MISMO’s Guide to Reshaping the Mortgage Industry, Leaving Paper for Pixels

A Conversation With Sage Nichols

The word “mortgage” evokes myriad responses depending on one’s relationship with homeownership. But one thing is certain: Mortgages are a big deal for the U.S. — and global — economy. These property payment plans support a large portion of one of the world’s largest asset classes and are, therefore, highly scrutinized.

In this episode, host Maiclaire Bolton Smith sits down with Sage Nichols, an executive for client success at CoreLogic, to talk about how standards and best practices can pave the way for modernizing the mortgage industry.

Up Next

Property Peril: Using Data Science to Examine Riskiest US Areas to Live Amid Climate Change

Sage Nichols:

So, I guess the data alone is good and that can help things, but the data standards is really what connects it all together and creates that commonality.

Maiclaire Bolton Smith:

Welcome back to Core Conversations: A CoreLogic Podcast where we tour the property market to investigate how economics, climate change, governmental policies and technology affect everyday life. I am your host Maiclaire Bolton Smith and I’m just as curious as you are about everything that happens in our industry.

Mortgages, a traditional sign of wealth building, a financial ball and chain and rent payments for homeowners. Whatever your feelings are when you hear that word, one thing is certain. Mortgages are important to both the people who have them as well as the foundation of the economy. They also require incredibly complex banking contracts. From the dozens of required signatures to the mountains of verifications required to approve a mortgage applicant. Getting the bank to loan a large sum of money for a piece of property is a daunting process. For those doing the loaning, things aren’t much easier. The ins and outs of the origination process can be slow and costly. In fact, the Mortgage Banker’s Association found that originating a mortgage can cost over $10,000.

To alleviate the cumbersome nature of financing a property purchase, MISMO, or the Mortgage Industry Standards Maintenance Organization is working steadily to streamline the process by replacing paper forms with digital processes. They are cultivating a broader understanding of what is reported in a mortgage contract and why. So to give us some insight on how this nonprofit is refining the process of applying for a mortgage, we have Sage Nichols, an executive for client success at CoreLogic.

Sage, welcome to Core Conversations.

SN:

Thank you, Maiclaire. So happy to be here. I’m a big fan of the podcast, so this is very exciting.

MBS:

Well, very exciting for us too. Since it’s your first time on our podcast here, can you tell our listeners a little bit about your background and your role at CoreLogic and how you became involved with MISMO?

SN:

Yeah. I lead the client success team for CoreLogic’s mortgage customer base, and that includes our borrower, collateral and risk, and servicing and payment solutions. I have been in the mortgage industry for a little over 20 years, and much of my career has been focused in the collateral platform space, actually.

MBS:

Okay.

SN:

And that space is all about technology and data-enabled workflow that facilitates both the procurement and the review of information that’s needed to underwrite the collateral component of a loan.

MBS:

Wow, interesting. Okay.

SN:

Yeah, so that background and being in that business for so many years, has built up a strong belief that data can genuinely transform the mortgage origination process. MISMO asked me to join the board and with the MISMO mission, which we’ll talk more about, it’s been a really great experience so far.

Erika Stanley:

Before we dive deeper into this conversation, I wanted to remind our listeners that we want to help you keep pace with the property market. To make it easy, we curate the latest insight and analysis for you on our social media where you can find us using the handle @CoreLogic on Facebook and LinkedIn or @CoreLogicInc on Twitter and Instagram. But now let’s get back to Maiclaire and Sage.

MBS:

Well, that is so great. I’m so excited to have you here. So we just learned that MISMO stands for the Mortgage Industry Standards Maintenance Organization, but unless you’re probably part of the mortgage world, that probably doesn’t mean very much to you. So do you want to talk a little bit about why is this organization so important to the property industry?

SN:

Yeah, so a little bit of background. MISMO is wholly owned by the Mortgage Bankers Association and it’s a nonprofit organization. And the mission of MISMO is all about enabling the mortgage industry by creating standards that are geared at solving some of the long-standing challenges that we’ll talk about today. And the ultimate goal of MISMO is really to forge a path to digitize the mortgage process through the vehicle of these standards combined with industry engagement.

MBS:

Okay.

SN:

Yeah, so it’s really cool. And the great thing about an organization like MISMO is that it’s connected to all of the key players throughout the industry. And when you’re able to connect those players together and then combine it with the mission around data, there’s really a great ability to drive meaningful change.

MBS:

That is really interesting. I guess when we think of the mortgage industry, on one hand, you think, “Mortgage industry has been around forever and people have been getting mortgages to buy homes for a long time.” But I imagine things have changed, especially the Great Recession. We talk about that quite a lot on this podcast too with our economists. Can you talk a little bit about how the evolution of the mortgage industry has changed over time and especially now as we’re moving towards this more digital way of doing things?

SN:

I would start by saying I think the industry has come a long way, but there’s a long way to go.

MBS:

Yeah.

SN:

And let me balance those two things out. There’s been a lot of progress, even before the Great Recession. A lot of progress in improving the process, improving the experience. A lot of technology available. A lot of technology I’ve personally been involved with that has helped pieces and parts of the process. And I think the Great Recession was certainly a wake-up call in several areas and helped to propel some things forward and really drive a new focus, specifically around data and transparency.

But even with that progress, even before and then after the Great Recession, you stated the number earlier, it’s still very costly, it’s complex, it’s time-consuming, it’s very manual in a lot of areas. The processes are fragmented. It’s very linear in nature — like this needs to happen and then this can happen. And when you add to that, the fact that there’s a lot of paper and a lot of systems and a lot of back-and-forth manual processes just for a lender to get what they need to make a decision, there’s a lot wrapped up in there.

ES:

Speaking of working with MISMO, today, MISMO standards are accepted and deployed by nearly every type of entity involved in creating mortgages. And these standards are required by most regulators, housing agencies and the Government Sponsored Enterprises that participate in the industry. CoreLogic has routinely had representatives on the regulatory agency’s 20-member board, and 2023 marks the second year that Sage is serving.

MBS:

Sage, I can’t help but wonder, COVID. We’ve talked a lot on the podcast… I remember talking to Shawn Telford, our Chief Appraiser, about how COVID really changed the appraisal industry. Did COVID have a significant impact on making this be more digitized, I can imagine?

SN:

It did. It definitely did. I think that can be seen in a couple of areas. As you mentioned, the appraisal process and how is information gathered, what type of technology can you use to get images and to get information throughout the underwriting process, but then also how do you get signatures and how do you do the closing process? A lot of things that were in the works that I think lenders and other providers in the industry needed to do and had desired to do and been really pushing to do for a long time, that moment in time, if you will, helped propel a lot of that forward.

ES:

If you want to hear more about the lasting effects of the pandemic on the appraisal industry, listen to our first episode of this season, Episode 50, where Maiclaire talks to Shawn Telford about how the home valuation process is gaining significant efficiencies thanks to innovation within the industry that was largely catalyzed by COVID-19.

MBS:

Okay. Well, interesting. I guess too, the other thing is MISMO is all about standards. Why are standards so important, especially in the mortgage industry?

SN:

Data, it’s the foundation of everything, before you even get to standards. There’s data behind everything. And that data can drive workflow, it can drive decisions. It connects disparate systems together and disparate processes. And when you effectively capture data and then you leverage that data, then you can automate workflow and you can improve decision making. So it’s not just about data though. You have to have the standards because those are critical to be able to create a language that provides for commonalities and true interoperability so the data can actually be effectively used to drive the improvements. So I guess, the data alone is good and that can help things, but the data standards is really what connects it all together and creates that commonality.

MBS:

Sure.

SN:

And if you take that back to your prior question, Maiclaire, around the mortgage industry and where we’re still faced with challenges on time and touch and cost and transparency, the continued development of standards then starts to have that transformative impact on the ecosystem by knocking out those challenges.

MBS:

Okay. Interesting. Interesting. So I guess, any of us that have ever gotten a mortgage or refinanced a home, they know that it takes forever and it takes forever because you’re sitting there with this big stack of papers. I often think of how that was kind of an exciting moment for a first-time homebuyer, but then when we refinanced our home, I was like, “Are you kidding me? We have to do this all over again.” So, it just gets the reputation of being such an archaic, paper-based process, like all of their operations are just so… They just aren’t with the times of everything just being a touch of a button, digitized and one-click to make everything happen.

I guess it sounds like MISMO is really putting a focus to make the mortgage industry come into the 21st century and the digital age and really having this friction of removing any friction of having to share documents, having to be in a certain location, at a certain time to do something. Of all things I can say, I would think that just because with the digitization of many things around the world, that’s probably what inspired MISMO to focus on this. But is that true? Or why did they start with trying to digitize things as their number one priority?

SN:

It is true. MISMO knows the potential impact of data standards to truly digitize the process. The MISMO organization exists to facilitate this more seamless exchange of information across platforms and across market participants. So that creates really a laser-focused objective on this because it’s so impactful on such a broad scale.

MBS:

Sure. Yeah.

SN:

And I would look at that from the standpoint of all of the constituents in a mortgage transaction. Think about lenders, think about providers, think about the secondary market and certainly, think about the consumer, the ultimate person and party at play here. And from a lender standpoint, there’s a big impact because the lenders have an ability, using data and standards to scale and operate more effectively as a business. That leads to increased efficiency, better decision making, better risk management and ultimately, a better customer experience and improving a lender’s ability to actually get people in their homes.

MBS:

Okay.

SN:

So, the providers, and when I say providers, that could be any number of parties that are involved in the mortgage industry, be that an appraiser or be that credit reporting. There are a lot of different parties involved in making a mortgage happen. And those providers data and data standards have a great impact there as well because it improves their ability to work with lenders and their ability to serve their clients and streamline their operations and operate as a business as well.

And then the secondary market, I think, is a really interesting party to think about here as well, because as you increase the utilization of data and data standards, you increase transparency and that can bring a lot of value to investors. And as the secondary market returns, data standards and both the availability and the reliability of data allows for a much more effective due diligence process.

ES:

Speaking of data, it’s that time again. Grab a cup of coffee or your favorite beverage. We’re going to do the numbers in the housing market. Here’s what you need to know.

Rising home prices and climbing mortgage rates continue to challenge property market affordability in early 2023. 30-year fixed mortgage rates are at some of the highest levels seen over the past 15 years and home prices remain elevated despite the national CoreLogic Home Price Index softening from double digits to single-digit annual growth over the past few months.

This environment has led many potential home buyers and investors to hit the pause button on their purchase plans, resulting in 59% of homes selling below the list price in March 2023. For those that already own a home, things are looking good. Not only are homeowners locked into some of the lowest mortgage rates seen in a generation, but the share of early state delinquencies on mortgage payments remains unchanged year over year. Nevertheless, the continuing possibility of a recession remains in the background and has economists, homeowners and potential investors all watching the market. And that’s The Sip. See you next time.

MBS:

And what exactly is the secondary market? Can you just define that?

SN:

Yeah. So secondary market really would be investors of mortgages.

MBS:

Okay.

SN:

Right now that’s largely Fannie and Freddie and certainly before the great recession, there were many other players in the secondary market. There’s a lot of progress towards the return of a more diversified secondary market with investors. And as that happens, these data standards become really even more and more important.

MBS:

Okay. No, that’s helpful. Thank you.

Erika Stanley:

While today we focused on what these MISMO standards mean for the industry, in part two of this conversation, Maiclaire and Sage will talk about how these standards affect homeowners. We’ll pick back up next week. See you there.

MBS:

And thank you for listening. I hope you’ve enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released.

And thanks to the team for helping bring this podcast to life. Producer Jessi Devenyns; editor and sound engineer, Romie Aromin; our facts guru, Erika Stanley; and social media duo, Sarah Buck and Makaila Brooks. Tune in next time for another Core Conversation.