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Who am I?

WHEN THE AGE-OLD QUESTION "Who am I?" is asked, there is the underlying suggestion that there actually may be an answer. The question typically arises when there is a struggle with identity or an identity crisis. The Merriam-Webster dictionary contains the following definition for "identity crisis": "a state of confusion in an institution or organization regarding its nature or direction." And the definition of "identify" is: "to establish the identity of."

It appears that the mortgage banking industry is, indeed, having an identity crisis in one particular area of technology. There are no industrywide standards for universally and uniquely identifying a mortgage loan, the property associated with the loan and the mortgage documents for the loan.

Instead, there are multiple loan and property identifiers, defined at different points in the mortgage process by many parties, including lenders, investors, title companies, insurance companies and recording jurisdictions.

For example, the mortgage industry standards organization, MISMO[R], defines 20 data points for property identification and more than 15 identifiers for a single loan. The multiple MISMO definitions for identifying a loan and a property are not standardized for format or length. To compound the identity crisis further and create confusion at all levels of the process, there is no mechanism--at all--to identify a mortgage document.

The lack of standardized and universally used identifiers for the life of a mortgage loan has an impact on loan documentation, consumers, and the processing and analysis of loan data. Because of this situation, in late 2012, three development workgroups were formed at MISMO to bring together industry representatives to discuss current challenges and issues related to identification.

The workgroups are focused on three different areas: unique loan identification; universal document identifiers; and a property-identification project to address multiple different methods for identifying a property. Each development workgroup is discussing best practices and recommendations for identification and each is developing a white paper to be completed in 2013.

For mortgage loans, a single loan identifier that is universally used for every loan does not exist. Many parties in the industry--including originating lenders, investors, title companies and mortgage insurance companies--utilize individual methods of identifying a loan. The end result is a collection of multiple identifiers, which are not standardized for format or length, used by various parties for different purposes during the life of the loan.

The Dodd-Frank Wall Street Reform and Consumer Protection Act amendments to the Home Mortgage Disclosure Act (HMDA) grant the Consumer Financial Protection Bureau (CFPB) the authority to require a universal loan identifier. To support the CFPB, the MISMO Unique Loan Identifier Workgroup is an assembly of industry participants conducting an open discussion to address the issues related to loan identifiers.

Some of the activities undertaken by the MISMO Unique Loan Identifier Workgroup include defining the characteristics of a unique loan identifier. Should the identifier be issued by an entity or should the identifier be created from information from the loan itself? Because the industry currently has multiple identifiers for a loan, should there be one identifier that points to the collection of identifiers? The workgroup is also discussing the types of governance models for loan identifiers, the format and syntax of a standardized loan number, related costs and adoption issues.

To address the issue of reliably identifying a document, the MISMO Universal Document Identifier Workgroup has developed and tested a "universal" (or standard) formula for identifying documents that can be utilized across the industry. The formula uses a What-You-See-Is-What-You-Get (WYSWYG) approach. A subset of data is extracted directly from the documents themselves to formulate the identifier.

The workgroup determined that the key to establishing a reliable identification mechanism is to ensure that the data merged into the formula is both unique for a loan transaction and reliable in that the data used in the formula is always available on all instances and variations of that document type.

Some of the outcomes of the MISMO Universal Document Identifier Workgroup included testing the formula against more than 100,000 HUD-1 Settlement Statement documents. The results of the tests show that the formula is reliable, works well and can be applied to a multitude of different loan document types (i.e., Good Faith Estimate, note, Settlement Statement) security instrument, etc.).

The third workgroup within MISMO is a the Property Identification Workgroup. There is no single mechanism for identifying a property. Just as in the situation for identifying a loan, there are multiple property identifiers.

One might ask, why not just use the U.S. Postal Service (USPS) address? USPS addresses are intended to deliver mail, not intended to identify property in a way that meets the needs of the mortgage industry. For instance, it may be important to know that Apartment 2B is not on the second floor of the building. The delivery address does not provide this information.

The mortgage industry uses a combination of postal addresses, legal descriptions, assessor parcel numbers and geospatial coordinates for property identification. To compound the issue further, recording jurisdictions across the country use different identifying mechanisms, which are locally defined.

This patchwork quilt for identification schemes can lead to misidentification, delays and inefficiencies. This has a direct impact on the entire mortgage process, including title searches, lien recordation, assignments and foreclosure processing.

The primary goals of the property identification project are to discuss the best practices for utilizing the MISMO defined property identifiers and to support outside efforts related to property identification. The group is exploring including identifiers defined by other standards efforts to the MISMO reference model.

The psychologist Erik Erikson coined the term "identity crisis." According to Erikson, an identity crisis is a time of intensive analysis, introspection and exploration. A single, strong identity is achieved after this conscious contemplation.

Based on recent activities at the three MISMO workgroups, loans, properties and documents in the mortgage industry are no longer in a state of confusion and are well on the road to achieving identities. This is a good thing: It is August, and the therapist is on vacation.

Rachael Sokolowski is an independent consultant and writer based in Cape Cod, Massachusetts. She is the founder and principal of Magnolia Technologies, which provides information technology consulting services for the financial services, health-care and publishing industries. At MISMO, she co-chairs the eMortgage, Document Identifier and Loan Identifier workgroups. She can be reached at
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Title Annotation:STANDARD TIME
Author:Sokolowski, Rachael
Publication:Mortgage Banking
Date:Aug 1, 2013
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