TheMReport

18 | TH E M R EP O RT FEATURE I t has been nearly eight years since the housing market collapsed and the mortgage industry has rebounded slowly. It is now on the path to building a foundation for long-term suc - cess. Part of this success can be attributed to how the govern- ment-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac reconstructed the require- ments for loan data. Together, they established a common ap- proach and protocol for the cap- ture of electronic loan data, and ultimately created a new normal for the mortgage lifecycle with the Uniform Mortgage Data Program (UMDP). The Uniform Closing Dataset (UCD), announced in December 2016, and scheduled to take effect on September 25, 2017, is the next step in realizing the GSEs' stream - lined vision for the mortgage process. The UCD is designed to provide a common industry standard for future loan deliveries to Fannie Mae and Freddie Mac as part of the Consumer Financial Protection Bureau's (CFPB) Closing Disclosure. Because it allows information on CFPB Closing Disclosure forms to be communicated electronically, the process allows for greater accuracy, consistency, and clarity on loan transactions. Lenders that start the UCD implementation and training process early stand to gain signifi- cant operational efficiencies. Flattening the Learning Curve O ne of the significant im- provements with the UCD is the ability to expedite and stream- line the process to get additional third-party information. It is fair to say there will be an advantage to lenders who already control the Closing Disclosure process, as they already have access to needed data. Others that rely on third parties for this information will be behind the curve and need to take additional steps to determine "what" information they're going to be able to obtain, as well as "how" and "when." For example, for a realtor or settlement agent, being able to add information not normally included in a closing disclosure, such as the NMLS ID and state license number, becomes very beneficial to lenders from a third- party due diligence perspective. Additionally, lenders not already familiar with using the alternative form of the Closing Disclosure, specifically the version that is intended only for refinances, may face a steeper learning curve with the new format. Training lenders on the various versions, as well as the nuances that are differ - ent from the standard Closing Disclosure, is imperative for a smooth transition process. Getting Started T o implement the UCD suc- cessfully, lenders must not only understand the regulation and the form, but also un- derstand the concepts behind exchanging this data. Lenders should encourage their teams to educate themselves on why each piece of information is important and necessary to the updated process. Having this background will help ensure they've got the right information beyond what is seen on the loan document on hand. If they just rely on what they're seeing on paper, they are missing a signifi - cant part of the requirement. A prime example of this is the calculation of points and fees for purposes of determining whether or not a loan's costs remain below the thresholds for High Cost Loans and Ability to Repay Qualified Mortgages. While the Closing Disclosure may reflect closings costs and payees, it does not, for example, identify when a payee is an affiliate of the lender. That determination is a critical piece in assessing whether or not a fee is included in the calculated points and fees total. To this end, the GSEs will need to leverage the information contained within the UCD to identify which fees to include in the points and fees total and lenders, through their systems, will be responsible for identifying those fees that are included in the points and fees total beyond what is shown on the Closing Disclosure. Electronically communicating the CFPB's Closing Disclosure information through UCD sub - mission will require extreme at- tention to detail and much closer communication between sellers and lenders than currently exists in the mortgage industry. With UCD, lenders will need to take responsibility for getting seller in - formation around the transaction and communicate the accuracy of the data in the loan files. Fortunately, the new integrations from the GSEs allow lenders to test Closing Disclosure data against the UCD specification for com - pleteness, validity, data consistency, calculation accuracy and purchase eligibility. This helps lenders Ahead of the Curve Preparing today for tomorrow's uniform closing dataset mandate. By Piper Beveridge and John Haring

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