TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/883125
20 | TH E M R EP O RT FEATURE vation is following. As a result, industry standards for con- sumer experience and compli- ance in the mortgage industry have evolved greatly in just two years. In an industry long considered short on technologi- cal innovation, this progress is welcome news. Among the innovations are data-driven processes designed to make risk more transparent. In the mortgage insurance industry, for example, a new risk-based pricing program (i.e., Arch MI RateStar ® ) allows customers to obtain the most precise mortgage insurance rate possible for each loan they insure, rather than the traditional rate sheets that used to set MI premium prices for undif- ferentiated groups of borrowers. Through this program, we've seen the integration of more and more third-party providers into loan origination and product pricing and eligibility (PPE) systems. Fannie Mae's Day 1 Certainty also gives lenders an improved borrower experience through greater speed and simplicity using certified third-party data ag- gregators. This sparks increased transparency and speed by relying on the larger ecosystem of participants to validate data in- formation in originations of files and then working with lenders to provide underwriter collateral tools that give relief from GSE repurchase with a sufficient score. GSE involvement has increased data-driven initiatives, introducing new data technologies to the table that ensure decisions are being made off of sound analytics. Additionally, GSEs have been collaborating with MI compa- nies to coordinate on relief from repurchases, credit relief, and appraisal relief. Though we are not yet fully aligned, there is progress, as demonstrated by the new master policy that MI com- panies implemented in 2014 that limited the ability for MI compa- nies to rescind customer claims. There is also more collaboration in terms of aligning rescission relief provided by MI companies to that provided by GSEs from repurchase demands. Together, MI companies and GSEs are using data and analytical tools from third-party verifiers to call the loan files "good" soon after or before they close, if possible, to limit the tail rescission risk when a loan stops performing. Though TRID may not be directly related to each of these collaborative efforts, its encouragement of trans- parency and teamwork leads to a more open mortgage industry. The increased use of digital data-driven processes has also created an increased ability to scale. With greater pools of high-fidelity data available, the industry is able to accelerate and expand the use of alternative, innovative forms of credit risk transfer, particularly those utiliz- ing reinsurers. These new models are also aiding in the creation of comprehensive plans to enhance housing affordability and access. Effective scaling happens through frequent data integration. A key component of the GSEs' duty to serve programs includes measur- ing the success of pilot programs. Without accurate data provided through collaboration with third- party vendors, there is no precise way to assess the efficacy of these programs. Data sharing is the key to measuring success. TRID has made this data transfer possible by empowering parties to adopt new technologies that make sharing and interpreting informa - tion highly compliant and nearly instantaneous. Creating Clear Connections W hile TRID is prompting collaboration and transparency between different parties in the mortgage industry, it's also driving the CFPB to be more transparent in terms of solidifying practices. Unlike its predecessor, the U.S. Department of Housing and Urban Development (HUD), which relied on FAQs to interpret different regulations, the CFPB has publicly said it can't be relied on to make official pronouncements on how laws should be understood. Rather, the CFPB requests public comment on a wide variety of topics to inform their work. Though not all gray areas have been addressed, this movement toward a more collaborative ecosystem has helped to solidify TRID 2.0 as part of the set of rules promoting stability. What's on Tap for TRID A s the industry shifts to create more transparency for the borrower, I'm optimis- tic that the protections trick- ling throughout the mortgage ecosystem will continue to spur responsible growth for the industry and, ultimately, help people realize their dream of homeownership. The com - pliance burden is easing as regulators publish guidance that addresses existing uncertainties. As that process continues, lend - ers will feel more comfortable expanding the number of loans they feel can be safely made without undue compliance risk, and more consumers will realize the American Dream of homeownership in a compli - ant, understandable, and timely fashion. SARA MILLARD is General Counsel and EVP at Arch Mortgage Insurance Company. She oversees a team responsible for all legal, regulatory and compliance services across Arch MI Holdings (Arch MI) and its subsidiaries. Prior to joining Arch MI, she served as SVP and General Counsel of United Guaranty Corporation (UG), which was acquired by Arch MI at the end of 2016. Millard holds a J.D. summa cum laude from North Carolina Central University and a B.A. cum laude from the University of North Carolina at Chapel Hill. She is a member of the American Bar Association, the North Carolina Bar Association and the Greensboro Bar Association. "With greater pools of high-fidelity data available, the industry is able to accelerate and expand the use of alternative, innovative forms of credit risk transfer, particularly those utilizing reinsurers."