Tuesday, September 6, 2016

UCD, ULAD, and HMDA. Oh My!

If you are a provider of mortgage or settlement services, you might have heard a lot of acronyms being thrown around recently. In addition to QM and TRID, which have been a source of anxiety over the past several years, now there are new terms such as UCD, ULAD, and HDMA that are causing consternation. Oh my, indeed.

What do all these new acronyms have in common? They are all new and upcoming data reporting requirements. Fannie Mae, Freddie Mac, and the Consumer Financial Protection Bureau want improved information about mortgage loans that are being made – and for the most part, they want it in MISMO data formats that are similar, but not exactly alike.

The first reporting requirement on the list is the Uniform Closing Dataset, or UCD. Beginning in Q3 of 2017, Fannie Mae and Freddie Mac (GSEs, or government sponsored enterprises) will begin requiring a data set that provides detailed information on the contents of Closing Disclosure documents for loans they acquire. The UCD specification requires the use of the MISMO 3.3 data standards.

Muddying the waters a little bit, MISMO has since released a newer version of its data standards: MISMO 3.4. Another upcoming GSE data specification will rely on this newer set of standards. The Uniform Loan Application Dataset, or ULAD, describes the information on the soon-to-be-available redesign of the Uniform Residential Loan Application (URLA) form.

Finally, the Consumer Financial Protection Bureau (CFPB) is also piggybacking on the newer MISMO 3.4 standards for the revised Home Mortgage Disclosure Act (HMDA) reporting requirements. The CFPB will begin phasing in the new HMDA rule in 2018, and the required data submission directly corresponds to terminology and data points from MISMO 3.4.

With all these scary-sounding acronyms and varying requirements for MISMO, how can an organization prepare for the future and proceed with the minimum amount of pain and cost? Fortunately, there are a few facts that can help alleviate some fears.

First, even though these required datasets use different versions of the MISMO standards, the mechanics of how MISMO files are laid out is mostly the same. Just as the English language has evolved over time to add new words and phrases, MISMO standards also evolve to capture additional terms and meanings over time. Usually, loan information that was supported in earlier versions of MISMO will still look the same in newer versions.

There are other ways that MISMO is similar to a spoken language. When someone learns a new language, there is effort required to obtain a minimal level of competence. With enough practice, a speaker can effortlessly exchange ideas. That is fluency. MISMO is similar in that once it is implemented the first time, adding support for future requirements is relatively easy.

Finally, and thankfully, UCD, HMDA, and ULAD are not coming all at once. They will be phased in over the next several years. With one year to go until the first of these, UCD, becomes a mandate, there is time to get a grasp on MISMO and be successful. Lions, tigers, and bears, these data specifications are not.