GISMO

Did you catch the reference to MISMO (along with the Common Securitization Platform) in the Republican bill - PATH Act approved last week by the House Financial Services Sub-Committee? 

The bill is being hailed as the solution to wind-down of Fannie Mae and Freddie Mac, limit the government’s role in the mortgage market and bring private investors back into the mix.  There are similar tones in the bi-partisan Senate bill (Crocker-Warner) released 6/25.  The later however involves a specific plan for a government guarantee.

But what really has caught my attention is the mention of data standards.  And, I have to say that while I am delighted that MISMO was recognized, it is how MISMO is mentioned that I find troubling:

Page 174 - of the current draft of the bill states that the utility will consider our work:

(k) DATA STANDARDS; DISCLOSURE STANDARDS.—

(1) DATA STANDARDS.—The Utility shall develop, adopt, and publish standard data definitions for all aspects of loan origination, appraisals, and servicing. In developing such definitions, the Utility shall consider the data standard-setting work under taken by the Mortgage Industry Standards Maintenance Organization through the enterprises’ Uniform Mortgage Data Program announced by the Agency on May 24, 2010.

Two key things jump out to me.  First, that “the utility” shall develop, adopt and publish standard data definitions for all aspects…  And secondly, that the "MISMO work" is to be considered through the lens of the Uniform Mortgage Data Program (UMDP).

But the Mortgage Industry Standards Maintenance Organization (MISMO) is so much more than the limited subset of data that has been identified for use in UMDP! MISMO has been around since 2000 with a mission to promote and support the common business interests of the Commercial and Residential Mortgage Markets. Its mission is to benefit industry participants and consumers of mortgage and investment products and services by: 

• Fostering an open process to develop, promote, and maintain voluntary electronic commerce procedures and standards for the mortgage industry, and
• Enabling mortgage lenders, investors, servicers, vendors, borrowers, and other parties to exchange real estate finance-related information and electronic mortgages more securely, efficiently and economically. 

Open standards organizations operating with proper governance ensures that no one single entity can dominate or control how the standards are developed. By definition, open standards are democratic in nature and are powered by volunteers.  And, I believe open data standards are the key to creating and maintaining the transparency that is absolutely essential to the recovery of the housing industry and fundamental to restoring and improving the US economy as a whole.  

My feelings about MISMO come from first-hand experience as one of many hard-working volunteers who have contributed blood, sweat and tears to this important industry effort over the years.  Many of my friends and colleagues tease me about how passionate I am about open data standards and data in general.  I even have a nickname, Ms. MISMO.  But fun aside, I view this as very serious business. Data, and more precisely, open data standards drive transparency, accuracy and legitimacy through the use of a common language.  As an open data standard, MISMO represents tens of thousands of cross-industry man hours in the biggest, most comprehensive mortgage dictionary ever created and supports business definitions across loan origination, settlement services, secondary marketing and servicing.  We are so much more than just a single implementation, or business requirement like UMPD.

And that’s why the language in this new bill has me a bit…well, concerned.

In 2008, at the tipping point of the credit crisis, Fannie Mae and Freddie Mac were taken under government receivership.  Today they are earning record profits and now own or guarantee more than half of all outstanding residential mortgages in this country.  They are essentially the only game in town for securitization these days as private capital has yet to return to the mortgage game in any real way.  Kudos to these recent housing reform bills for attempting to fix this unintended monopoly.     

The other related draft legislation that mentions data standards is in the bi-partisan Senate bill (Crocker-Warner) released 6/25.  Unfortunately, no mention of MISMO specifically in that one, just UMDP.  See page 98 under the discussion about establishing a national mortgage database:

“(b) CONSIDERATIONS.—in establishing the database Required under subsection (a), the Corporation shall take Into consideration, build upon, and adopt to the extent the Corporation determines appropriate, the existing data Standards set forth under the Uniform Mortgage Data Program initiative established by the Federal Housing Finance Agency.” 

But back to data! Thanks in part to the results of the Uniform Mortgage Data Program, mandated by their regulator, the Federal Housing Finance Agency, in May of 2010, the enterprises have gained enormous data stores as a result.  And, MISMO provided the baseline data structures to support their new data policies:  version 3.0 for loan delivery, version 2.6 for appraisal and the upcoming version 3.3 for mortgage servicing and loan disclosures.   In fact, in 2010 is when MISMO released its first consolidated dictionary under the version 3 series.  It represents a significant departure for single formats for individual requirements.  Version 3 and above represent a cumulative superset of data from which any type of data exchange requirement could be conceived and supported.

MISMO volunteers for the last three years have made significant contributions to the success of UMDP by providing the vehicle for the GSEs to bring their requirements forward for inclusion in the MISMO standard.  This means that MISMO volunteers have helped craft definitions, review submissions and include their business requirements along with the submissions of other businesses and requests well beyond just the realm of UMDP.

The question is: "What will the PATH Act and other housing reform legislation mean for MISMO if we are seen only as a UMPD vehicle?"  It could appear to the casual reader that MISMO could be swallowed up by the reincarnation of the GSEs as the Common Securitization Platform (CSP).  And if so, would we still have a viable open data standard that enables private enterprises and investors in the mortgage business outside of loans traded on the new CSP?   Maybe we just need a new name for the data standards referenced in the PATH Act: “GISMO”.