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The Mortgage Industry Data Standards publication has been released. It explores the potential impact of introducing a system of data standards to the Canadian mortgage industry. These results come from findings from various reports commissioned by CMHC and other sources.
One major benefit explored in the publication is the potential of creating operational efficiencies of at least $4 billion a year.
$4 billion in potential annual savings
Uniform data standards simplify data management, which is an important part of the mortgage lending process. Using data standards can result in ongoing cost reductions for organizations in the mortgage industry. While there are costs in implementing uniform data standards, the cost-benefit analysis estimated $4 billion in potential annual savings across the Canadian industry.
These savings come from three main benefits:
- Reduced staff time by lenders due to higher-quality data: by 81 hours less per loan over the life of the mortgage
- Reduced loan processing times: by 2.9 days
- Fewer custom IT interfaces: by up to $1 million saved per year, per firm
These three savings are from the cost-benefit analysis based on the U.S. experience with the MISMO data standards at US$25 billion. That would be the equivalent of $4 billion per year in annual savings across the Canadian mortgage industry (see table 1).
Additional costs savings were identified but could not be accurately estimated. However, these benefits could be as significant as the three quantified benefits.
| Benefit category | Annual benefit to Canadian industry |
|---|---|
| Reduced required staff time by lenders due to higher-quality data | $3.2 billion |
| Reduced loan processing times | $906 million |
| Fewer custom IT interfaces | $19 million |
| Reduced hedging costs | Unquantified |
| Reduced post-closing costs | Unquantified |
| Reduced development costs for technology providers | Unquantified |
Transitional costs will vary by organization
This study also looked into the potential costs of aligning to a reference model. In the United States, the cost of updating an existing data structure to align with the standards vary.
Costs will depend on the:
- size of the organization
- complexity of the legacy data system
- degree of difference between their legacy data structure and the standards structure
- speed of the transition
Based on experiences in other countries in firms of all types, the benefits outweigh the costs. All transition costs can be recouped within 5-years for all firms.
About Mortgage Industry Data Standards
This report summarizes the potential benefits and costs for the development of a mortgage data standards framework in Canada.
The first objective is to outline the potential costs and benefits of data standards for the industry. Its second is to identify processes in Canadian lending that could be improved through standards.
Data standards in the mortgage industry are a common reference model developed by and for mortgage industry participants. They include commonly agreed upon definitions, relationships and processes and can be used as guidelines in:
- data models
- data exchanges
- forms
- business operations
Data standards are a proven solution in other countries such as the USA and Australia. This solution could help alleviate common challenges facing organizations involved in mortgage lending in Canada.
CMHC is committed to the development of a data standards system. This will be done in collaboration with organizations within the mortgage-lending ecosystem in Canada.
