Technology Update

1
Technology Update

• Gabe Minton, MBA
• Harry Gardner, MBA
• Steve Jenkins, Arc Systems
• Kevin Jarnot, The Debt Exchange
• 20 April 2004

2
Agenda

• MBA/MISMO update
• Gabe Minton to provide update on MISMO and
  security standards initiatives with a focus on
  Secondary
• Harry Gardner to provide update on eMortgages and
  eRegistry initiatives
• Spotlight on Secondary Technologies
• Steve Jenkins to highlight Automated Underwriting
  technologies and their expansion into new areas
• Kevin Jarnot to highlight online/web trading
  technologies in the Commercial mortgage space
• QA (time permitting)

3
MBA / MISMO Update

• Gabe Minton
• VP Industry Technology
• MBA

4
MISMO by the numbers

• Over 1,000 participants
• Over 130 subscribers
• Residential and Commercial industries covered
• Record 185 attendees at the last January F2F
  meeting!
• Growing number of data points in the standard
  over 3,600 approved, soon 5,000!
• Origination and services (1,000)
• Closing (1,000)
• Servicing and Investor Rptg (1,500)
• Property (1,000)
• Secondary (500)

5
Important Highlights of 04

• MISMO leadership approved its IPR Policy
• MBA leadership wants to make MISMO a household
  name
• Focus adoption adoption adoption
• MISMO spin out (501c6)
• MISMO Compliance Service (MXCompliance)

6
Highlights for Secondary 04

• Servicing investor reporting done
• Loan-level data set for loan set up and
  application processing done
• Core AUS dataset updated for HMDA and PATRIOT
• Secondary product and price complete in 2Q04
• Secondary Loan Delivery complete in 3Q04
• Securitization, locking, pooling, all starting to
  be looked into will complete MISMO

7
Value-add of data standards

• Agreed-upon terms
• Data sets, pools, electronic correspondent loan
  submissions, hedge data, product information, all
  mean the same thing from company to company
• This means when you get a report, you will know
  what loan amount means, and it will be the same
  from report to report, or defined differently and
  succinctly if necessary

8
Value-add of data standards (2)

• Agreed upon format
• By leveraging the software standards XML and
  XHTML the representation of the data will be
  consistent throughout the industry
• This means faster movement of data to and from
  new customers/trading partners (6 months down to
  2 wks!)
• The software costs next to nothing, so is much
  easier to procure and maintain then previous
  formats and standards (horizontal vs. vertical
  standards)
• SMARTDocs are the universal Note, Mortgage/Deed
  of Trust, soon the HUD-1 and more no paper!

9
Common need for digital certificates

• A digital certificate is like a secure network
  identification of who you are. It is can be used
  as a digital signature for digitally signing
  files
• A digital signature is not a holographic
  signature (a common misunderstanding in the
  industry)
• The three functions of standardized certificates
  are
• Authentication telling if someone is who they
  say they are
• Encryption securing files as you send them
  across the net
• Verification checking if the contents of a file
  have changed

10
Security Standards Update

• Status One vendor accredited (Verisign), one
  auditor accredited (KPMG) Two more in immediate
  pipeline
• Most important function Verification!
• You can receive tapes or other data sets over
  the web/Internet that are automatically checked
  for validity
• The use of a digital signature, combined with a
  file match, verifies if any (SMART) mortgage
  document has changed from the time it was sent to
  the time that you received it
• Therefore
• You know that pool data is correct
• You know this loan data is accurate
• You hedge without flying or shipping loan files
  around anymore
• Faster deals, increased efficiency, and more
  velocity

11
eMortgage Update

• Harry Gardner
• Senior Director Industry Technology
• MBA

12
eMortgage Overview

• eMortgage Workgroup part of MISMO
• True electronic mortgage fully paperless
• Electronic docs contain VIEW DATA
• ePackaging eMessaging allow paperless bundling
  and transmission
• eRecording in enabled counties (35)
• National eNote Registry (now the MERS eRegistry)
  provides legal infrastructure for transferable
  instruments

13
Perfect (e)Mortgage

• All docs electronic (SMART Docs)
• Virtual closing
• Closing post-closing changes sync back to LOS
• eRecording, eLien Releases
• eDelivery to Secondary, Servicing

14
Hybrid eMortgages

• Only some docs need to be SMART Docs
• The rest will be a mixture of paper and simple
  electronic docs (PDFs, image files, etc)
• Closings happen in a controlled eClosing
  environment with buyer(s) and seller(s)
  physically present
• eRecording depends on County capability
• Only eNote is e-delivered to Secondary
• This saves a lot of time and money!

15
eMortgage Value-add

• Significantly reduce paper storage requirements
• Eliminate courier/shipping costs
• Reduce processing times from days to minutes
• Eliminate keying of paper data into multiple
  systems (and the accompanying errors!)
• Allow closing docs review electronically before
  closing Value-add to consumer
• Allow virtual buyers to participate
• SMARTDocs can be viewed by web-browser

16
Related Groups

• SPeRS Standards and Procedures for electronic
  Records and Signatures
• Legal guidance and background info on
  Authentication, Consent, Presentation,
  Signatures, and Records Retention
• Available on www.spers.org
• PRIA Property Records Industry Association
• eRecording and eNotarization (in conjunction with
  Notary industry)

17
National eNote Registry

• Has been implemented by MERS as the MERS
  eRegistry
• Similar to what MERS provides already on
  assignment side
• Replaces endorsement of the paper note
• Identifies single, unique authoritative copy of
  the eNote, and its location
• Phase 1 production operation this month

18
eMortgage Workgroup Status

• eMortgage Guidelines and Recommendations
• Released in January 2003 SMART Doc, ePackaging,
  eMessaging
• SMART Docs
• Implementation Guide 1.0 released in January 2004
• Developing additional chapters
• Developing sample SMART Docs like HUD-1 and
  1003/65
• Using MISMO Closing dataset and PRIA eRecording
  dataset
• eRegistry
• MERS production operation April 2004
• Uses MISMO eMessaging, ePackaging XML standards

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How they all fit together
How do we choose our ESIGN and UETA solutions?
What should we be thinking about?
How do we know which eNote is the original legal
copy?
How do we create and process eMortgage files?
How is the business data defined?
MERS eRegistry
How do we know which digital signatures to trust?
How do we plug all this into the County Recorder?
20
Steve Jenkins, Arc Systems
21
QA?