00:10Welcome, everyone. My guest today is MISMO President Brian Vue to talk about the organization's
00:16work on AI governance, state regulatory audits, credit score models, and more. I'm excited
00:22to jump in. Brian, welcome back to the podcast.
00:25Sarah, I'm excited to be here.
00:27Excited to have you here. We were talking before we started recording, and wow, are you guys
00:31busy. You have a lot going on.
00:33Yeah, I'm on. Literally, tomorrow is the completion of month 11 for me, so I'm beginning my final
00:40stretch into the first year in the role at MISMO.
00:43You know, it's interesting because if you were to describe this to someone who has no idea
00:47what MISMO is or whatever, it's like a standards organization. It doesn't sound that exciting,
00:52but actually, you guys are working on some really interesting things, which I'd love to
00:55dive into today. Let's start with AI governance, right? Got to be the big topic of the day,
01:02AI, and how are you trying to help mortgage lenders as they're trying to figure this out?
01:08Yeah, great question. It is literally the thing that I spend probably the most time on right
01:14now. So back in the spring, MISMO published this product called FRAME, F-R-A-M-E. It's an acronym
01:24for Framework for Responsible Use of AI in the Mortgage Ecosystem. So much easier to say FRAME,
01:31just like it's easier to say MISMO. FRAME came to MISMO as a work suggestion from the Mortgage Bankers
01:40Association's Residential Board of Governors, MBA Resbog. And the MBA Resbog chair for fiscal 26,
01:50Dan Sugg, made it his top priority or one of his top priorities for Resbog to deliver to members,
01:58so principally MBA members. But this is where MISMO is not just an MBA member-only organization. We are for
02:05the entire universe of mortgage lending in the United States. And so Resbog brought this work
02:11idea to MISMO to create, call it a set of guardrails. It was loosely defined at the beginning,
02:18right? And this is the beauty of the MISMO community. I'm not, like, I was not the guy that
02:24anybody came to to say, Brian, go create an AI governance framework. No, no, no, no. We have
02:29smart people across the industry that come together in our community and we leverage their experience
02:36and expertise. And FRAME is a great example of that. So what we published in the spring of this
02:41year is version one of FRAME, which is essentially it's a toolkit for lenders and lenders of all sizes
02:49can use it. I'll be candid and tell you that when we developed this, we really thought it was going
02:54to
02:54be ideal for the mid to small size mortgage lender. And I'll say this, and I say this a lot,
03:00it's the organizations that may not have that single throat to choke as it relates to risk
03:05governance. And they certainly don't have it for AI governance. And so what FRAME is, is a,
03:11it's a toolkit with three artifacts in version one. One is a templated policy document. It's like
03:1810, 12, 14 pages. It's meant to be editable. So yeah, not edible, but editable. And lenders can
03:27download it, modify it for their business practice, and then publish it as their AI governance policy.
03:35And then the other two, two artifacts tie together with the policy document. The one is an AI use case
03:42inventory tool. And it's just what it sounds like. It's a place where lenders can collect and document
03:50all of the AI use cases in their business, both those that they use directly, the AI use cases that
03:57they're consuming indirectly through vendors and tech platforms, et cetera. And we even go as far as to
04:03suggest that lenders, you know, give their employees an amnesty day and bring all the shadow AI use cases
04:10to the forefront and get those documented. And the idea here, Sarah, is nobody wants to be the lender
04:17when, not if, but when Fannie or Freddie or the state regulator comes knocking and says, Sarah,
04:25can you tell us where you're using AI in your business? You don't want to be in a position that
04:29says, let me get back to you in 90 days. So, you know, the, the frame inventory arms lenders with
04:35the
04:35ability today to document all those use cases. And then the third tool in the toolkit is a risk
04:42assessment tool that is meant to be applied to each of those use cases. So if I've identified 50 AI
04:50use
04:50cases, presumably I'll do a risk assessment on each of those use cases. And then based on the tiering of
04:56the risk, high, medium, low, I'll have, you know, the, the requisite mediation if needed to mitigate
05:03those risks. That's in a nutshell, what we've developed is this I'll call it a DIY, but it's much
05:10more, it's, it's more than that, but it's, it's, it's the ability for the average lender, the small to
05:15average size lender to, you know, spend a few days with this toolkit and they can literally stand up
05:22an operational AI governance practice within their organization.
05:27I think that what you just talked about is a great illustration of MISMO, what, what you do,
05:33and also the strength of MISMO. So first off, it's not just lenders in this community, it is about
05:38mortgage lending, but you have so many stakeholders. So you have a lot of different, I mean, you have
05:43all these committees, you have all these working groups, you have these, you know, different, what do
05:48you call them, action chairs or something like that. Communities of practice, yeah.
05:50Yeah, there's just so many people involved here, coming up with something, and then it is, you know,
05:57helpful for people throughout the industry, specifically, like you said, small and midsize
06:02and small lenders who may not have their, you know, dedicated person. So I guess one of my, one of
06:07my
06:08questions is, if someone is listening to this, they don't know that much about MISMO, like how, how does
06:13the government look at MISMO standards? So like, is the MISMO standard, does it become the de facto
06:19regulatory standard? Or as you know, if regulators come, if auditors come, if they see that, and they
06:25see that someone is, is complying with MISMO, that means something to them, like, hey, this is a
06:29company that's really trying. Great. That's a great question. And there's, there's a couple paths
06:33there. I'll start by, by, by explaining that. So there's somewhere in the magnitude of 100 plus
06:41data specifications and or standards, you could call a data spec, a standard, I guess, that have
06:49been created over the 26 plus years, now 27 years that MISMO has been in existence. There are maybe
06:56a dozen, 13, maybe 15 at the most of those data specs that roll up to the Uniform Mortgage Data
07:06Program, UMDP, which is the mandated standard created by Fannie and Freddie for loan delivery.
07:16So I don't, I think it was about a decade ago, the FHFA, the Fannie and Freddie's regulator mandated
07:22that they come together to create a more fungible asset. And part of that process was to ensure that
07:31the same data used for loan delivery to Fannie could execute a loan sale to Freddie Mac and vice
07:37versa. MISMO, the MISMO reference model, you'll hear us talk about the reference model. That's
07:43essentially the architecture that houses all of the data specifications. The MISMO reference model is
07:50where Fannie and Freddie house their dozen or so data standards. And so the first part of your
07:58question was, are there standards that are mandated? Yes, that's an example of mandated
08:04standards. If you want to sell a loan to Fannie or Freddie, you must follow their UMDP, which is part
08:10of the MISMO reference model. Beyond that, most other standards are like, I'll call them more best
08:16practice type standards, things like a standard for loan boarding, right? So there's been a standard
08:23developed that's adopted at a different scale for loan boarding. So taking a loan from origination and
08:30boarding it to loan servicing as an example. And then there's an emerging standard that we're really
08:38excited about that we believe over time will be mandated by state regulators. And it's the mortgage
08:45compliance data set. And MCD, another acronym, MCD, it has a really cool story in terms of how it came
08:54to be. But it's an example of the power of MISMO and why everybody in our ecosystem should care about
09:02MISMO. So about three years ago, the Conference of State Bank Supervisors, which is the state's,
09:09you know, basically it's the trade association for the state regulators. So CSBS came to MISMO with a
09:16problem statement. And their problem statement said something like, our 50 state regulators have requested
09:24through CSBS that we develop a data standard so that they can, when they're asking lenders for loan file
09:32data for audits, it's in the same format. And the problem they're trying to solve for is,
09:39nobody from a technology platform perspective is going to spend a lot of time trying to build a
09:44solution for the state of New Mexico in their loan audit process. So if they could come together on a
09:49standard, there's much more likelihood or a higher likelihood that technology can come in and actually
09:54change and help the states with their audits. Literally at the same time that CSBS brought that
10:01to MISMO. Rocket, large 50 state regulated licensee, brought the exact same problem statement
10:09worded differently to MISMO. And so the fact that the problem came from industry, Rocket, and regulators
10:17through CSBS, we then formed a work group that consisted of lenders like Rocket and others, technology
10:25platform providers like loan origination system platforms, compliance tech platforms, and then
10:31the regulators all had a seat at the table. And Sarah, this is, I don't want to brag about this
10:37because it's not worth bragging about, but it took three years for those parties to collaborate and
10:44create what today is the MCD. We want to move much faster than that going forward, but you can imagine
10:51there was a lot of push and pull and give and take. And the work process that exists within these
10:56MISMO work groups is a collaborative process. We talk about the participants come in, they take off
11:03their company hat and they put on industry hat and they get to work together to solve these problems
11:09through standardization. So we're in the adoption phase of MCD. It would be great at this time next year,
11:17you and I are talking and maybe we're now at a stage then where states are mandating that lenders
11:23use this data set. And we do see this as a tremendous opportunity to improve the quality
11:31of the audits that get done, improve efficiency. The states will tell you that the rework of data,
11:38the back and forth that they do with their licensees could double the cost of the state audits,
11:44which the lender pays for. And then lenders, especially large lenders, they have full-time
11:49staff members that literally most of their job is working and reworking data. So there's a huge cost
11:56opportunity and a quality opportunity here as we move from this adoption phase, hopefully into a
12:02mandated state. You know, anytime you're doing collaboration, especially across 50 states, regulators,
12:09industry, all parts of industry, no wonder it took three years. I mean, actually, I mean,
12:13when you look at the Road to Housing Act, how long is that? How long did that take? So anytime
12:17you're
12:17doing collaboration, it's going to take a while. But I think it's such a great example of the power
12:24of this, because, you know, what we hear all the time from companies is like, certainty is so helpful,
12:29right? And standards are in some ways, it's certainty. It's like, hey, this is what you need to do. And
12:36someone else's, all the work going into this, again, it's just like, the first thing we talked about,
12:41I just feel like this is such a benefit to small and midsize, but anybody, large lenders, like
12:46Rocket or other people who have the 50 states, I mean, I can't even imagine audits from 50 states, and
12:53the
12:53different data requirements that they have.
12:56Yeah, what one of the things that one of the byproducts that CSBS is excited about, and by extension, its
13:04members, the state regulators is there's already this concept of one company, one exam. And so if you're a
13:11multi state lender, you can opt in to a process where your lead state will do the exam, and then
13:19other
13:19companies can accept that. But there's still a little bit of friction in that because the data requirements from
13:25state to state are differ. And so once MCD is is adopted, you know, by by most of if not
13:33all the states, then it
13:34totally changes the dynamic of this one company, one exam concept. And again, I, there's a there's a massive
13:41opportunity to take cost out of the equation for both the regulators and the licensees, and ultimately, who benefits the
13:50consumers that we all serve.
13:53Absolutely. Okay, let's talk about another hot topic credit score models. Okay, so this is something that, you
14:00know, I feel like there's not a lot of consensus around you have, you have different people feel like
14:04different things. I think that what people are trying to solve for here, what lenders would like to solve for
14:09is is the
14:11cost right now, right. But then you also have quite a bit of talk about likes, standards, but, but especially
14:19like,
14:19the risk, right, is this opening up if we change this? What does this mean to lending standards? What is
14:25the risk
14:26involved? How does some how does MISMO come into this kind of conversation?
14:31Yeah, it's, it's a great question, Sarah. And it's one where so first of all, we were on the heels
14:36of our fall summit and
14:39Clayton Collins moderated a super credit super panel, we called it. Somebody told me afterwards, that may never happen again
14:48to
14:48have those five companies share the stage. So I bet we were, we were very fortunate. But I think it
14:55speaks
14:56to, I think it speaks to the what MISMO means to the industry, and it is this collaborative place. And
15:03so
15:03our, you know, one could argue that there's no, there's no more contentious part of our industry
15:09right now than the credit part of the industry. You know, there's a lot of kind of stuff going on
15:14there. And so where, where MISMO sits, and I'm a certified mortgage banker, you know, I, I have
15:22a personal opinion, but I have to set that aside. I set my personal opinion aside as it relates to,
15:30you know, FICO classic versus 10 T versus vantage score 4.0 versus try merge versus buy merge versus
15:38single merge. I do have an opinion. Nobody cares. It doesn't matter. My role at MISMO is it does not,
15:45my opinion doesn't come into my role here. And what we, what we see specific as it relates to credit
15:51is a focus within our credit reporting work group. And trust me, there's people in there that have
15:58opinions one way or the other on, on how this shakes out. But again, they, they kind of, they check
16:04that
16:04opinion at the door when they step into the work group and whatever the problem is that they happen
16:10to be working on, which in this case, it's really it's really modernizing the, the, all of the data
16:17that makes up these credit files that get moved from, you know, point A to point B to point C.
16:22And so we were, we were fortunate to, to have, you know, Clayton in the, in the, in the five
16:29companies
16:30do that session. And I'll, I'll tell you, there was a, there was some tough questions asked, but I
16:35thought all the participants replied with respect for the industry, for each other. And there was,
16:44you know, it was truly, it came across as a, a positive collaborative session. But it's, it's,
16:52it is, you know, we're not going to solve in MISMO. We're not going to solve for
16:56the, the tri merge, buy merge, single merge. We're not going to solve for what's better,
17:01which models better. What we're going to solve for is what, what does the data set need to look like
17:07across the different credit products and credit models such that we, we have these fun, you know,
17:13we have a fungible process and we can, you know, the technology can talk to each other and things like
17:18that. Yeah. You're not going to solve it for us, Brian. Come on now. We, we need somebody to solve
17:24this.
17:25Not my job. No, that it's a great, a great way to bring everything together. That, that panel,
17:32of course, we had a reporter there, actually an editor covering that. Clayton thought it was
17:38an incredible panel. Your whole fall summit was great. You have a winter summit coming up.
17:43Yeah. And, you know, would love to, to promote that for you guys, because it is such a gathering of,
17:49of, of what the community does. What else do you guys work? Okay. That kind of hit some high topics.
17:53Anything else that are your priorities for you guys right now? So we're, yeah, we're kind of,
18:00I'm going to sneak this in here. I'm going to get in trouble, but stay tuned guys. First part of
18:05October, we're launching a new brand. So we're refreshing the brand of, of Mismo. So we're
18:11excited about that. We, you know, there's, there's 30 plus active work streams and we just talked about
18:19three or four of kind of the big ones. But there's work going on in loan servicing from,
18:25from loan boarding to investor reporting and all the things in between. There's, there's an exciting,
18:31exciting work being done. I think it's exciting, but I'm kind of a mortgage nerd, exciting work being done.
18:38Um, and we're standing up a brand new work group. It's, it's going to be, uh, titled the tri or
18:43the, uh,
18:44tri party agreement. So today, if you, if you think back to February and you all reported on this,
18:51our industry hit the 15% mark for e-note adoption, right? That was like the high water mark.
18:57Well, it's 2026. Don't you think we should be like well beyond 15% adoption?
19:04There's things there's, there's friction still in the process. One of those is the requirement for
19:09a tri party, uh, agreement on every note between the warehouse provider, the ultimate investor buyer
19:17of a loan, and then the originator of the loan. And we're told that, you know, for an originator
19:22to add an investor, another investor that maybe buys, uh, purchases loans with e-notes,
19:29it could take three months or six months to negotiate these tri party agreements.
19:34So again, MISMO became the place and we kicked this off at our, uh, our recent summit where we had
19:40somewhere around 50 or 60 representatives in the work group representing lenders, warehouse providers,
19:47technology platform providers, um, and investors, right? The penny max, the Ameri homes of the world
19:54were in their plan at home loan, et cetera. And so we're excited that that group is now getting formed
19:59formally. It'll be a brand new work group. And the goal, the objective is to, again, check our
20:06corporate hats at the door, work collaboratively, collaboratively to create templated legal language
20:11that the industry agrees upon. And that takes us out of this three months, six months, nine months
20:17contract negotiation. Cause we do believe that if we can advance, um, if we can get more buyers
20:23of these e-notes that opens up the liquidity. Uh, and then we, we, we think, you know, getting from
20:2915
20:29to 25% in, in 2027 is within reach. So we're kind of informally calling it our drive to 25,
20:37uh, for
20:37e-note adoption. I love this again, another example of where standardization doesn't sound very sexy,
20:45but it actually could make a huge difference in people's bottom line and their business,
20:49which is the whole goal. And those, you know, that e-note, if you're, there's a couple studies
20:54out there. I saw, uh, Veterans United, um, did a great study, like the, the impact of their e-note
21:01adoption. Now they're at the very, very, very far end of the spectrum. Like they've really leaned into
21:07e-note adoption, like they're North of 75% probably on their, on the Ginnie Mae for sure.
21:13You can go check the study, but you know, I think they pegged like an $8 million a year
21:19incremental savings to their operation because of their, uh, ability to adopt a fully, you know,
21:25e, e-mortgage, e-note process. And so, you know, even the smaller lenders, if they can get
21:31half of their production in that category, it does make a meaningful difference in their
21:37operational cost to produce. And ultimately the, you know, the rate and fees that they pass along
21:42to consumers.
21:44Okay. You, you're, you mentioned you're coming up on a year. What's the funnest part about your job?
21:48Um, it's, it's actually doing this. It's, it's talking, it's, it's sharing
21:53the, the, the work that gets done by the community. And like myself and my team, there's six of us
21:58on,
21:59on the MISMO team and people are like amazed. There's only six people in MISMO. Yeah, that's it.
22:04Six of us. None of us have propeller hats. We're, you know, we're not in the,
22:08we're not in the work groups doing the work. The, the most gratifying part of, of my first 11 months
22:15is getting to see the hundreds of humans that come from every part of our industry, uh, that sit in
22:23these work groups, uh, and selflessly give their time, experience, expertise to truly solve problems
22:30that are bigger than their company, right. That are truly industry problems. And, and yeah, you know,
22:37fall summit was a great example. We had our, a record attendance, uh, at our summit, you know,
22:43it could have been because we had Clayton Collins on stage. I don't know, maybe, uh, but you know,
22:47we had record a number of people attend the summit and I popped into as many of those work groups
22:53as
22:53possible. And just, it's just cool to see the energy, uh, that people have to solve these problems.
22:59And so for me, I've, I've gotten the most enjoyment, um, out of like uncovering those people, like,
23:06you know, almost being like the, the inside eyes and ears of what's happening. And then
23:11sharing that with the industry because there's a lot of people that they still don't know exactly
23:16what we, what we do at MISMO. And I, I thank you for giving me this opportunity because it's,
23:21it takes these kinds of conversations to really, you know, uncover the, the power and value of,
23:26of this MISMO community. We love helping, uh, shine the spotlight on people doing such great work.
23:33Brian, thank you so much for being with us and we will talk again soon. For sure. Thanks, Sarah.
