DMN Now Recognized as Mortgage Industry Standard

The Impact for Decision Management

The Mortgage Industry Standards Maintenance Organisation (MISMO), a wholly owned subsidiary of the Mortgage Banker’s Association, announced on Wednesday March 25, 2019 that it is adopting the decision model and notation (DMN) standard for documenting, implementing, executing, and exchanging business rules and decisions across the mortgage industry.

MISMO develops and champions standards that are widely used throughout the mortgage business—by mortgage lenders, real estate investors, resellers, housing agencies, and companies servicing borrowers—to exchange information effectively and securely. Most regulators require the use of their standards to support automation of mortgage paperwork and to facilitate fast, low error, low cost collaboration between the entities involved in mortgage funding, creation, selling, and end-borrower support. It also provides certification and advocacy for its standards.

The use of DMN, a standard that support executable documentation, will support a more effective integration between the partnering entities within the mortgage industry, allowing them to exchange business rules and decisions (for example repayment requirements, reporting mandates and service constraints) more directly, more quickly and with fewer errors than ever before. This in turn will support tighter and more effective compliance and drive down costs for everyone involved. As Brian Stucky, CEO of DecisionX and co-chairman of MISMO’s Decision Modelling Community of Practice, says:

“Sharing rules, along with the data used by the rule, will help address many of the interpretive and compliance issues that currently bedevil the mortgage industry. Understanding the rules used by business partners will help resolve differing interpretations and confusion, which in turn should greatly reduce costs across the industry.”

What this Means for DMN

This is momentous news for the users of DMN as well as the mortgage industry. This acceptance of the need for and use of standards in the interchange of decision making and business rules in mainstream finance paves the way for use of DMN in many other industries. It also provides an excellent illustration of the benefits of using the standard.

Concrete Illustration of Benefits

The mortgage use case epitomises the tangible benefits of representing business decisions using a standard to:

  1. Provide a means of representing business policies and contracts that are demonstrably free from error and that can be exchanged without ambiguity, facilitating faster, lower cost collaboration.
  2. Combine documentation and execution into a single form that is tangible to business experts and can be certified by regulators as a vehicle for the low overhead support of compliance.
  3. Facilitate the safe and agile development and evolution of business policies and products.

The key benefit is the lower operational costs achieved by using a standard. Costs are lowered because the full impact of policy changes can be tested more effectively and quickly, reducing the cost of mistakes—the errors that are made when policies and business rules are merely implied by data rather than explicitly stated. We believe this move beyond exchanging mere data towards the explicit development, representation, management and communication of business policies and products using a standard is a significant step towards greater transparency, more rigor, higher agility and lower cost of business collaboration and compliance.

Rapidgen’s DMN products and services can help bring these advantages to your business.

About the Author

Jan Purchase has been working in investment banking for 20 years during which he has worked with nine of the world’s top 40 banks by market capitalization. In the last 13 years he has focused exclusively on helping clients with automated Business Decisions, Decision Modelling (in DMN) and Machine Learning. Dr Purchase specializes in delivering, training and mentoring all of these concepts to financial organizations and improving the integration of predictive analytics and machine learning within compliance-based operational decisions.

Dr Purchase has published a book Real World Decision Modelling with DMN, with James Taylor, which covers their experiences of using decision management and analytics in finance. He also runs a Decision Management Blog, contributes regularly to industry conferences and is currently working on ways to improve the explainability of predictive analytics, machine learning and artificial intelligence using decision modelling.   |   @JanPurchase   |