updated to ensure they continue to support the maturation of the RON industry, thereby allowing the eNote market to scale and conferring additional benefits on industry and consumers.

We’ve also launched an eMortgage Technology Certification program, including a certification for eClosing platforms, and we’ve doubled the number of technology platforms receiving MISMO RON-certification. This certification program assists lenders by providing a quick way to find MISMO-compliant vendors in the eClosing and RON space and the platforms that meet industry standards. This is a critical designation, as MISMO standards are the underpinning of a number of regulatory and program requirements.

MISMO is not just focused on the development of these standards, but also on their adoption in order to achieve greater utilization of digital mortgages. To do so, we are tackling what lenders have identified as a key barrier to the scalability of digital mortgages: the lack of knowledge about how digital a loan can be. MISMO is creating an e-Eligibility Exchange, powered by Snapdocs, to provide a central information source so organizations can better understand how digital a loan can be at the transaction level. This industry resource will provide access to criteria that impact digital closings, including information on counterparty requirements, eNotarization regulations, county recording requirements, settlement agent readiness, and title underwriter restrictions.

Beyond digital mortgages, post-closing is also an area of activity for MISMO this year. MISMO is reducing friction in servicing by working to standardize servicing transfers and servicing portfolio risk and retention. At the present time, we are creating a catalog of information that will outline recommended processes and best practices to consider when conducting servicing transfer transactions, which have often proved cumbersome and have a high degree of complexity.

APIs are providing faster access to business data and services and MISMO’s API Toolkit is facilitating the rapid development of new products and applications across the mortgage industry. APIs allow market participants to efficiently exchange small bits of information and the MISMO API Toolkit ensures that all parties are speaking in the same language when exchanging data in these transactions.

A recent Kroll Bond Rating Agency report found that private-label residential mortgage-backed securities are expected to reach a post-financial crisis record in 2022, with issuance expected to increase 15% over this year. MISMO’s new standardized Private Label Securitization (PLS) dataset is focused on improving the quality and consistency of the data sent to credit rating agencies, for faster, more efficient, and more accurate due diligence for private label RMBS.

Environmental, social and governance criteria gained traction in 2021 and its momentum is increasing heading into 2022. MIMSO’s new ESG Community of Practice  is working to help the industry successfully navigate and innovate in the evolving ESG landscape by defining and streamlining the exchange of ESG information, which could include standardized checklists, questionnaires, forms and disclosures.

MISMO is also focused on industry standards to benefit the commercial segment, with a Commercial Appraisal Standard and a Commercial Green Utility Dataset, both of which enable the efficient exchange of commercial real estate information.

With these initiatives, MISMO is uniquely equipped to help the real estate finance industry achieve its productive and profitable future. We invite interested participants to join us in this important work. Together we aim to innovate, collaborate and prosper in 2022.