Stewart in the Studio

E2: Credit Score and Reporting Changes – Update from MISMO Summit

Marvin: So, we’re at the MISMO Summit this week in the Woodlands and had a great turnout with lenders, title, settlement, credit valuation, AMA. But there are so many lenders who don’t attend or weren’t here last week. So can you briefly explain what MISMO is for those who aren’t familiar?

Shawn: Yeah, absolutely. Thank you for the opportunity to chat with the community here, Marvin. So MISMO is a standards organization that focuses on mortgage banking. For about the last, now hitting two and a half decades. So for 25 years, it’s been all about just helping to build collaboration across the industry community, helping to produce a common language where those standards could be used.

So if you work in the title sector, everything around title is using the same. Definitions, the same data standards, the same ways for how we exchange data. Same thing for credit valuations, the other domain areas that the lenders are dependent on. So I think the quick way to describe it is basically it’s about industry communities and collaboration from both a business and technology perspective.

Marvin: Perfect. So you’ve been a thought leader in the credit space for many years and you have leadership positions, both within MISMO and that community of practice for the credit space that you lead. Can you talk a little bit about the last few meetings and what the kind of discussions have been about?

Shawn: So I mentioned previously that a lot of this is about community and collaboration between business experts and technology subject matter experts and, and the credit reporting community practice is no different in that, in that context.

So we explore everything that’s going on from an industry perspective and help to drive forth. The creation of or enhancement of existing standards throughout the community to be used. We’re, we’re meeting every 2 weeks right now. It’s a very broad group. I think at our latest meeting, we had close to almost 100 users that were representative from government enterprises, from, Service and technology providers, lenders.

So it’s a very diverse group of folks that participate there. And we’re talking about all aspects of the loan manufacturing process on where credit reporting, uh, data is used. I think for those that are familiar with the standard, there is a lot of staying power around credit reporting. The first release of the standard was actually.

In 2001, so there’s been quite a bit of adoption on that. Our focuses are in areas to help just continue to expand on that. So topics such as pre qualification, pre approval, use of credit data in AI and other emerging technologies are all hot topics that we explore.

Marvin: Yeah, that’s a pretty robust group you have there with a hundred participants and across lenders, vendors, GSEs, and you’ve got the full span.

Of course, you, the credit industries really has been shaken. You alluded to it, uh, lately by the price increases, but you took the stage last week and spoke on credit score and reporting changes, industry implementation updates, which was very informative. For mortgage lenders who weren’t in the room at the MISMO Summit, give us the bullet point version of everything you shared with the audience last week.

Shawn: So as you mentioned, there’s a lot going on. We provided an update that went over all of the industry activities that have been ongoing from that, the community of practice, whether it is the credit score modernization effort, adoption and use of, of buy merge within the loan manufacturing process. We are looking at better ways to represent what would be commonly referred to as like non traditional data.

So like consumer permission type of trade lines. So you hear of utilities, cell phone bills, all rental information that’s all able to show up on the credit reports. We also provided some new adoption information around our backwards, um, compatibility survey. So as we look to move things forward, um, we always want to know what’s out there and what’s being used in the industry.

So, um, the good news is that, uh, there is adoption and energy around the use of the new and latest MISMO standards, while there is a fairly high percentage of folks that are considering an upgrade or have already upgraded to that version. There is also, along with that, a preference to be using that latest and greatest, uh, standard.

So we talked a little bit about that. Certainly we talked about our 2024 roadmap and what is out there in regards to supporting a number of the items that, that I just mentioned. And as a community, making sure that we’re in a go forward position to help progress that and help the industry with their adoption efforts.

Marvin: Great Sean, that was really well received last week, and I know there were a lot of questions afterwards. You’re in a leadership position at MISMO with the credit community of practice, but also in Stuart’s informative research division as well. What is informative research doing to help lenders cope with the increases in credit costs that we’re just seeing across the board during this time of lower volume?

Shawn: Yeah, absolutely. Great question. So there’s a couple of things that first come to mind while IR does offer the traditional suite of credit reporting products as a reseller. We also see that one of the biggest values that we’re bringing out there as a platform provider of access to data services, especially for where lenders need to do any type of verification and whatnot.

So, uh, a core component of that, of those platform capabilities. Is around workflow automation. So it’s being able to intelligently analyze the data that is being aggregated from multiple sources and apply business rules to them to determine where it is needed. Most importantly, throughout the loan manufacturing process.

So we feel that by doing that. It helps lenders to effectively manage their overall credit costs to focus on only the places that they really need it versus the whole, let’s just boil the ocean type of approach and pull everything at the very beginning and see where it goes. Through the use of that automation and that business rules intelligence, we feel like we really can provide a solution stack to the lending community out there to effectively manage those costs.

Marvin: Perfect. And informative research has already demonstrated those cost savings with several well known lenders in the space out there, Sean, thanks so much for your time and we’ll talk to you in a future episode. Great. Thank you, Byron.