XML Is a Strategy Not a Technology. (Cover Report: E-Commerce)
Livermore, George, Mortgage Banking
Extensible markup language (XML) is going to unleash widespread sharing of data in the mortgage business. The old, slow ways of making loans may never be the same.
THERE IS A NEW DIGITAL CELLULAR TELEPHONE COMING TO MARKET. It can be worn as an earpiece because it weighs less than an ounce. It has a battery that requires charging once a month--producing 40 continuous hours of talk time. It's voice-activated so you can dial and receive calls using voice commands.
* Interested? Of course you are.
* There's a catch, though. It's not compatible with standard cell phone networks. For that matter, it's not compatible with land-line systems. You can only communicate with people who are on the same network, which today covers five states.
* Still interested? Probably not. What good is a telephone that doesn't connect with other telephones?
* Now apply that same logic to your information and processing systems. Why would you use a system or an application that couldn't exchange information with complementary applications managed by your vendors, your customers and even other financial institutions?
* The free flow of information has fueled record economic growth and productivity gains. In October, Department of Labor Secretary Elaine Chao reported that, from 1995 to 2000, productivity grew by 2.5 percent a year, compared with an annual growth rate of just 1.4 percent from 1973 to 1995.
Certainly the mortgage industry has demonstrated remarkable productivity gains, on a pace to finance a record-breaking $2.4 trillion in originations in 2002 using supporting infrastructure smaller than what was available in 1994.
But to sustain this trend in improved productivity, the mortgage industry must rethink technology's role. Technology should do more than automate a single process or task. It must also enable the widest possible exchange of information so information flows faster and allows for more informed decisions. Processing technology enables you to close a single loan faster. Information-sharing technology allows your entire enterprise to move at the speed of the new information-driven economy.
The Internet has improved communication by establishing a common network for human-to-human and application-to-application connectivity. Until now, however, we have lacked a common language for application-to-application data-sharing. Extensible markup language (XML) is rapidly filling that void.
Unlike humans, software applications cannot process an information stream unless each element has been predefined and logic-checked for validity. In the 1990s, we believed the best way to do this was to establish a common data language, and electronic data interchange (EDI) was believed to be the answer. The EDI initiative fell victim to its own grand design, however. It was perceived as expensive and its design motivated by special interests.
XML has emerged as a less cumbersome means of establishing a data exchange. It is a machine-to-machine language that is instantly recognizable by sender and receiver because the transmission includes "tags" that define each data element. The tools to implement XML are free, unlike the high technology cost associated with implementing EDI. Moreover, an XML data stream can be read and interpreted by humans. In the true renegade spirit of the Internet, XML is the common man's alternative to EDI because it is flexible, inexpensive and easy to implement.
The Mortgage Bankers Association of America (MBA) has sponsored a high-profile and successful XML initiative since 1999, with the aim of making XML the standard language of mortgage e-commerce. In the last year alone, the Mortgage Industry Standards Maintenance Organization (MISMO) has developed voluntary data element standards for automated underwriting, credit reporting, mortgage insurance, and title and servicing transfer.
Waiting in the wings for release are standards for mortgage applications, property information and appraisal products, including automated valuation models (AVMs). …