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The looming threat of government-sponsored enterprise (GSE) legislation has caused the mortgage banking industry to take a sharp look at current operations. Particularly as it relates to data collection by mortgage bankers, the proposed regulations would further complicate a machine whose gears are already grinding from manual processes.

One aspect of the pending GSE legislation (the Federal Housing Enterprises Regulatory Reform Act of 1992) would require Fannie Mae and Freddie Mac to report many data items about the loans they purchase. These proposed data elements are not supplied in the current delivery cycle, and several are not even collected in the origination, interim or servicing phases of a loan. New data fields such as first-time homeownership status, family size, room count and rental income have been among those proposed. Unfortunately, these types of data cannot be extracted from other data that are already reported, and they do not appear on any delivery document. Other fields, such as stable monthly income, require calculation prior to reporting. And while, this extra step of interpretation causes raw data to be transformed into actual information--it comes with a large cost. Mortgage bankers already spend a lot of money on underwriting, and if this proposed reporting legislation is passed, we will probably see further increases in these costs.

To accomplish the technological reporting, of these additional data items to the agencies, the industry will need to develop changes in its paper-based data collection. Technology managers will be pushing for increased paper dependence to recount the necessary information. While at first this may seem surprising, it is easy to understand that computers cannot transmit information that, prior to its electronic appearance, has never been collected, derived or complied on paper. When technology managers push for a change in paper forms, it is because the data was lacking from the process to begin with.

Most industries that handle a dramatic volume of data entry use forms that are designed to list data in ordered, delineated and evenly spaced fields. This not only assists the keypuncher, but allows those requesting the data entry to more easily check their work for completeness, field size and coding. Mortgage bankers have put their data-entry personnel to the test, by making them derive information from various forms and make the data conform to the available space.

What can make this process easier? Rather than advocate changes to many forms (such as the application, appraisal and others), we would recommend that all delivery-related information be contained in one place. A good candidate for this would be on a form such as the Fannie Mae 1008/Freddie Mac 1077, where many HMDA-related data elements are already listed. This way mortgage bankers could train data-entry personnel to know where to look on just one form--instead of having to hunt through the package on every case that comes in the door.

Another way to enhance data delivery would be to set up a sensible time frame for implementation. From the loan officer who has to change his or her "spiel" at the time of application, to the underwriter who has to make sure that monthly income, as listed, reflects the guidelines for delivery, mortgage bankers would be required to go through a certain amount of retraining. This takes a fair amount of time, however the change in our actions must precede the delivery of data.

In a March meeting of the MBA InterAgency Technology Liaison Committee on this issue, representatives from Fannie Mae and Freddie Mac made suggestions that would reduce the amount of paper-based changes. For instance, it was recommended that items such as third-party originator indicator or cash-out indicator could easily be delivered as special-feature codes. These codes are commonly used at the time of commitment and delivery to identify products to the agencies. It was also suggested that to ease the burden of "coding" on shipping clerks, alphanumeric descriptions be allowed in place of numeric codes. While we would not want to encourage dependence on either of these two methods, they are inroads toward developing a comprehensive policy that will assist mortgage bankers in dealing with this issue.

MBA's InterAgency Technology Liaison Committee is working hard to propose solutions to issues related to required paper-based changes in documents. This committee is a powerful vehicle to assist in easing these proposed reporting requirements on our members. In addition to soliciting commentary on any paper-based or process changes, MBA will ensure that all additional collection requirements are handled uniformly by Fannie Mae and Freddie Mac. In this manner, regardless of the burden placed upon our industry by this potential legislation, at least the costs to comply will not have to be spent twice.
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Title Annotation:pending regulation on data collection by mortgage bankers
Author:Hershkowitz, Brian
Publication:Mortgage Banking
Article Type:Column
Date:May 1, 1992
Previous Article:Guide to Commercial Real Estate Loan Documentation.
Next Article:Secondary Market.

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