MISMO Study Shows Up To $249 per Loan Benefit from Standards Implementation
November 15, 2004
WASHINGTON, D.C. – Earlier this year, the Mortgage Bankers Association (MBA) commissioned a study by CC Pace and The STRATMOR Group to evaluate the value to the lending community of near-term and mainstream adoption of the standards of MISMO (Mortgage Industry Standards Maintenance Organization). This initiative has resulted in an economic study of the mortgage transaction to measure and assign value to the application of MISMO standards to these activities from both a human resource and capital expenditure perspective. These measurements tell a compelling story to the mortgage lender and other industry players that the application of MISMO data standards today will begin to reap real benefits in time, money and quality. As adoption rates continue to grow, the benefits will begin to multiply.
"We are very pleased with the results of this study," said Regina Lowrie, Chairwoman elect of the Mortgage Bankers Association, and past Chairwoman of the Board of Directors Technology Committee. "We now have real results illustrating the business value of open, transparent standards implementation over proprietary formats."
The economic study was accomplished through a combination of practices including interviews, onsite visits and surveys. Data gathered in the course of this study clearly supports the case that broad adoption of the standards can dramatically lower origination costs for the lender and borrower alike. The study shows that direct costs can be lowered by as much as $249 per loan. In addition, the surveys show that execution costs can be improved by as much as 15.38 basis points, a 25-50% pickup in retail lending margins or $450 for the average loan.
The study also demonstrated that while data standards are too often incorrectly perceived as a purely technological interest, some of the greatest values were seen in their ability to reduce manual activities, increase data accuracy, lower the costs of third-party services and improve a lender's competitive positioning in the marketplace. Seamless internal and external interfaces act as enablers to process improvement and automation, as well as improved service levels. Data standards also help lenders measure performance distinct from the impact of poor data quality and improve accountability and transparency in financial reporting. As the study clearly demonstrates, adoption of the MISMO standards should, in fact be an important business priority for all lenders seeking greater operational efficiencies and the agility needed to compete effectively in a dynamic market.
MISMO, as an organization, is committed to not only continuing creating and maintaining industry standards, but to fostering widespread adoption of those standards. With MISMO's help, organizations should embrace and implement the standards as a simple yet powerful economic decision.