[David] Brian, good to have you back on the podcast. How you doing, my friend?
[Brian] I am doing well and I I’m thankful to be here with you.
[David] Well, it’s a good opportunity. you know, one of the things that’s when you started with MISMO, there was some things going on with you and your family and I want to give a major shout out and props to the MBA for supporting you through what was got to be one of the most difficult, challenging situations without getting into specifics. But I want to say to the NBA, thank you for how they handled that. It’s exemplary of good leadership and I’m sure that was affirming to you as you had made the right decision to join in this role.
[Brian] Yeah, there as you as you said, there were there was a lot going on and for the audience, we’re in a really wonderful spot, thank God today for that. yeah, the MBA was amazing in support. I was literally, you know, going through this event for call it three weeks, with a…
[David] As we were accepting the job, it’s supposed to be starting. That’s the part.
[Brian] The start date was imminent, yes. and so it was it’s the MBA for sure, but it was the board of directors of MISMO, the team at MISMO, including Rick Hill, who was the interim President at the time. They were all extremely helpful. and then shout out to the folks at Finlocker and our leadership at FinLocker, because you know, I was exiting Finlocker at the time and joining MISMO and dealing with this this family issue. And so everybody was amazing. You you had reached out a number of times throughout and a shout out to our industry and the humans that that make up our industry, because man, you when when when you’re yeah, when you’re in when you’re in need and you know, people are people who you know, we were across the country, we were in Seattle, and I had people who I don’t even know, but who are aware of what we were going on, offering their a room in their home for my wife and I to stay while we were out there dealing with our or their daughter. So just yeah, puts everything in perspective and I’m just grateful for everybody.
[David] It restores our faith in humanity when you go through so nice things. We do battle when we go into business, we do battle. Can you do this? Why can’t you do that and all that? But then when you go through something major, that yeah, you were in our thoughts of prayers during that, as I know many were keeping you in our thoughts of prayers. We both share a common faith, and that’s wonderful. But give us a little insights to the journey since you joined as a president of MISMO. What’s been going on? You have our new crow’s nest. I’m actually two aspects of this question I want to get. covered from you is you have the crow’s nest, so you see what’s going on in the industry. And then you also got to look on the inside of a really impactful organization. What did you come into? Share with our audience what you can out of that.
[Brian] Well, I what I would share right out of the gate is shame on me for my prior thirty-five years of existence in this industry for how little I really knew and understand how impactful an organization like MISMO is, but also the Mortgage Bankers Association and I’m a you know, lifelong, career long member of MBA. but until you’re until you’re in it and you see the behind the scenes stuff that goes into the things that become public, you don’t have a real appreciation for the level of effort that goes into you know, influencing DC, frankly, on policies that become, you know, that impact our business. And then, you know, I joke half jokingly that, you know, a year ago I knew the letters I S M O, but I couldn’t tell you what they all meant. I’m happy to say Dave, but I do know what they all mean today. and the depth and breadth of the work that happens in this community that is MISMO is amazing. And I know we’ll get into a few of the topics today. We don’t we clearly don’t have time for all of them, but there’s just understand as as a as a viewer, a listener who’s in our industry, it’s not just myself and my team of six at MISMO, it’s a community of seven hundred plus people at any given time that are working on our collective behalf to make this a better place for the consumers we all serve.
[David] Well, you’ve grown you’ve grown into this role really effectively in the nine months. Been nine months already? So what is your perception in the industry? I wanna get into AI because I think the most significant thing we could talk about today is the latest in white paper, white paper the guidance that you’re you’ve crafted with the framework for responsible AI mortgage ecosystems, another acronym.
[Brian] Yeah. Yeah.
[David] Want to get into that, but more of what your perspective is how you’re seeing technology evolving in our industry. We’ve watched one particular company be the major LOS for pretty much the majority of the industry. And you see a new ones coming in. From your perspective, what are you what are you seeing? What are you sensing? Well, you got that crow’s nest view. What is it?
[Brian] Yeah. so definitely seeing and engaging with a a a lot of new coes, right? New new entrants into our industry.
[David] And you talk about technology from a technology standpoint for
[Brian] I would say these are definitely technology players, platforms. Most of them are point solution type tools, right? Ninety nine percent of them are AI powered, AI empowered, or AI native, however you want to define that. and what really has been eye-opening for me and since January, really, is we’ve had about a dozen of these new companies that have come to MISMO specifically. Come they came to us to become members of MISMO to have access to all of the data specifications, all the versioning, and I got I started seeing kind of this pattern happening. And so I started reaching out to the founders and like, how did you find MISMO? What led you here? Right. And so, you know, started with, you know, their research said that the mortgage industry is one of the industries quote unquote ripe for disruption or impact from AI? Not a surprise, and then as these folks kind of continued their research, you know, and maybe they prompted or asked the question, where should I start? All roads led to MISMO, not because of MISMO, but because of what is MISMO, which is this standard, this set of standardized data. And so it really the light bulb went out. And you know, if you’re gonna leverage an LLM or any kind of machine learning or frankly any automation, the output’s gonna be only as good as the input. And so if you think of MISMO as the foundation for the input, it makes a lot of sense that that’s where they started. So when they engineered their solutions, they used the b the MISMO business glossary of 8,000 plus terms. They use the MISMO reference model, which is the the compilation of the hundred plus data specifications and standards and schemas, and then built on top of that foundation. So it was really eye-opening. And then as I thought of the landscape of legacy platforms and tech that’s out there, I started I’ve had I’ve had a lot of conversations with those folks on what are they doing to become AI ready. If you’re on a legacy platform that maybe is two decades old and maybe the foundation was your own foundation and not this industry defined foundation. And again, a lot of attention, even at the legacy level, is on at is at the data layer, that the foundational layer is getting that intact so that whatever you build on top of it, it’s not gonna crumble because your foundation is shaky.
[David] Are you encouraged by you see some of the new entrants come into the marketplace as to it there’s real true innovation happening?
[Brian] Loaded question.
[David] Yeah, I didn’t mean to blow it up, but I.
[Brian] No, no, no, no. I it’s an honest it’s a
[David] But I think honestly, you there’s no one better in the industry to find the have that have an opinion on this and a perspective on this.
[Brian] Yeah, I think there’s a handful that I would call truly innovative. And there’s others that have simply built automation on a pretty bad process to begin with and so, you know, the ones that I think have are extremely innovative are actually looking at the root processes and the workflows and let using the tools and the AI to actually improve the process and the workflow. And then and then the automation on top of it, whatever the tool is on top of it. And so that that is encouraging to me because you know you talk about this a lot on this show and in your practice. We’ve we’re challenged with this, you know, call it eleven thousand five hundred dollar or twelve thousand three hundred dollar cost of manufacture a loan. It’s only gone up over the years. And you know, if we’re going to find a way to finally chip away at that on average. It’s gonna take to me, it’s gonna take us getting out of this business of checking the checkers and the checkers, checking the checkers, checkers. And you do that by having foundational data that you trust, such that when that data moves from player A to player B, player B is not re redoing all the work that A did to validate. And then if we can get out of this checkers checking the checkers, there I think there’s there’s this thing, there’s this shadow cost in the manufacturing of a loan that we can get, you know, we can chip away at and maybe there’s a thousand dollars or fifteen hundred dollars or even two thousand dollars in this shadow cost that eventually we can kind of rip away at. And I think some of the new innovative thought thinking around process and workflow improvement and trusting the data, you know, along the way will get us there.
[David] Well, AI, as you said, is at the center of this. Let’s get into discussing the framework for responsible AI in mortgage ecosystems frame. what was the genesis of this? What I mean if I understand correctly when you and Ty talked getting ready for this podcast, you said just more and more people were s contacting you or caught to the MBA saying we need some guidance and no one better to do it than MISMO and you.
[Brian] Yeah. Yeah, so we you know we go back to, you know, my first day in the role was literally at MBA annual, right? yeah, that was like drop me in and let’s go. and so one of the very first meetings I sat in on when I got to MBA annual, it was like midday Sunday afternoon was the Resbog, the Residential Board of Governors. and for folks that aren’t aware, Resbog is the is the governing body for the Mortgage Bankers Association. It’s I don’t know, 50 or 60 member companies that make up ResBog and ResBog for their for their calendar year 26 initiatives, AI was in the top two or three of those priorities for ResBog to deliver on four members. And the specific deliverable that ResBog you know promised, if you will, or communicated to membership, was that ResBog would lead the delivery of a framework or guardrails for lenders to operationalize AI in a manner that’s gonna keep them out of trouble. Let’s just call it what it is, right? So that was the priority for Resbog. And you know, Rick Hill again, who was the interim President before I joined, who’s also a full time he had a full time day job with MBA leading their, you know, the technology area. You know, Rick and the Resbog leadership were already communicating on where MISMO could play a role in executing on this priority aAnd so coming right out of MBA last fall, we have this we have a standing body within the MISMO community. It’s called the AI community of practice and this is a group of any at any given time, a hundred plus you know, humans that make up this community of practice, a subset of that COP community practice was pulled together. Rick Hill really led the charge and started working on creating a framework, a set of guardrails. So proud to say that just a few weeks back we published version one of frame, all caps, F-R-A-M-E. You already spelled it out, framework for responsible use of AI in the mortgage ecosystem. It’s a lot easier just to call it frame. We published we published V Yeah, yeah. We’re in We could do an episode just on acronyms and run out of time. The frame was published, version one of frame was published. It’s available now for access. If you’re a MISMO member company, you can access Frame. It’s no additional cost, just the cost of membership covers that and what Frame is in its current state, it’s essentially three tools that make up this kit. Tool number one is a templated policy and procedure document. And so the idea, David, was that a segment of the lenders out there, let’s just call them the mid to small size IMBs by and large, most don’t have, you know, a mature, robust governance infrastructure. They’re small, they’re small companies. Governance might roll up to the COO or the CEO, and among the 14 other things that those roles are responsible for. And so if they don’t have this mature governance infrastructure, they certainly don’t have an AI governance infrastructure. So at a minimum now, if they use if they come in download frame, they’ll have a templated policy and procedure document or set of documents for their governance of AI. They’ll have a second tool is the an inventory tool. The inventory tool is a step-by-step process whereby a lender can literally inventory every use case of AI that they know of in their organization. And I say know of with air quotes. We believe that going through the inventorying of your current use cases that you know of is gonna ultimately unlock other use cases that you’re not so aware of, which also carry a lot of risk to you as a lender. And then the third tool is a risk assessment. That you would perform on each of those use cases. So let’s just say your inventory had 25 use cases where AIs use from marketing to loan decisioning to customer communication. Each of those use cases you would take you would take it through a risk assessment and you’d ultimately assess that risk as low, medium, high. Typically, the high risk items you would have risk mitigance, risk mitigations identified and controls in place that you would define. And so now if you think about the world that we live in where both Fannie Mae and Freddie Mac have issued guidelines for its seller servicers on how they’re going to expect or not expect, how they’re going to hold you responsible for the use of AI as a lender. The specific states that you’re regulated by also many have their own guidelines, if you will, for AI. At a minimum now, if you’ve downloaded, you’ve implemented FRAME and someone knocks on your door, you have something you can actually put in front of them and at least demonstrate that you are been you’ve been thoughtful around your use of AI. and we think we’re still early, early, early in the AI game as an industry. And so just having the artifacts handy is probably going to put you ahead of most of your competitors.
[David] But this FRAME will not impede growth or the use of AI. I think I heard one person saying this could have that kind of AI. I said, no, I don’t see no. I mean, this is actually putting a guardrails on it, if you will, to help lenders do so as you suggest the name, responsible AI in the mortgage lending process.
[Brian] Yeah, I agree. I don’t think it impedes you at all. In fact, we heard from plenty of lenders kind of going back to post MBA annual and into the even into the first quarter of this year, there was a lot of leaders at lenders had who had not allowed AI to even be implemented in their shop for lack of guardrails, governance, oversight and so if anything, for those lenders, this is gonna allow you to start to get your toe in the water at least, right?
[David] Yeah, well what I’m hearing more from lenders recently, and they’re talking about the problem of having two laptops or a the company computer and then the personal laptop because the company they can’t do the things they need to with their company computer, so they have their personal laptop, or they just use their cell phones with accessing open AI or Claude or Club Groc or whichever one they’re using to get answers. And that really starts opening some problems for some lenders. And so how do you deal with that? And so it’s it when where do you see this all going? Is your this is fast evolving. I mean, how in the world is as adaptable as and the tenacity you have to stay on top of this? I mean, how do you and how is it where do you see this going? It’s not getting easier.
[Brian] No, it’s not getting easier, but this is where, you know, nine months in, I’ve got I now have a new appreciation for you know what the MISMO community does for the industry at large and by extension, what MBA and specifically bodies like ResBog do for the industry. So where we see this evolving is yes, we created this frame for lenders, but we’ve already heard from non-lenders who are in our ecosystem, vendors, tech platform providers, service providers, et cetera, who also want to be better prepared and so we’ve we have vendors coming to MISMO and asking MISMO, would you certify our us and our readiness, our AI governance readiness, right? So we’re starting to explore what a what an AI governance certification might look like if MISMO as this independent.
[David] You’re not doing that currently. You’re not doing anything like that currently.
[Brian] No. We’re in its development stages. We’re gonna do it. We’re gonna do it. It’s but we’re we’re being very thoughtful about what goes into that, but we also have within the MISMO community we have several third party consultant companies who are certified today as implementers of various MISMO standards and data sets and schemas and so it got us to thinking there’s probably, you know, a couple dozen or so of these folks that exist out there that we could certify for helping implement frame for lenders that maybe don’t have the resource on premise to do this. So, you know, a third party consultant could do it and we would, you know, we could at least certify them that they are they are knowledgeable enough on FRAME to be able to, you know, help you successfully implement. The other thing, David, that I think is really cool about where we sit here at MISMO is you know, you understand the lenders and the vendors that are associated and then you’ve got Fannie and Freddie over here that are also very connected within MISMO. I mean, I have two, I have a board member from each company, from Fanny and Freddie. They literally have representatives that sit in every one of our working groups. So Fannie and Freddie are extremely involved within MISMO and then we have the Conference of State Bank Supervisors, the CSBS, which is the trade association for all the states. They’re very involved in MISMO and so what we’ve been doing with FRAME and its current state is we’ve socialized it with Fannie, Freddie, with the CSBS. They’re not going to approve it. They’re not going to bless it. They’re not going to stamp it. You know, we’re not asking them to do that. We’re simply asking them for their input, their feedback, you know, how would you react if you saw these tools, these artifacts when you visit a lender? And we’re starting to use that feedback to iterate in and push us to a V2 of frame.
[David] There’s so many reasons why someone should be involved in MISMO. It is, I mean, there is you’re getting in with a great think tank of people, but it’s really critical as you start looking at the future and it’s affordable. So let’s wrap this up by saying how can people get involved? And what’s the process and how do they show up? I mean, walk through.
[Brian] Yeah. So I’ll probably get hit over the head by my team for this, but MISMO is for everybody and anybody. Soyou know, whether you’re a paying member of MISMO or not, you still have a seat at the table. You’re welcome to join any of our work groups. you you go to MISMO.org, you can navigate to get involved, you’ll see a link for the 34 work streams. Anybody literally could poke in, click the Zoom link and sit in on a on a on a work group meeting. Do we want that to happen? Not necessarily. But it but it can happen because we are a nonprofit standards body and so in order to you know fulfill that standards organization mission, if you will, we have to be available to everybody. And we are. Our the MISMO standards, the specs that get created, there there’s an XML version that is available to the general public. Not behind a paywall. Anybody and everybody has access to that. Now let’s get into membership because membership does unlock additional benefit. If you’re a lender, membership is tied to your funding of MISMO through the Innovation Investment Fund, also known as IIF. And each lender on an annual basis is assessed in IIF invoice and it’s 75 cents per closed loan from prior year. so for the vast majority of lenders, you’re probably talking about you know, three to five thousand dollars is your membership fee. obviously the larger lenders, it’s a little bit higher. and you know, for the mid to small size lenders, you know, I think the cost of membership, let’s say it let’s just say it was five grand. If it unlocks this full this FRAME that we just talked about, that alone has is worth the price of admission, in my opinion. So that’s the lender. The lender side is that IIF, it’s based on you know 75 cents per closed loan. The non-lenders, we call them industry partners. we have membership tiers like a traditional organization starting at a $5,000 membership tier all the way up to $55,000 and just based on what your organization is how involved you want to be with MISMO, if you if you wanted to send, you know, three, four, five people to the three summits a year, you probably want to be at somewhere in our mid-tier, call it $10,000 to $20,000 membership, because at that level it essentially pays for that those folks to attend. But outside of the benefit of attendance and being in the room, I think from a from a vendor perspective, the value of being in the room and all across as many work groups as possible is is gonna be super impactful for your own product roadmap. As you think, you know, we’re we work on we we’ve been working on this mortgage compliance data set for a number of years. And the parties that were in the room from like the early stages of that have kind of had a head start on ahead of this thing becoming a standard so that as a product developer, You kind have a vision for what’s coming down the pipe, and you can build product maybe and be ready to implement faster than your competitors if you’re actually in the room helping iterate on you know the creation of these standards. So I think there’s a lot of benefit for product builders. and then there’s there’s I’ve seen some some pretty cool business development benefit by being in the room next to partners, lenders, and even competitors. through this you know through the collaborative nature of MISMO.
[David] That’s very exciting. Well, congratulations on doing well. There, what you’ve accomplished in nine months is pretty extraordinary. Looking forward to seeing a lot more under your leadership. Kudos to the MISMO board and the MBA and all those that are making this possible. I read through FRAME, it is a great start on a fast-evolving, almost impossible challenge to provide guidance, but you’re doing it and I’m grateful for it. Thanks you, Brian, for being here. Have a great fourth of July. We’re recording this the just on the eve, just before we start celebrating tomorrow morning. So thank you for being here, friend.
[Brian] Thank you, appreciate you.
[David] You bet
Important Links
As President of MISMO I guide the mortgage industry’s standards organization to foster collaboration and innovation across the housing finance ecosystem. By driving the adoption of critical data standards like the SMART Doc® specification and Loan Boarding Dataset, our work enables interoperability and efficiency from origination to servicing.
With expertise in financial education, teamwork, and homebuyer education, I am committed to advancing MISMO’s mission of creating a more efficient, transparent, and trusted mortgage market. I lead strategic initiatives that empower lenders, servicers, technology providers, GSEs, and regulators to build confidence, reduce costs, and drive digital transformation in the industry.