MISMO matters: the industry's technology standards-setting organization--MISMO (Mortgage Industry Standards Maintenance Organization)--made strong progress on several fronts in 2003.

SINCE THE CREATION OF THE MORTGAGE INDUSTRY STANDARDS MAINTENANCE ORGANIZATION (MISMO) in 1999, MISMO has steadily worked to establish its presence in the mortgage technology industry. Significant achievements were logged in 2003, and MISMO is looking to accomplish still more in 2004. * MISMO now has more than 1,000 participants and 130 subscriber companies and financial backers. Its conventions and meetings tallied record turnouts in 2003, according to Gabe Minton, vice president of industry technology for the Mortgage Bankers Association (MBA). * MISMO's core mission is driven by the processing inefficiencies that result from the redundant data entry into multiple systems that has traditionally plagued the mortgage industry. Companies as a result need dedicated data-conversion systems for business-to-business (B2B) interfaces within the industry. * MBA established MISMO to coordinate new mortgage standards through the development and maintenance of Internet-based extensible markup language (XML) real estate finance specifications. MISMO develops common data definitions and transaction structures, eliminating the need for custom interfaces between business partners. * Over the past year, MISMO has accomplished some of its core goals and is currently focusing on new initiatives for the remainder of 2004.

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"The largest two projects we have been working on that are new to the standards initiative have been [version] 3.0 architecture and intellectual property rights policy [IPR policy], which has spanned both the residential and the commercial side of the MISMO organization," Minton says.

"The 3.0 architecture is the next big release for MISMO--it takes into consideration all that we have learned over the last four years, and strives to be a better architecture that embraces the latest in XML technology," says Minton. "The IPR policy is important because it protects people's rights in creating the standards, not only so they expressly can keep their IP [intellectual property] for their own use, but [also because it] protects them as end users wishing to implement systems to support or use the standards.

"We also took this as an opportunity to break backwards compatibility with the existing MISMO standards, so we can increase the robustness of the standards and design them better and make them more plug-and-play and component-based," Minton says. Version 3.0 is expected to ship in the first or second quarter of 2004.

"We are actually going to see transactions for commercial mortgages start to come out this year [2004]," adds Minton.

"What is really neat is that commercial [version] 1.0, or the first release of its architecture, lines up one-to-one with the 3.0 residential MISMO architecture because they don't have any legacy issues with DTD [document type definition]," says Minton.

Other initiatives

MISMO's eMortgage Workgroup has completed the first release of its comprehensive Implementation Guide for the SMART doc (securable, manageable, archivable, retrievable, transferable document) specification, which consists of 28 chapters and five appendixes. It provides extensive guidance on the technical implementation of electronic documents, including the various "states" a SMART doc would pass through during the eMortgage process (see Figure 1).

Other MISMO initiatives include the National eNote Registry project. Originally conceived by the eMortgage Workgroup, the eNote Registry requirements were then developed by MBA's Residential Technology Committee in conjunction with Fannie Mae and Freddie Mac. Now being implemented by MERS (Mortgage Electronic Registration System), the eNote Registry will act as the single, central reference for tracking the ownership and location of electronic notes (eNotes) contained in various eVault systems.

"The eNote Registry Task Force was made up of some 35 individuals from different companies, and was formed by MBA's Residential Technology Committee to address the first inaugural set of business requirements for the eNote Registry. The set of requirements was released to the industry for review and comment last March and was subsequently closed in [the] May/June time frame," Minton says.

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Security standards

Lastly, MBA's security standards, which are complementary to MISMO and a source of much discussion over the past year, have taken on great importance among industry groups.

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"We have two groups that we focus on [that address security standards]: an open group that anyone can participate in called Real Estate Finance Management Security Organization [REFMSO], which meets with the MISMO workgroups and concentrates on security issues, most notably identity type issues like identifying somebody to a transaction or identifying somebody on an electronic closing document. [And there is] a wholly owned subsidiary [of MBA] that we announced and launched last year [2003], called the Secure Identity Services Accreditation Corporation [SISAC]," Minton explains.

SISAC created requirements and guidelines to accredit and certify public key infrastructure (PKI) and secure identity providers. This accreditation structure allows industry firms to establish various levels of identity within the context of secure eCommerce transactions for use over unsecured networks such as the Internet.

"SISAC handles the authentication and digital credentials that might be used in MISMO transactions or eMortgage implementations. SISAC complements MISMO," Minton says.

SISAC consists of four categories: issuers, auditors, subscribers and relying parties.

* Issuers create and manage the life cycle of digital credentials. An issuer must be accredited to issue SISAC credentials and provide validation services.

* Auditors or audit firms participate to ensure issuers meet the standards and requirements set by SISAC. Every issuer requires an independent or third-party audit/attestation of SISAC standards prior to accreditation.

* "Subscriber" is a term used by PK1 to designate the certificate holder or user of the credentials. Subscribers may be lenders, brokers, appraisers, closing agents, county recorders, attorneys, etc. Individuals, organizations or devices are all valid subscribers.

* Relying parties are organizations that depend on the credentials. This could be an investor that receives a loan package or a lender or subscriber that requires assurance of business partner or record.

New York--based KPMG LLP, a provider of assurance, advisory and tax services, was the first SISAC-accredited auditor. Mountain View, California-based VeriSign Inc.--which delivers critical infrastructure services that make the Internet and telecommunications networks more intelligent, reliable and secure--recently became the first accredited issuer.

MISMO is actively working on the area of compliance and certification of its data standards and eMortgage specifications this year. The focus is to drive up adoption using a formal definition mechanism the industry can use to validate that a company and its partners are not only using, but are also compliant with, specific MISMO standards.

"There are a lot of companies that have implemented MISMO in whole or part, and want to announce that they are MISMO-compliant," Minton says. "What does that mean? Somebody has got to step in and arbitrate, and that should be MISMO, of course."

Currently there are no checks and balances on standards; as a result, MISMO is implementing a mechanism that will accredit a firm as validating against MISMO-tested data. Trading partners, in turn, will be able to go to www.mismo.org and check to see if a firm has passed these tests and has the right interfaces, Minton says.

MISMO has become an important part of the mortgage technology movement as the industry increasingly relies on technology innovations to streamline the mortgage process.

Jamie McAfee is an editorial specialist for Mortgage Banking.