Paul Martin: The Time for Title Standards Is Now
(Paul Martin is Registry Director with the American Land Title Association. This article also appears in ALTA Title News.)
Over the past several years, the hurdles to creating digital property transactions have been overcome with increasing speed. Between the rising adoption of the Mortgage Industry Standards Maintenance Organization (MISMO) SMART Docs and eNotes to remote online notarizations (RON), today’s housing industry finds itself standing on the precipice of a truly digital future.
Title professionals have helped drive this digital wave with the implementation of technology at various steps of the transaction, from title policy production to post-closing tasks. The automation of processes helps drive efficiency by expediting the exchange of data.
The accurate exchange of information in a digital environment requires the presence of data standards. Title companies are utilizing automated workflows and advanced application programming interfaces (APIs) to integrate with various partners.
While data standards are commonplace in other housing segments—such as real estate, mortgages and appraisals—there is no data standard in the title industry. But there has never been a better time to change this situation than now.
One of the most obvious benefits of having common title data standards would be the ability for a lender to type in the borrower’s name and property address only once at the beginning of the loan process.
Understanding the Challenges
Despite progress on this front, many title companies still manually input title data, increasing the probability of errors and adding to loan production costs. Low-tech processes also create friction in the secondary market, where investors must use manual checklists on large loan portfolios that all have different title data elements.
For example, title insurers and lenders each have their own production platforms. But because these platforms are not easily integrated with each other, orders for title commitments and insurance policies are often received manually. Typically, a title processor will key in an order, only to send information back to the lender that must be retyped into the lender’s origination system. Besides creating a production burden, this amplifies the risk of critical information being mistyped, which creates additional delays.
Underneath this scenario is the ongoing pressure on lenders to lower costs and remain compliant. While consumers are demanding an easier, more transparent mortgage process, regulators and investors are demanding mortgage lenders embrace sound underwriting protocols. The development of title data standards would help achieve both goals of improving transparency and managing expenses.
How to Change the Picture
Almost everybody aware of this situation agrees it’s important that lenders, title companies and software vendors all speak the same language. In addition to streamlining real estate transactions, lowering costs, and reducing errors, data standards would also make integrations between title companies and software providers much easier, since software vendors now spend weeks or longer mapping out integrations between different underwriters.
For example, one of the most obvious benefits of having common title data standards would be the ability for a lender to type in the borrower’s name and property address only once at the beginning of the loan process. As the loan goes through origination and underwriting, common data standards would enable this information to be exchanged seamlessly through all the different systems used in the creation of a mortgage—including the title production platform—without the need to retype it.
The presence of title standards would also encourage more innovation in the title space. Instead of being constrained by the disparate, siloed legacy systems and software, all parties involved in the transaction could speak the same language. By streamlining the exchange of data, the title standards could accelerate processes, lower costs and deliver better, more enjoyable customer experiences.
Ultimately, title data standards will push digital property transactions closer to reality as well, which would make the process of buying and selling real estate faster and easier for all parties. As entire industries have transitioned to working remotely as a result of the COVID-19 pandemic, there has never been a greater incentive to go fully digital. But as long as there is a human somewhere retyping information that could have been exchanged electronically, the ability to conduct real estate transactions entirely online remains elusive.
Only through the creation of data standards shared by all segments of the housing industry will this barrier be removed. But how do we get things started?
The Power of Collaboration
By most accounts, the entity best positioned to get things moving is MISMO. For the past 20 years, MISMO has established a successful track record of standards development touching every facet of the housing economy. Today, MISMO standards are accepted and deployed by almost every entity involved in the U.S. mortgage industry, including lenders, appraisers, title companies, Fannie Mae and Freddie Mac, and the Federal Housing Administration and Consumer Financial Protection Bureau.
One of the key reasons behind MISMO’s success is the unique, collaborative environments it has created, where experts from across the housing spectrum are able to address the industry’s most pressing challenges in an open, transparent manner. Today, MISMO operates more than two dozen Communities of Practice and Development Work Groups that have created standards for everything from digital mortgages to remote online notarizations, mobile communications, commercial rent roll data, and much more.
These workgroups have been extraordinarily effective at not only assisting industry participants in communicating more effectively, but also helping to solve critical business challenges and create greater opportunities for innovation. For example, MISMO, ALTA and the Mortgage Bankers Association collaborated to develop a standard template for closing instructions. Introduced in 2020, these uniform closing instructions have brought consistency to how lenders communicate this critical information to their closing partners and prevent the data from being misinterpreted. In 2019, MISMO released a set of standards for adopting and implementing remote online notarizations that multiple U.S. states have since adopted when drafting new laws legalizing remote notarizations in property transactions. MISMO’s RON standards support model legislation that was developed by ALTA and the MBA.
In recent years, MISMO has also expanded its vision of data standards beyond XML by embracing new and emerging data formats. This included creating a version of MISMO standards in JSON format, a lighter data language that is increasingly being adopted throughout the mortgage industry. MISMO also has longstanding partnerships with ALTA and the Property Records Industry Association (PRIA), placing the organization in perfect position to take the lead in creating title data standards.
Amid the growing demand for the industry to conduct more business digitally, it makes sense for title insurers and title software vendors to become more involved in the creation of industry standards. The platform and resources already exist. MISMO already has the Title and Closing Community of Practice, which is responsible for developing data standards and providing guidance for using them. There is always room for new voices and perspectives at MISMO as well. Otherwise, title professionals may end up allowing mortgage companies and LOS vendors to make important decisions about title standards. To prevent this from happening, it may be incumbent upon other industry participants, such as mortgage companies and LOS vendors, to give their title partners a gentle push.
As demand grows to conduct business digitally, it makes sense for title insurers and title software vendors, to become more involved in the creation of industry standards.
Additional support is needed from the title industry. The ideal situation is for title insurers, settlement service providers and title software providers to bring their voice to the standards-setting conversation. The sooner everyone is at the table, the sooner one of the last remaining barriers to digital transactions will fall.
Title professionals who want to get involved in the development of title standards, should contact Paul Martin at email@example.com, or visit collaborate.mismo.org/home and become a member of the Title and Closing Community of Practice or contact firstname.lastname@example.org.