Buzzworthy with Ann Fulmer: Pilot Programs

(Editor’s Note: the following is a transcript of Episode 3 of Buzzworthy, a monthly podcast appearing in MBA Insights from FormFree, Atlanta, hosted by Ann Fulmer, the company’s chief strategy and industry relations officer. Buzzworthy delivers unbiased analysis of developing mortgage industry news, market trends and regulatory updates in five minutes or less. The podcast can be accessed at

Well, here it is, [January]–time to take stock and put serious thought into how we’ll make mortgage lending in 2018 better by providing a better customer experience at a lower cost. With that in mind, I am offering advice in this episode of my podcast–something I rarely do.

Early this month, the Federal Housing Finance Agency signaled that testing of a common securitization platform is taking longer than expected. That’s not surprising, because transitioning Fannie and Freddie to a single mortgage-backed security is an enormously complex task. What caught my eye is that Director Mel Watt went on record to “urge [the] industry to take advantage of the resources available and be ready for the transition.”

That’s what I want to talk about: taking advantage of current resources and being ready for what’s coming next.

When regulators and investors want to make changes to how we do business, they telegraph their intentions well in advance of the implementation date so that industry participants can start making the changes needed to adapt to new requirements and technologies.

So, when Mel Watt says “be ready,” and even offers a market adoption playbook that explains how the common securitization platform will work–it makes sense to take him up on it.

This was also the case back in 2011 and 2012, when the Uniform Mortgage Data Program evolved into the Uniform Appraisal Dataset and the Uniform Collateral Data portal.

The Consumer Financial Protection Bureau, too, signaled the significant changes Know Before You Owe would require by publishing in advance the TILA-RESPA Integrated Disclosure regulations and conducting an eClosing pilot to explore whether technology could improve the closing process, benefit consumers and save time and money. (Pssssttt – turns out the answer is a big, fat yes.)

Each of these programs, initiatives and pilots moved from laboratory to standard operating procedure in a couple of years or less following the initial heads-up. In each case, lenders had time to understand and test the implications of new workflows and processes before they went live. And in each case, the ramp-up period gave lenders an invaluable opportunity to conduct operational testing and work out any bugs well before the effective dates.

Lenders that elect to take advantage of these tip-offs become first movers and early adopters – a position that comes with significant upsides. In addition, there’s little or no risk to being an early adopter when Fannie, Freddie, or regulators have been explicit in telling folks where they’re going.

While I don’t have any hard statistics to back this up, conference chatter and water cooler conversations indicate that lenders who take advantage of extra lead time have an easier time implementing change and, consequently, realize its benefits much sooner.

Operational changes can be a pain in the patoot. But as Andrew Bon Salle, executive vice president of Fannie’s single family business, noted in a recent article, “these efforts…reflect a long-overdue investment in data quality and efficiency…[and] we are beginning to see the return on investment [in the form of ]…the Day 1 CertaintyTM freedom from representations and warranties on key loan components plus more speed and simplicity.”

He continued, saying, “Pilot lenders who test-drove the DU Validation Service told us it brought efficiencies to their business processes, shortening originations by four to seven days with quicker pre-approvals and meaningful time savings for loan processors and underwriters.”

The latest pilot is Fannie Mae’s Single Source Validation, where a single data pull will give lenders asset, income and employment verification in one report. Since it’s already underway, here’s my advice for how to take advantage of the lead time and get ready:

–First, assess your current validation technology to identify inefficiencies and pain points.

–Since results from Fannie Mae’s Day 1 Certainty initiative indicate lenders are shaving 10 or more days from time to close, determine how much room for improvement you have by benchmarking your own stats to current industry averages.

–Similarly, examine your costs to originate a loan, especially as compared to industry norms.

–Research relevant vendors and the technology options they offer.

–Consider how adopting a new technology that supports SSV will impact your workflow and start planning for those changes.

–Don’t be afraid to think big: imagine how technology cost savings might be leveraged into other areas of your organization, like marketing or customer retention.

Being an early adopter isn’t just a nice idea–it’s really the only way to position yourself strategically at the starting line when major announced changes go into effect.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA Insights and MBA NewsLink welcome your submissions. Inquiries can be sent to Mike Sorohan, editor, at; or Michael Tucker, editorial manager, at