Happy Anniversary UCDP!
Mar 15, 2013
Featuring Darius Bozorgi, President & CEO
Duration: 15 minutes
Adrienne Ainbinder, Moderator: Welcome to the Veros Real Estate Solutions monthly podcast. Today I'm talking with Darius Bozorgi, founder, President and CEO of Veros. We’re celebrating an anniversary at the moment. What anniversary might that be Darius?
Darius Bozorgi: We’re not quite there yet, but we’re close. This March 19th will be the one-year anniversary of the mandate that went into effect for the Uniform Collateral Data Portal or UCDP that is part of the uniform mortgage data program mandated by FHFA and delivered by Freddie Mac and Fannie Mae.
Adrienne Ainbinder: I know UCDP just on it's own has been a Herculean effort simply by the nature of the number of lenders and vendor partners who had to integrate or otherwise be connected to the portal since that March 19th date last year. Tell me a little bit about what’s happened since that point in time.
Darius Bozorgi: It's been a wild success I think by most accounts. We’ve exceeded virtually all expectations on a project that I think a lot of the market did not think was ever going to see the light of day. It was announced and I think everybody said, great idea and long time in coming, but I think many aspects of the market thought it would never actually occur. Not only did it occur and the portal was actually launched back in June 2011, and then as I mentioned the mandate in March of 2012, but the performance of the portal in this past year again, has exceeded all expectations. We’re approaching close to ten million appraisals, which is a database of appraisals that is unprecedented in this industry. It has allowed the GSEs to really enhance their risk management capabilities.
Adrienne Ainbinder: That’s huge. I'm not really sure that many people realize that ten million appraisals have flown through or close to it at this point in time. You're a CEO who always has his ear to the ground. What do you hear from the lender community about the impact that the portals had on them?
Darius Bozorgi: I think as I mentioned it has had huge positive impacts for the enterprises. It significantly increased their risk management capabilities. It has led to very positive changes to the rep and warrant model that FHFA announced back in the fall of 2012 in September or October if memory serves. Just the rep and warrant changes have had a huge impact on lenders in terms of what that does relative to capital reserves. It has led to a huge push on things like data quality and data standardization. I believe most people know if you look just relative to UCDP, the premise of that from a data input is the Uniform Appraisal Dataset that the enterprises proffered and that other organizations and institutions have since adopted. You’ve had FHA and you’ve had VA who adopted UAD several years ago now. It's just been a huge push in data quality that previously didn’t exist around the appraisal.
Adrienne Ainbinder: What about the community outside that direct lender to GSE relationship? Certainly there are many more parties in the equation when we really open this up and talk about the vendors who support the lenders, appraisal form vendors, and really the appraisers themselves. How has their world changed in the past year?
Darius Bozorgi: I think it's changed significantly. If you remember there’s one aspect about just collecting data. You create a standard. I would argue that a standard is virtually meaningless if you don’t have means through which to enforce it and even determine if people are following the standard. I think that’s one of the real value propositions behind UCDP because it allows the enterprises to actually verify that on an individual loan-by-loan basis that the standards they set and require are actually being followed and they can enforce that. The same issues that the GSEs have so do, for example, large aggregators out there that not only originate their own loans, but also then acquire and aggregate a number of loans themselves. They have the same issues around data quality that the enterprises had, vis-a-vis, the rest of the market. That flows all the way down to those service providers – be it appraisal forms vendors who undertook their own Herculean effort to do the work they needed to do on their appraisal form software so that their customer’s appraisers could meet the new standard - they did a great job, down to the appraisers themselves who are filling out appraisals through this forms software. They have to adapt to these new standards and the whole education process that was required to make sure the market was ready for this. If you think about all of the participants be it the enterprises, be it the regulators, be it the large lenders, medium size lenders, small lenders, all the vendors from Veros to the forms vendors to other vendors who offer connectivity services to mid-size and smaller lenders down to the appraisers themselves. Everything that had to be done in a relatively short period of time was and it's not surprising why many people thought it would never happen if you think about it on paper. The fact that it was pulled off, all of these different stakeholders deserve an enormous amount of credit.
Adrienne Ainbinder: Absolutely, I couldn’t agree more. I was going to say that’s really a tremendous thing that the GSEs have achieved in creation of the portal. You're right with the combination of all of the partners that have had to be part of that as well. I know that all of us at Veros are extremely pleased to be a part of this as the technology provider. The question for you Darius is, what’s next?
Darius Bozorgi: I would say there’re probably two primary categories under what’s next. First is, specific to UMDP itself and everything that falls under that which is obviously ULDD and FHFA has already announced there will be continued enhancements to ULDD. I believe there is ULDD II and I think that will continue. UCDP itself has already evolved significantly since its initial launch in June of 2011. Since the mandate in March of 2012, the GSEs have announced that warnings will turn to fatal. I think there will be more announcements on that as that comes out as to which one those will be. That’s going to be a big change for UCDP as those announcements come out from the enterprises. Everyone I assume has heard of UMSD the Uniform Mortgage Servicing Dataset. That’s something that’s going to be a future effort that will come out and was even referenced again just earlier this week when FHFA on Monday published its 2013 scorecard for the enterprises. That platform, the UMDP platform, will continue to evolve and everything under that will continue to evolve. That’s certainly something front and center when you talk about what's next.
Then the second major thing – again you do see some references of it in some of the content coming out of FHFA is that this infrastructure that the enterprises have built and again, they deserve a tremendous amount of credit for that and taking that industry leadership role. It's bigger than them and will serve as that foundation for the rest of the market. You see FHFA talking about the securitization platform. You have bipartisan committee comments that have come out regarding the future of the GSEs and the future housing finance reform. MBA has proffered different positions; regardless of which of those you agree with or others – that common thread that runs through all of those is a framework or an infrastructure that allows for very transparent, very granular access to standardized loan level data to bring back accountability and transparency to the secondary market.
Adrienne Ainbinder: Thanks Darius. I've got one last question for you here. As you look back on the past year with the UCDP what lessons would you say you’ve learned or what lessons has Veros learned from the efforts that had been put behind the portal?
Darius Bozorgi: Again, I think the biggest lesson that I would talk about relative to UCDP, as I was very impressed with the primary participants. If you think about this project and all the stakeholders – I alluded to it earlier – just focus on the enterprises themselves first. Here are two competitors – a lot of people forget that in today’s world post-conservatorship that you have two companies with a history of aggressive competition that we’re being asked to work on a joint project on a project they’ve never worked on together – another reason why I think a lot of people thought this would never see the light of day. To their credit and to the regulator’s credit the commitment that they demonstrated to see this project through and see it in a way that would benefit the industry should be applauded. I was impressed being involved in that at the ground floor and witnessing that. That was a pleasant experience for us.
Then also the stakeholders – so there’s one part to say that the enterprises came together and worked together to create an unprecedented industry-changing platform. Just that decision in and of itself wasn’t going to make it happen. You’ve had a lot of integrations that had to take place from the nation’s largest lenders, midsized lenders and small lenders. We talked about vendors that had to change their software. You had a tremendous amount of process reengineering that had to occur. I’d like to think that Veros played a big part in helping manage all of that and make all of that happen so this portal could get launched on time and be the success that it has, but obviously, we didn’t do that alone. I also applaud all of those lenders and vendors that really undertook the Herculean effort of their own to make all of this occur.
Adrienne Ainbinder: It sounds like a big industry-wide lesson and moving mountains is what was learned here.
Darius Bozorgi: It really should be the model. I’d suggest that it's a model for any type of future efforts. There has been a lot of discussion around industry standardization. That gets thrown around a lot. I don’t think you have a lot of examples of it actually being achieved. Here we have again a very wide reaching industry effort that involved data standardization, data collection, verification against the standard, analysis, risk management, enhancements, policy changes as a result of those new capabilities and things like the rep and warrant model. What better model of success could you look towards? I can’t think of anything.
Adrienne Ainbinder: I agree with you. It's great to be able to celebrate the first year of the portal since the mandate date. It sounds like there's just so much more to come as we go forward.
Darius Bozorgi: It's a very exciting time.
Adrienne Ainbinder: Absolutely. We appreciate your time today and of course your expertise. For our listeners additional information on UCDP can be found on Veros.com as well as efanniemae.com and freddiemac.com, of course. If you're looking for additional insights on Veros products and strategies, be sure to visit Veros.com or reach out at info@Veros.com. Thanks for listening.