As a believer in the importance of homeownership as part of the American Dream, and a taxpayer, I really appreciate the thoughtfulness that went into the recently released FHFA strategic plan for the housing market, “Preparing a Foundation for a More Efficient and Effective Housing Finance System.” Being a mortgage industry professional, I also have a vested interest in the housing industry and see things from that perspective, too!
As the government and private sector collaborate on restructuring the mortgage industry to return private capital back into the secondary mortgage market, one of the building blocks is expanding standardized data exchange. This enables investors at the loan and mortgage-backed security levels to validate the assets for themselves prior to purchase, at a more granular level, than ever before.
The question then becomes how to effectively validate that data, so the purchasers can evaluate their buying risk quickly and efficiently—and preferably do most of this data validation in an automated way, with triggered escalation for human intervention when the data doesn’t match or is otherwise flagged.
As the industry makes decisions about what to keep and update—and what to create from scratch—to shape the go-forward model that will affect all of us, one of the recommendations in the FHFA strategic plan caught my attention.
“Develop a new system for document custody and electronic registration of mortgages, notes, titles, and liens.” (You can find this on page 23, as one of the tasks for Strategic Goal No. 4.)
Regardless of your position on the use of MERS as a nominee for the lender, creating a shared, accessible database of record is another reason why lenders and servicers have worked diligently to certify the accuracy of the data entered in the MERS database.
Restructuring the U.S. mortgage market is critical to all of us, and it has to be a joint effort between the government and the mortgage industry. The GSEs have been an effective industry vehicle for supporting, promoting and essentially forcing the adoption of standards—for data, forms and procedures. As this national dialogue continues about what to do with the GSEs and how to reduce the government footprint in the housing market, there’s a lot to be leveraged from many of these existing standards.
That’s also where many of you come in as mortgage technology experts, through your thoughtful application of technology to solve these business challenges.
And with the expanding ability to exchange data, we really have an opportunity together. This is especially true with data that’s in its native electronic format from the source, and when comparative data is available, from consolidated electronic databases of record such as land records, MERS, internal records and other sources.
Speaking of industry utility databases that can serve as data checks for business partners exchanging data, e-mortgage adoption (specifically, electronically-signed promissory notes) isn’t quite at a tipping point yet. However, I want to point out that the MERS eRegistry, which is a separate database specifically for electronically signed notes, provides another searchable database of record for prepurchase validation purposes, especially since it can be automatically updated using the source document (an e-note).