This article was written by the technology committee of the Mortgage Bankers Association of America. The committee chairman is Chuck Elgin, chief technology officer of the mortgage servicing division of Chemical Residential Mortgage Corp.

The commmittee wrote in response to a Dec. 14 commentary, "Standards Institute's Mortgage Format Is a Disaster Just Waiting to Happen," by Scott Cooley, president of Contour Software Inc.

When misinformation about the role of ANSI (American National Standards Institute) X12 - a standardized data format - appears in a major trade journal under the guise of "open discussion," it is time to set the record straight.

The following commentary addresses some claims from a vendor who has been consistently anti-ANSI X12.

After several years of cooperative effort by national associations and their members, vendors, the federal government and the secondary market agencies, the mortgage industry has begun to embrace ANSI X12 data standards as a prerequisite step toward the world of electronic commerce.

Developers of products and services that are ANSI X12-compatible have made a commitment to their customers to compete for their business based on price and service, not by requiring them to support proprietary data formats for each vendor with whom they choose to do business.

The Mortgage Bankers Association supports and encourages open discussion of how ANSI X12 standards are developed and implemented. In fact, by its very nature, the process relies on broad industry consensus before a standard can be approved.

The appropriate forum for business partners to discuss and debate the development of standards is an X12 electronic data interchange work group. If they took the time to involve themselves in the ANSI X12 process, those who have not embraced the standard would most likely become its advocates. At the very least, they could claim some authority on which to base arguments against the value of ANSI XI2.

Outlined below is the MBA technology committee's response to specific statements - noted in italics - made in the American Banker comment piece.

*The ANSI X12 format is "promoted mainly by the Mortgage Bankers Association."

In partnership with the MBA, ANSI X12 development in the real estate finance industry is supported by the following organizations; American Land Title Association, America's Community Bankers, American Bankers Association, Associated Credit Bureaus, Appraisal Institute, Fannie Mae, Freddie Mac, Ginnie Mae, Department of Housing and Urban Development, many mortgage insurance companies, credit reporting companies, and most of the larger mortgage banking firms.

What do these organizations have in common? All are dedicated to giving their members, customers, and the consumer the best services and products at the most competitive price.

*"Several years ago (1986), MBA released a standard format for 1003 information, one of the more standard kinds of mortgage information. The format never enjoyed widespread acceptance."

The lack of acceptance of flat file, proprietary standards is precisely why the MBA along with other supporters of the concept of data standards for the mortgage industry looked for a national, cross-industry EDI solution that had been proven in other industries.

The ANSI X12 approach offered a formal development, approval, and maintenance process for EDI that did not rely on any one national association or vendor to be the "owner of the standard."

*"Vendors offering products that integrate well with existing loan origination systems have found a competitive advantage that was made possible in large part by ignoring the X. 12 (sic) format."

Proprietary formats limit choices and force the customer to bear the cost of mapping to each vendor's proprietary format. In this environment, the vendor is not required to share in the investment of establishing "seamless integration" with the customer. Many large lenders must support proprietary data formats for each of their software providers.

Lenders have found it to be more cost-effective to support a common data format that is used by all their business partners. Appraisal software vendors, for example, are adopting ANSI X12 standards to compete head-on with each other based on software functionality, customer service, and price.

*"The requirements of all the parties involved change constantly. You can count on Fannie Mae, Freddie Mac, the FHA, and Veterans Administration - along with individual investors, Congress, and a hundred other federal or state regulators - to invent new fields, eliminate some, and modify others with and without due notice."

The primary value of the ANSI X12 standard's nonproprietary nature is that it offers all parties involved the opportunity in a given business transaction to define requirements without the threat of antitrust action, while meeting all parties' business needs.

Furthermore, ANSI X12 enables industries to maintain their own lists of values for a given data element that might be shared among several industries. This means that new values can be easily added to suit a single industry without requiring the definition of a completely new format.

*"For many transaction sets, the data itself is the product being sold ... Those companies that adopt the 'voluntary' standard may find themselves restricted in the kinds of information they can offer for sale."

Customers of credit reporting and appraisal vendors, to take just two examples, value accurate and complete data to meet investor and insurer requirements.

ANSI X12 standards support efforts throughout the industry to improve data accuracy and streamline reporting requirements. Rather than "restricting" companies from offering products the customer values, ANSI X12 compliance greatly increases the likelihood that software-service providers will offer products the vast majority of customers want and need.

*"An industry 'standard' might be difficult to change or enhance."

There are three opportunities a year to submit changes to existing ANSI X12 transaction sets for approval. The process is driven by business need, not technical theory.

Software packages are readily available on the market to translate business data into the X12 transaction sets. Translation vendors maintain all versions of ANSI X12 releases so that the burden of version control does not fall on the user of the transaction sets.

With proprietary formats, the customer must maintain each proprietary vendor's formats itself for every business partner with which it does business.

*"For the most part the X. 12 (sic) format will struggle against formats that are simpler, faster, more flexible, already widely used, and likely to provide a competitive advantage."

Accepted industry practice for the use of EDI relies on ANSI X12 concepts and implementation. Data standardization, once adopted, frees up development resources to focus on value-added initiatives to better serve customers.

Data standardization also offers increased flexibility to mortgage bankers for responding to changing business requirements without having to commit themselves to proprietary business relationships.


The MBA, along with its many partners in the ANSI X12 development process, extends an invitation:

All those who are skeptical or unaware of the value of nonproprietary data standards may join any of the EDI work groups sponsored by national associations serving the mortgage industry, attend a training seminar, join the Data Interchange Standards Association, and attend panel sessions at conferences where ANSI X12 concepts and implementations are discussed.

The acceptance of ANSI X12 standards in the mortgage industry is a "disaster waiting to happen" only for those in the industry who fail to invest in the future.

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