by Rachael Sokolowski
SMART documents will allow title companies to transmit electronic documents to customers knowing that the information is accurate and secure. It just might take a while before we realize its full potential.
Long ago and in a faraway land before computers, there was one standard for business documents — it was called paper. Paper was standardized into size (letter or legal) and often content, (letters, memos, preprinted forms). The only “techie” way to transmit that paper from one place to anther was via the fax machine. Today’s desktop publishing systems create electronic documents and the information contained in them, and imaging systems allow documents to be electronically archived. E-mail and other communications technologies have eclipsed faxing. However, these electronic document technologies are not always compatible, and industries are now forming standards organizations to address the smooth transmission of electronic data and documents from one person to another.
Standardization is not a new concept. Take for example the fact that your toolbox contains both a flathead and a Philips screwdriver, two standard tools necessary for any do-it-yourself home project. But to understand industry standardization for electronic documents, you have to think about the power cord for computers. For your desktop computer, one end of the cord is standardized with a two or three prong plug for the wall outlet. You know that any electrical outlet in the United States will accept that plug. The other end fits all computers that are the same model as yours. However, on the cord for a laptop computer, one end has a connector that will not work on different models or brands. Computer manufacturers are increasingly converging the connectors, and laptop power cords may soon have a standard and interchangeable design like desktop computer power cords. Standardization requires cooperation among competitors and an umbrella organization with rules and structure to provide an environment of trust. Creating standards is a complicated and long process.
Standardization and eTitle
What does industry standardization have to do with paper, electronic documents, and eTitle? Paper is still, by far, the standard format for documents in the mortgage industry. In order for the title industry to begin to use more electronic documents in real estate transactions, some standards need to be developed for the capture of data and the delivery and privacy of that information. Standards are available today thanks to the work of industry volunteers from the Mortgage Industry Standards Maintenance Organization (MISMO). The combination of these standards with existing business processes and applications is an exciting new area of creativity and business opportunity. Sending documents in any electronic format saves time, money, paper, and reduces errors due to less rekeying of the information. How do we realize the full potential of eTitle? By creating standards for our industry’s paper documents to coordinate with data standards.
Since data standards already exist, we need to give paper documents a standard electronic document representation. The basic content of many paper title forms, such as the Short Form Loan Policy or Owner’s Policy, are already standardized by organizations such as ALTA®. But there are many ways to format electronic documents. Some examples of electronic document formats, or standards, include:
These electronic document standards provide many advantages, including rapid, easy information access, reduced costs, and improved efficiency. But electronic documents do not have the same characteristics we have come to expect with paper documents. For example, with electronic documents there is no concept of the “original” document and “copies” of the document. Electronic documents require additional protections to prevent compromises in integrity and appropriate usage of sensitive information. Document privacy, security, and integrity are essential aspects of electronic documents for mortgage banking.
Why XML Instead of HTML?
Not all of the electronic document formats guarantee appropriate and secure usage of the information in the document. Since the HTML format is so widely used to create Web pages, it would be tempting to just use the Web to create, share, and store electronic documents. However, HTML has two main limitations: possible inaccuracy of information and lack of security. For instance, a recent search using the key words “short form,” “title policy,” and “Oregon” produced a title industry job posting in Oregon. Not what the user was looking for. So the access to Web information is not always accurate. In addition, most Web sites do not provide security against the user making copies of Web pages or modifying that page. This would be disastrous for title companies storing title policies on the Web. Anyone could have access to them.
XML (eXtensible Markup Language) is another electronic document format. Both HTML and XML are markup languages; that is, they insert additional information, called markup, into the text. The markup is known as a “tag.” For example, HTML marks up text on a page by inserting a [b] tag when the text should be presented in bold type. But the HTML tags leave no way to distinguish between a borrower’s name and the title policy number if both are tagged with [b] for bold on a Web page. Therefore, it is more difficult for the user to search and use that information. XML, on the other hand, marks each item with more meaningful tags that enable computers to distinguish them. With XML, both humans and computers can tell the difference between a [BORROWER] tag and a [PROPERTY] tag. Using XML to create eTitle electronic documents ensures consistency in the data and a secure context for the information.
What are SMART Documents?
SMART is an acronym that describes the salient characteristics of the electronic document as defined by the MISMO Workgroups: Securable, Manageable, Archivable, Retrievable, and Transferable. XML is crucial in the development of the SMART Document. Over this last year, ALTA® and MISMO have worked together to define an industry standard version of the short and long form title policy. Detailed instructions for implementing the SMART Doc version of the Long and Short Form Policies are in development and will be available in the eMortgage section of the MISMO Web site (www.mismo.org). Look for the new SMART Doc Implementation Guide later this year.
Let’s see how each one of the SMART characteristics apply to the electronic transmission of title policy documents (eTitle).
A SMART Document is Securable in the sense that it contains a method, which is called a tamper evident signature, to maintain the integrity of the document. A tamper evident signature indicates if a document has been altered in any way. This provides the SMART Document with characteristics similar to paper. If, for example, the title policy amount has been changed, the signature will be a clue that some piece of information has changed and the document is not to be trusted. The tamper evident signature will not be able to pinpoint the actual change to the title policy amount, only that the information has been altered. In a way, this tamper evident signature is akin to an initialed or embossed wax seal used in the past to prevent letters or documents from being opened by an unwelcome, prying individual. Tamper evident signatures provide the same characteristics as wax seals; i.e. they provide evidence of unauthorized access to the document and have the ability to convey the identity of the original signer. Additionally, the SMART Document secures the transfer of the electronic document. If transmission of an eTitle document is interrupted in some way, the tamper evident signature “knows” that the entire document was not received as originally signed and sealed.
The second characteristic of the SMART Document is that it is Manageable, which, in the general sense, applies to the definition of SMART Documents. People and things are described as manageable if they can be easily handled or controlled. A SMART Document contains sections, each with its own purpose that helps manage the electronic document. For example, A SMART Document contains a section called the header. This section is comparable to an e-mail header, which identifies the sender, the recipient, and a subject. It’s information about the e-mail. A SMART Document header provides information about the electronic document such as its document type (a HUD-1 or a Short Form Title Policy) and whether it has been signed or not. By explicitly knowing this information, we are able to determine how to manage or process the document. A computer application designed to receive and process SMART Documents will have business rules that tell it how to process incoming documents. For example, there may be one process for handling HUD-1 settlement statements and another for title policies and another to identify a missing signature, which can then be obtained.
The third characteristic, Archivable, is a fictitious word. Who says that industry standardization efforts can’t be creative? It was added so that all words end in “able.” But you get the point. SMART Documents may be archived or kept in an electronic vault for the length of time prescribed by the business process, which for a fixed 30-year mortgage could be as long as 37 years.
The next characteristic, Retrievable, has multiple meanings. It is possible with SMART Documents to retrieve or get access to the tagged information such as the loan amount or borrower name. The data section in a SMART Document uses XML tags to organize information into pieces that computer systems can easily consume. The data section includes tagged fields such as “Lender Name” and “Interest Rate.” All of the data tags are standardized by MISMO Workgroups. That means the borrower name is in a standard element called BORROWER (in all caps), not Borrower and not Buyer. By using MISMO standards for data inside the SMART Document, we are able to retrieve the information regardless of the document’s source.
But the design of SMART Documents also satisfies the other definitions of retrieve:
1. to save something from being lost, damaged, or destroyed
2. to restore something to its original condition
Without the SMART document format, information is gathered from a computer, placed on a form, and then printed. Once the document is complete, the connection between individual pieces of information on the paper and the database or computer source is not easily restored. However, by saving the data in a separate section of the SMART Document and using MISMO standards for the XML tags, we will never lose the connection between source data and information.
In addition to the data section a SMART Document contains a view section, which is like a snapshot of what was on a computer screen at the time it was presented. Capturing the “view” creates an electronic document that looks like paper and allows for variation in presentation format. This means that the view format may be either a Web page in HTML, a PDF, or any other electronic document format. Having variable view formats allows for exchange of electronic documents regardless of the internal processing system. For instance, if a system can only accept PDFs, a SMART Document can be delivered in PDF format with additional information telling you whether the document is a title commitment or title policy so that the system knows how to process it.
If the view is in a tagged HTML presentation format, links are created between the data and the view section. By linking the data and the view, a further level of document integrity is provided. A “snapshot” of the document and the information within the document can be checked against one another. For instance, in the title policy the data section is used by computers that prefer to process numbers, such as the title policy amount represented as 169000.00. The document view prefers the use of dollar signs and commas; e.g., the title policy amount is represented as $169,000.00. In this way, the information can be retrieved in its original format.
As for the last characteristic of Retrievable, it is not possible at this time for SMART Documents to fetch small game that has been shot by a hunter, so your Labrador retriever can still rest assured that his or her job is not at jeopardy! This simply means you can retrieve the documents easily when you need them.
And, finally, Transferable ensures that documents can be transferred easily i.e., moved from document preparation to closing table to lender and recorder, or from one electronic vault to another, regardless of computer systems.
How Will My Company Benefit?
Why is it important to have standards for eTitle documents? One reason is cost savings. Electronic documents save money in terms of creation (no need for paper printouts), transmission (no postage or delivery fees), maintenance (no need for imaging), storage (no need for file cabinets) and destruction (no shredding costs). To play off the acronym, its smart to have standards in place.
Because there isn’t really a concept of a “page” in an electronic document, the indexing and referencing required of paper pages may be reduced. Associated information such as title exceptions or endorsements can easily be added directly into the electronic document, increasing the size of the file without increasing the cost.
With the SMART Document, the data is readily available for downstream processes to utilize. This not only reduces costs but also speeds the time required to issue a title policy. With data stored inside the SMART Document, automated reviews can be performed to check the quality of the information, not only within the document itself but also within the entire loan file.
Take another look at the power cord on your laptop. One day, eTitle will be a reality; there’s just some work to do before then.
Rachael Sokolowski is an experienced technologist and a leading expert in XML. She has been a major contributor to MISMO’s electronic mortgage SMART Document specification, implementation guide, electronic title policies, and the XML architecture for the MERS eRegistry. She is the principal of Magnolia Technologies LLC and may be reached at firstname.lastname@example.org or 781-646-8877.