In many industries, a certification is the benchmark. You probably wouldn’t do business with a CPA who isn’t certified. Would you rather have your car serviced by a certified mechanic or someone under a shade tree? Many open positions for project managers require a Project Management Professional (PMP) certification. Then how is it that certifications in the mortgage industry are limited? To date, very few positions posted required certifications, but things are changing in the industry, and more and more, certifications are becoming important. In this article, we will discuss the state of the industry, look at trends and how the future is unfolding. We will then discuss why specific certifications will become more critical and pose some thought-provoking questions.
The mortgage industry is changing due to increasing pressure and competition. Originating mortgages cost a lender more than $8,000 on average according to statistics from the Mortgage Bankers Association (MBA). Costs are far greater than 10 years ago. The industry faced increased spending on regulatory compliance coming out of the default crisis and Dodd-Frank. Lenders are competing for borrowers more than ever and have seen new entrants. Non-bank lenders take market share by leveraging better customer experience, modern technology and lower costs of production. Traditional lenders feel the squeeze, and some notable names have exited the industry entirely.
So where does this take us? The solution is moving to a true digital mortgage process where paper is eliminated, and many manual tasks can be automated. One example is quality control. In a paper-based world, documents and data used in underwriting are reviewed by a separate team whose job is to ensure that there are no defects in the documents or data. A typical process includes checklists and manual reviews of the documents, data and images. The activities are time-consuming and do not cover all loan packages. In a digital world, it is simple to create software to perform these tasks, and since machines don’t sleep, they can check loan files around the clock. The incremental cost to check additional loan packages is small, so checking every loan package is the expectation. Other examples of time and cost savings include leveraging electronic closing, remote online notary and e-vaults.
Consider the rise of fintech companies. These companies leverage technologies to disrupt current processes and norms. Many have entered the market in the form of customer portals. Others are entering the regulatory compliance arena (RegTech). The new technologies are better than what customers are used to with a traditional or legacy software platform. They can make a splash, but without someone with true business knowledge, this disruption could end in frustration. However, if lenders understand how to leverage modern technologies and harness the power of fintech software tools, they can gain an edge or outpace the competition.
In industry surveys, a vast majority of lenders want to move to the digital model, but many do not understand the keys to success and how to leverage new technologies. It is not difficult to see where robotic processing automation (RPA), machine learning, and advanced analytics can play a role. They could all be used in the quality control example above. However, these technologies cannot be leveraged effectively without high levels of data quality, and high levels of data quality cannot be attained without standards. One key to success is to leverage data standards, specifically MISMO. The Mortgage Industry Standards Maintenance Organization (MISMO) has made significant strides and the MBA is investing more money to accelerate adoption. Fannie Mae and Freddie Mac have leveraged MISMO for nearly a decade in their Uniform Mortgage Data Program. If you want to do business with them, you need to use MISMO. Recently, MISMO is being leveraged by the CFPB, FHA, Ginnie Mae, the Veterans Administration among others. More and more efforts are requiring MISMO. In fact, many RFPs and job postings are requiring a MISMO certification. The Certified MISMO Standards Professional (CMSP) designation requires course work, industry participation, and completion of a rigorous exam. Ongoing maintenance of the certification requires continued participation.
Why is CMSP certification important? The simple reason is that MISMO is complex. The data model is enormous and covers the entire life of the loan. Understanding the model requires not only knowledge of data models, but also understanding of the mortgage industry from a business perspective. There are currently less than 50 individuals with CMSP designations, and they are in high demand. Given the rigor of the requirements to achieve the certification, an individual should expect to spend approximately two years preparing for the exam.
MISMO also offers a certification on software. Leading and innovative companies in the industry have MISMO software certifications. The service mark means that that software has been certified compliant by MISMO. You can trust that it is using the industry standards appropriately and, in a manner, consistent with the objectives of their use.
Another certification that is important in the changing mortgage industry is the Certified Mortgage Banker (CMB) designation issued by the MBA. Similar to the CMSP, the CMB requires industry participation and completion of an exam. In addition, an oral exam is required. To achieve this designation, one must truly understand the industry. Traditionally, this certification is viewed as an honor rather than a requirement, but I believe that those with a CMB will also become critical to the digital revolution.
As lenders engage in modernization activities to enable a digital mortgage process, they should consider several areas when embarking on the journey. Lenders should have a road map that aligns with corporate priorities and includes consideration for customer experience, cost reduction, risk reduction and innovation. If not already in place, a comprehensive inventory of process metrics needs to be in place to understand where positive returns on investment are possible.
Finally, an awareness of what technologies and capabilities are available in the market that can be leveraged, especially those with MISMO service marks.
Lenders have choices to make. They can leverage outside consulting support in the form of companies specializing in digital transformation or they can leverage expertise in house. Perhaps a transition from leveraging outside help to having in house expertise makes sense given time to market pressure. In either case, it is imperative to demand teams and individual consultants to have certifications. It is foolhardy to invest a significant amount to time and money modernizing infrastructure without true experts, especially those with certifications.
So, the question I will pose to lenders is very simple. Where are you on the journey? If you are already finished with your digital transformation, congratulations, but I will bet that you are reading this article. If you are in the process of transformation, take a step back and ask yourself how things are going. If you are happy with the progress, that’s great. If things are a little shaky or you don’t know what the outcome may be, pause and reflect on who is working on the effort and whether they have true credentials and certifications. It may be time to make a course correction.
For those of you who haven’t started the transformation, you have the ability to create a team that will have better chances for success. If you are doing the transformation in house, make sure that you are involved in MISMO. Take a look at the Web site and find out how to participate. MISMO is open to all and is very inexpensive to join. Make the same choices with the MBA. Getting involved will provide near limitless support from industry experts who want to move the industry forward. If you chose to leverage outside help, make sure that you are hiring companies and individuals who are mortgage people. Ask for certifications for individuals (CMB and CMSP) when you procure your software and look for the MISMO service mark.
Industry pressure isn’t going to abate, and keeping ahead of the competition will continue to remain a priority. Those companies who are embarking on a digital transformation have made the right choice and will have a strong chance for success by leveraging individuals and software that are certified. Having staff with these certifications will enable smart, targeted transformation and will increase your probability of success.
Matt Seu is a principal at Actualize Consulting, a financial services consulting firm. He is an industry expert in mortgage standards serving as a board member and chair of the Strategic Planning Committee with the Mortgage Industry Standards Maintenance Organization (MISMO). Matt is also a member of the Mortgage Bankers Association and a true thought leader committed to moving the industry forward. He may be reached by e-mail at [email protected].
This article originally ran in the August 2019 print edition of National Mortgage Professional Magazine.
