The Mortgage Industry Standards Maintenance Organisation (MISMO), a wholly owned subsidiary of the Mortgage Banker’s Association, announced on Wednesday March 25, 2019 that it adopting the decision model and notation (DMN) as a standard for documenting, implementing, executing and exchanging business rules and decisions across the mortgage industry.
What is the Industry Impact?
MISMO develops and champions standards that are widely used through the mortgage business—by mortgage lenders, real estate investors, resellers, housing agencies and companies servicing borrowers—to exchange information effectively and securely. Most regulators require the use their standards to support automation of mortgage paperwork and to facilitate the fast, low error, low cost collaboration between the entities involved in mortgage funding, creation, selling and end-borrower support. It also provides certification and advocacy for its standards.
The use of DMN, a standard that support executable documentation, will support a more effective integration between the partnering entities within the mortgage industry, allowing them to exchange business rules and decisions (for example repayment requirements, reporting mandates and service constraints) more directly, more quickly and with fewer errors than ever before. This in turn will support tighter and more effective compliance and drive down costs for everyone involved.
Sharing rules, along with the data used by the rule, will help address many of the interpretive and compliance issues that currently bedevil the mortgage industry. Understanding the rules used by business partners will help resolve differing interpretations and confusion, which in turn should greatly reduce costs across the industry.
What This Means for DMN
This is momentous news for the users of DMN as well as the mortgage industry. This acceptance of the need for and use of standards in the interchange of decision making and business rules in mainstream finance paves the way for use of DMN in many other industries. It also provides an excellent illustration of the benefits of using the standard.
Concrete Illustration of Benefits
The mortgage use case epitomizes the tangible benefits of representing business decisions using a standard to:
- Provide a means of representing business policies and contracts that are demonstrably free from error and that can be exchanged without ambiguity, facilitating faster, lower cost collaboration;
- Combine documentation and execution into a single form that is tangible to business experts and that can be certified by regulators as a vehicle for the low overhead support of compliance and
- Facilitate the safe and agile development and evolution of business policies and products
The key benefit is the lower operational costs achieve by using a standard. Costs are lowered because the full impact of policy changes can be tested more effectively and quickly, lowering the cost of mistakes—the errors that are made when policies and business rules are merely implied by data rather than explicitly stated. We believe this move beyond exchanging mere data towards the explicit development, representation, management and communication of business policies and products using a standard is a significant step towards greater transparency, more rigor, higher agility and lower cost of business collaboration and compliance.