Mortgage Data Initiatives: Setting the Stage for Digital Disruption

Digital innovation is disrupting almost every industry with varying speeds and intensity. The mortgage industry is no exception. Mortgage processes involve transmitting a large volume of data among a series of interconnected players from consumers to investors. Some data initiatives have been rolled out to establish or update data standards/datasets, transmission protocols, and platforms across the industry. Recent examples include components of the Uniform Mortgage Data Program: the Uniform Loan Delivery Dataset (ULDD)¹ and the Uniform Closing Dataset (UCD), which took effect in September 2017². Fannie Mae's Economic & Strategic Research (ESR) Group surveyed senior mortgage executives through its quarterly Mortgage Lender Sentiment Survey^® to understand lenders' views regarding data management and their experience with these data standardization initiatives.

Survey findings include:

• A majority of lenders surveyed (74%) believe that these mortgage industry data initiatives are valuable. Larger institutions are more likely than smaller ones to find these data efforts valuable.
• When asked to provide ideas on how to derive more value from these initiatives, lenders suggested developing clear standards of practice, addressing compliance issues, and ensuring system integration across players.
• "Enhancing data accuracy and consistency" (41%), "enhancing borrower experience" (33%), and "reducing repurchase risk" (33%) were cited by lenders as key benefits these data initiatives bring.
• When asked to identify major challenges, lenders’ responses varied and included "updating IT systems" (34%), "getting key players to follow requirements" (32%), "working with vendors" (30%), and "ensuring data quality" (30%).
• The resources that lenders said they need also varied, including "more time," "more support from their vendors," "dedicated IT resources," and "more training."

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The mortgage industry continues to be very focused on improving data consistency, transparency, and flow across the mortgage loan life cycle. These data standardization efforts serve as critical foundations to transition the industry to a more streamlined and digitized world. The results should enable lenders to improve operational efficiency, build better risk management tools, and enhance borrower experience. The industry is seeing fewer data corrections and loan delivery issues as a result. Nevertheless, adapting to these standards can be costly and time-consuming. The cost and time investment will have a larger impact on institutions with limited resources and create higher barriers for new entrants into the mortgage market. Most importantly, the success of these data efforts requires all industry participants' collaboration. Data standardization alone is not enough. Major challenges lenders cite point to the lack of integration across systems and players, a need that was highlighted in our previous research for future mortgage technology success³. The industry needs further innovation to address the end-to-end integration issue to help all players effectively compete in an era of digital transformation.

To learn more, read our Fannie Mae Q4 2017 Mortgage Lender Sentiment Survey Topic Analysis.

Lisa Dorsey
Director, Digital Products

January 24, 2018

The author thanks Prabhakar Bhogaraju, Christopher Porter, Sejal Patel, Thomas Seidenstein, Doug Duncan, Steve Deggendorf, and Li-Ning Huang for valuable comments in the creation of this commentary and the design of the topic analysis questions. Of course, all errors and omissions remain the responsibility of the author.

Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic & Strategic Research (ESR) Group or of survey respondents reflected in this commentary should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in this commentary is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

¹ The Uniform Loan Delivery Dataset (ULDD) is the common set of data elements required by Fannie Mae and Freddie Mac for single-family loan deliveries. For more information, visit the ULDD webpage: https://www.fanniemae.com/singlefamily/uniform-loan-delivery-dataset-uldd

² The Uniform Closing Dataset (UCD) is a common industry dataset that allows information on the Consumer Financial Protection Bureau's (CFPB's) Closing Disclosure to be communicated electronically. It was developed by Freddie Mac and Fannie Mae (the GSEs) at the direction of their regulator, the Federal Housing Finance Agency (FHFA). For more information, visit the UCD webpage: https://www.fanniemae.com/singlefamily/uniform-closing-dataset

³ "Integration: Key to Future Mortgage Technology Success," (March 13, 2017), Mortgage Lender Sentiment Survey^® Special Topic Survey Results, https://www.fanniemae.com/portal/research-insights/perspectives/mortgage-technology-success-seidenstein-031317.html