Business Rules Exchange

Business Rules Exchange Workgroup Implementation Guide (Version 0.3 03/05/2009 Draft)

Introduction
1. Purpose of this Document
  1. Constituency (from Breakfast Meeting)
    1. Lenders/Rule-Processors - Parties who are obligated to follow rules published by other parties. Their benefit would be simplified business processes, Better Data Quality, Lower fallout, and less time/effort spent in interpreting third party rules
    2. GSEs/Investors - Parties who create business rules that their business partners need to comply with. Their benefit would be simplified publishing processes, reduced ambiguity, reduced training costs, higher data quality, lower fallout, and reduced effort in publishing human-understandable rules.
    3. Vendors - Parties who create and sell systems which author or process rules.
2. Charter (from Charter for Business Rules Work Group):
  
  For a number of years in MISMO there has been recognition that efficient trading partner processes would be enhanced if a standard existed for the trading partners to exchange business rules. This topic has been of interest in the broader e-commerce arena as well. There are several different Business Rules Exchange formats under development by other standards bodies; W3C, OMG and OASIS all have initiatives that are focusing on different aspects of the issue. There is also a collaborative effort between the groups to have interoperability at a minimum.
  
  The Real Estate Finance industry has a number of unique use cases. Designers of e-commerce systems in this industry could benefit from these external standards. As general standards there will be a lot of flexibility and choice embedded in the standard.
  
  In recognition of these trends we establish the MISMO Business Rules Exchange Work Group (BREW). Just as MISMO data standards have taken the flexibility of XML 1.0 standard and restricted it down to standards that serve the use cases of our industry, the standards created by the BREW will provide guidance on how to use external business rules standards for the use cases of our industry.
  
  The general activities of the BREW will be:
  1. Identify the status of the Business Rules Exchange standards
  2. Identify the major Real Estate Finance Use Cases for Business Rules exchange
  3. Determines which external Business Rules Exchange standards fit our use cases
  4. As the external standards pass through their public comment phase submit comments about the proposed external standards.
  5. Once the external standards reach their final state of approval prepare MISMO guidance on the standards that will promote interoperability.
3. The mission of the MISMO Business Rules Exchange Workgroup is to specify a framework of recommendations, guidelines, and references for the exchange of business rules that is consistent with existing MISMO recommendations and specifications.
4. Scope (from BREW Scope Draft):
  
  Even as business rules can involve a vast array of domain action, BREW’s scope will stay within the confines of business rules which need to be shared (or exchanged or interchanged) among partners. This scope section covers what is “in scope”, as well as what is “out of scope” for the workgroup. The first item of in-scope, “capturing use cases and scenarios” will set the precedent for the group’s remaining in-scope items. The items considered “out of scope” offer a reference point for further investigation if one so desires. Additionally, BREW’s scope could be refined as well as redefined as new use cases and scenarios are identified or existing ones evolve. The work group will study existing standards and standardizing efforts within the W3C, OMG, OASIS, and related organizations as to make a qualified decision for supporting the business requirements derived from the use cases.
  1. In Scope
    1. The domain of the WG includes managing the exchange of business rules in the following contexts:
      1. Inference - creating new data facts that are derived from existing data.
      2. Internal Consistency - Using business rules to specify and validate that data requirements based on other data points are satisfied.
      3. Business Workflow - Using business rules to determine process orchestration - the BPEL Domain.
    2. BREW Scope and Procedures (from Draft BREW Scope and Procedures)
      1. Capture/Create Rule-Related Mortgage Industry Use Cases
      2. Recommend Standards and Practices to Support the Use Cases
        
        Rule Definition Recommendations
        
        MISMO Vocabulary (closely mapped/related to MISMO LDD)
        
        Rule Classification
        
        Rule-Related Integration Recommendations
      3. Create Reference Implementation (review - is this in scope?)
    3. Use cases and scenarios for the mortgage loan processes
      1. See Chapter 4, MISMO Business Rules Use Cases And Scenarios.
    4. Development and maintenance of a formal mortgage domain vocabulary
      1. MISMO maintains an extensive Logical Data Dictionary of mortgage-related data points. BREW will build its vocabulary based on the MISMO LDD vocabulary. Specifically, the vocabulary will be formalized into classes, subclasses, properties, and instances, as well as relationships and constraints. The defined properties, relationships, and constraints will be expected to pass the test of logic and reason using a standard reasoner. (A reasoner is software that performs validation checks on the constraints and relationships of a formalized vocabulary.)
        
        It is anticipated adding new terms to the vocabulary outside the existing MISMO LDD will be more the exception than the rule. In those situations, BREW will first look to existing formalized vocabularies for support and will seek the assistance of the appropriate MISMO workgroup in need of the newly defined term.
    5. Recommendation of an XML based language for rules interchange
      1. BREW will recommend an existing rules language for use in rules exchange. Although the exact language has not been decided, the language will be based on XML standards. Several existing languages will be evaluated as well as a close following of the W3C Rules Interchange Format’s (RIF) progress. The RIF working group is actively addressing the needs of rules interchange for the semantic web and expects a standard established within 2008. Additionally, The Object Management Group (OMG) is actively involved in rule modeling. In any case, a full proof of concept with the various industry use cases will need to be challenged for final recommendation. The decision for language selection will be driven by the business requirements as derived from the use cases.
    6. Recommendation of content packaging for business rules interchange
      1. BREW will recommend the content packaging method of the business rules as it relates to the rules document during transmission among trading partners. For example, BREW will explore the advantages and disadvantages of including the business rules as part of an existing MISMO document, as well as explore the advantages and disadvantages of creating the business rules document as a stand alone item.
        
        Rule-Management Transactions (from Breakfast Meeting)
        
        Publish Rules (Seller Servicer Guide for example)
        
        Update Rules
        
        Deprecate/Expire Rules
    7. Creation of guides and technical references
      1. BREW will provide the necessary documentation resources for implementation, technical and informational references, as well as high-level business use case documentation.
        
        Depending on the audience, guides will be created for integrators, developers, analysts, and business users including c-level executives.
        
        Simply stated, the various documentations will be created to help follow and grow BREW’s mission of development, promotion, and maintaining of business rules exchange in the mortgage industry.
  2. Out of Scope
    1. Creation of a Rules Language
      1. BREW has no intention of “re-inventing the wheel” with a new rules language. There are many ongoing initiatives for a standardization of rules. Including but not limited to W3C Rules Interchange Format, RuleML, BRML, SWRL, and SRML among others. BREW believes through these existing technologies and initiatives, its needs will be met.
    2. Execution of Rules
      1. BREW will strictly be within the confines of the sharing (or exchange) of the knowledge instances and rule expressions between the requesting and responding parties. Once the business rules are received by the receiving party, it is left to that party’s guidelines and processes to determine the mode and method of execution.
    3. Translation of Rules
      1. BREW will remain agnostic to any method and mode of translation of the rules into the native format of the receiving party. Various technologies and tools including but not limited to XSLT could be used for the translation process.
    4. Method of Transport
      1. MISMO’s enveloping workgroup exists for the purpose of recommendations and best practices on transport methods. The work group will make no recommendations of transport protocols such as HTTP, SMTP, SOAP, FTP, or Messaging. BREW will only recommend following the guidelines as developed by the enveloping workgroup.
    5. Security Best Practices
      1. MISMO’s security information workgroup exist for the purpose as a resource on best practices and guides on security practices. BREW only recommends consulting with the available resources of the security information workgroup as guidelines to security best practices.
5. Deliverables (from BREW Scope Draft)
  1. Archive of rules exchange use cases from various mortgage loan processes
  2. Mortgage domain vocabulary based on the latest MISMO schema
  3. Rule language recommendation based on existing or emerging XML-based standards
  4. To determine from mortgage industry participants whom produce and publish rules, in particular the GSEs, MI companies, and investors, which part of the rules they publish are publicly available.
  5. Recommendation of content packaging for rules interchange
  6. Creation of I-guides and working documents
    1. Implementation Guide (this document)
    2. Technical Reference Guide
    3. BREW Glossary (See Chapter 8, Glossary)
    4. Business Case Guide
    5. MISMO Ontology Development Best Practices Guide
    6. Maintenance Guide (Auditing, Tracking, Versioning, Lifespan, etc.)
6. What Else You Will Need
  1. MISMO LDD?
    1. Semantic metadata/ontology?
  2. Other MISMO standards?
    1. Version 3 and later?
      1. No DTD support.
  3. External standards?
7. Information Security
  1. Any issues?
    1. Rules do not include personal information.
8. Draft BREW Operating Procedures (from Draft BREW Scope and Procedures)
  1. General approach is to look closely at other standards bodies and organizations and leverage their work.
  2. BREW Workgroup will engage the other MISMO Workgroups to solicit their use cases.
    1. BREW Workgroup will maintain core/generic use cases such as “Party Publishes a Rule” or “Client invokes RuleProcessor”
    2. Workgroups will build their use cases around these core use cases
  3. BREW Workgroup will solicit for an early adopter workgroup (much like Credit was for MXCompliance) and prototype use case that is relatively complex (but not too large in scope) to help to flesh out the rules domain.
9. How to Comment (boilerplate)
Rule Systems Overview
Rules in the Mortgage Process (from Rules in the Mortgage Process)
1. Origination Rules
  1. Producer
  2. Consumer
    1. Rate Sheet Rules
    2. Loan Processing/Documentation Rules
    3. Product Eligibility Rules
    4. Regulatory Rules
      1. Local/State/Federal Compliance Rules
    5. Pricing Adjustment Rules
    6. Loan Ranking Rules
    7. Pre-Qualification Rules
      1. Lender Specific Underwriting Rules
        
        LTV Rules
        
        Debt to Income Ratio Rules
        
        Housing to Income Ratio Rules
        
        Compensating Factor Rules
    8. Additional Data Rules
      1. MI Inclusion Rules
      2. Pre-payment Penalty
2. Processing Rules
  1. Producer
    1. Lender Specific Loan File Consistency Rules
    2. Lender Specific Loan File Completeness Rules
    3. Lender Specific Accuracy Rules
    4. Loan Processing/Documentation Rules
  2. Consumer
    1. Vendor Management Rules
      1. Order Credit Report
      2. Order Appraisal Report
3. Underwriting Rules
  1. Producer
    1. Lender Specific Underwriting Rules
      1. LTV Rules
      2. Debt to Income Ratio Rules
      3. Housing to Income Ratio Rules
      4. Compensating Factor Rules
  2. Consumer
    1. Investor Guidelines Rules
4. Closing Rules
  1. Producer
  2. Consumer
    1. Regulatory Rules
      1. Local/State/Federal Compliance Rules
    2. Loan Type Rules
      1. HUD Rules
      2. VA Rules
      3. FHA Rules
    3. Investor Guideline Rules
      1. Required Documentation Rules
    4. Loan Program Rules(ARM, Fixed, etc)
      1. FHA
      2. VA
      3. Conventional
      4. Jumbo Non-Conforming
      5. ABDCD Non-Conforming
    5. Fund Dispersement Rules
    6. Deed Recording Rules
5. Funding Rules
  1. Producer
    1. Fund Dispersement Rules
  2. Consumer
    1. Regulatory Rules
6. Warehousing Rules
  1. Producer
    1. Mortgage Banker Line of Credit Rules
    2. Warehouse Risk Mitigation Rules
  2. Consumer
    1. Regulatory Rules
7. Shipping and Delivery Rules
  1. Producer
  2. Consumer
    1. Loan and Commitment Matching Rules
    2. Document Transmittal Investor Rules
    3. Shipping and Delivery Rules
8. Secondary Marketing Rules
  1. Producer (Fannie Mae, Freddie Mac, Private Investor, VA)
    1. Investor Guidelines Rules
      1. Shipping and Delivery Rules
      2. Loan and Commitment Matching Rules
      3. Underwriting Rules
      4. Investor Accounting Rules
        
        Remitting Fund Rules
        
        Reporting Rules
        
        Reviewing Guarantee Rules
        
        Reconciling Custodial Accounts Rules
        
        Remedy Rules
    2. Risk Management Rules
      1. Pipeline Management Rules
        
        Interest Rate Risk Rules
        
        Product Risk Rules
        
        Credit Risk Rules
        
        Fallout Risk Rules
        
        Basis Risk Rules
  2. Consumer
    1. Regulatory Rules
      1. Accounting Practices
      2. Tax Treatment
      3. Bank Management/Capital Flow of Assets
      4. Real Estate Investment Rules
    2. Investor Guideline Rules
      1. Investor Shipping and Delivery Rules
      2. Investor Underwriting Rules
9. Loan Administration Rules
  1. Producer
    1. Loss Mitigation Rules
  2. Consumer
    1. Trading Rules
    2. Investor Accounting Rules
      1. Remitting Fund Rules
      2. Reporting Rules
      3. Reviewing Guarantee Rules
      4. Reconciling Custodial Accounts Rules
      5. Remedy Rules
    3. Loss Mitigation Rules
      1. Predictive Rule Models
    4. Servicing Trading/Sales Rules
    5. Regulatory Rules
      1. RESPA
      2. Truth in Lending Act
      3. Equal Credit Opportunity Act
MISMO Business Rules Use Cases And Scenarios
1. Origination
  1. Application
  2. Underwriting
  3. Closing
2. Real Estate Services
  1. Credit Reporting
  2. Escrow & Settlement
  3. Flood Insurance
  4. Fraud Detection
  5. Hazard Insurance
  6. Mortgage Insurance
  7. Real Estate Property Information (from Business Use Scenarios for BREW):
    
    Appraisers following Lender and/or Investor Guidelines in the Property Valuation Process
    1. As a part of the Real Estate Services process during the mortgage loan, it is common to order an appraisal (valuation) on the property. As systems have become more advanced, often the communication with an appraiser can be performed in a system to system method using the lender’s loan origination system (LOS) or a technology vendor which provides a means of electronic communication through a web-based application, or some other “back-end” system. Currently, the industry has realized efficiency gains in utilizing existing standards such as MISMO in the ordering of the appraisal, status reports & updates, and delivery of the appraisal report. These tasks can all be performed electronically using the Internet and a common extensible markup language (XML) standard. When ordering an appraisal, certain industry specific guidelines exist for the appraiser to follow, as well as lender or investor specific guidelines. The lender or investor specific guidelines have a tendency to change frequently as to keep in line with current market trends. In current scenarios, it is common for lenders to communicate these guidelines to the appraiser using an electronic format such PDF, MS Word, spreadsheets, web pages, or even email. Unfortunately, there isn’t a way for a machine to process these guidelines as they are in a non standard format and use a variety of industry terms which could be ambiguous. Humans must manually input the guidelines into their current systems, or visually check that each guideline is followed according to specifications using the given format.
      
      This scenario will show how the process can work using MISMO BREW as the medium of exposing these guidelines.
      
      ABC Bank uses it LOS to electronically place an order for an appraisal to Appraisers R Us, a national appraisal management company (AMC). With the borrower anxious to close the loan as soon a possible, ABC Bank flags the appraisal order as a “Rush” job. The property is a new construction located in a newly developed neighborhood in a previously rural area just outside a large city. The lender has determined the appraiser needs to include some specific information in the appraisal report in addition to the typical guidelines for new construction properties.
      
      Below are four captured “rules” or guidelines specific to this type of property as determined by ABC Bank:
      1. The appraisal must include a full consideration of the Cost Approach to Value
      2. IF the structure is framed on the exterior, THEN the appraiser must provide calculations of measurements on the appraisal.
      3. Data on other construction projects ongoing in the new subdivision must be provided with the appraisal.
      4. The total number of lots planned in the new subdivision must be included with the appraisal.
      5. IF the actual measurements of the property are different from the plans, THEN the appraisal must contain an explanation summary in the appraisal report.
        
        Appraisers R Us assigns this appraisal order to a local appraiser in the area, Jane. Jane’s day typically consist of going to the office early in the mornings, sitting down at the computer and accepting new appraisal orders electronically, scheduling appointments, and completing her appraisal reports from her scheduled appointments the previous day. Once she finishes her reports, she submits them electronically to the requesting lender through Appraisers R Us. Appraisers R Us has a team of quality assurance personnel whose primary job function is to make sure ABC Bank’s guidelines are met. Once reviewed, Appraisals R Us sends the completed appraisal report electronically to ABC Bank.
        
        On the next morning after viewing the new construction property for ABC Bank, Jane sits down at her computer and commences to finishing the appraisal report. However, as Jane is getting ready to leave for a well deserved two week vacation in the Bahamas, she has forgotten about the lender’s specific guidelines for new construction properties. Omitted is the information on the cost approach to value, data on the total lots planned or newly constructed property in the new subdivision. Additionally, Jane notes on her appraisal report the structure has a framed exterior, but provides no calculations of measurements. She did notice a difference in the measurements from the plans and noted it as such. However, no summary explanation was provided.
        
        Jane is ready to sign the appraisal and submit to the lender. Luckily, Jane’s appraisal form software has MISMO BREW capabilities and ABC Bank has made its guidelines available in BREW format.
        
        As a result, Jane’s software immediately notifies her of the discrepancies and she is able to correct the omitted information immediately and submit the appraisal report right away.
        
        As one can realize, BREW allowed for efficiency gains which flow upstream directly to the borrower. In a scenario without using BREW, it is possible the appraisal would be delayed two weeks due to Jane being on vacation. Another gain resides in the quality assurance processes of Appraisals R Us and ABC Bank as they are able to preserve resources on the quality control units, and focus those on other items deserving of attention.
  8. Real Estate Tax
  9. Title Insurance
3. Secondary Marketing
  1. Bulk Pool Transfer
  2. Commitment
  3. Funding
  4. Pricing & Discovery
  5. Product Development
  6. Securitization
  7. Shipping & Delivery
4. Servicing
  1. Cash Transmissions
  2. Credit Reporting
  3. Default Management
  4. Escrow
  5. Hazard
  6. Insurance Claims Investor
  7. Reporting
  8. Loss Mitigation
  9. Modification
  10. Reclassifications
  11. Remittance Processing
  12. Special Loans
  13. Transfer & Setup
5. Government Housing
6. Document Classification
  1. Document Requirements
7. eMortgage
  1. eMCIT
Rule Exchange Technologies
1. Evaluation Criteria
  1. Standardization status
  2. IP status
  3. Dependencies
  4. Data model
  5. Semantic model
2. W3C Rule Interchange Format (RIF)
  1. Related Ontologies
3. XBRL Formulas (XBRL)
  1. Related Taxonomies
4. OASIS Content Assembly Mechanism (CAM)
5. ISO Schematron
Conforming implementations
1. Levels of conformance
Frequently-Asked Questions (from Business Rules Exchange Workgroup FAQ):

Purpose: The purpose of this document is to answer frequently asked questions regarding the MISMO Business Rules Exchange Workgroup (BREW). All documentation referenced in this document is subject to change by BREW workgroup members.
1. Question 1: What is the Business Rules Exchange Workgroup trying to accomplish?
  
  Answer: Our scope and purpose is outlined on the MISMO SharePoint website. The document can be found by following this link.
2. Question 2: Why would I expose all of my private business rules to the public? I consider these rules private and in some cases “secret”.
  
  Answer: This is a common misconception about what BREW is trying to accomplish. We are not suggesting that anyone publish all of their private / secret business rules to the public. BREW fully recognizes that there will always be rules that are not suitable for exchange or publication to anyone. There are some rules that participants in the mortgage process would like to publish privately to their trading partners. This implies that the publication would be isolated to the trading partner(s) that the participant chooses. There may also be instances where business rules are published on the internet for all to see and consume. BREW is concentrating on the rules within the mortgage process that may benefit from public OR private publication/trading.
3. Question 3: We do not trade business rules today at all. How does BREW fit in with my business goals and needs?
  
  Answer: BREW is a little unique in the sense that it is somewhat on the cutting edge of the mortgage industry. Many of the business rules that are traded today are accomplished via a manual process. In some cases PDF files are traded and systems are coded accordingly, and in other cases tribal knowledge is used to communicate business rule requirements. BREW is looking to help automate some of these manual processes into an XML based exchange that the other systems can consume/produce. This may require people to think a little differently about how they are doing business today and how that may be able to be automated via an XML based rule exchange. In the end the BREW group is looking to help automate and speed the overall mortgage process. This hopefully will translate to faster turn times and lower expenses for the industry.
4. Question 4: How does BREW fit in with Desktop Underwriter and/or Loan Prospector? I currently use these products and do not see that how BREW fits into the picture.
  
  Answer: This is a very common question and it should be noted that it is not within our scope to compete with either of these products. Certainly these products could be potential use cases to allow investors to “publish” their rules up the service chain to LOS systems and others. This does not necessarily mean we are suggesting that investor “publish” all of their underwriting rules as many can be proprietary. At some basic level there are some very public rules that are in place today with both of these products. Maximum loan amounts, loan types, and loan grade are all very basic rules that could help an LOS decided if it should even send a request to LP or DU. One option is that these high level rules could be “published” to allow LOS’s to more intelligently route underwriting requested to various downstream underwriting systems. Ultimately it will be up to the industry to decide what rules make sense to expose and what rules make sense to keep secret.
5. Question 5: Why is MISMO trying to come up with a new XML standard for exchanging business rules as opposed to using an existing standard?
  
  Answer: The answer to this question is BREW is not necessarily creating any new standards from scratch. The W3C, OASIS, and OMG all have existing standards that allow trading partners to exchange rules. BREW is focusing on evaluating these standards as a possible basis for the MISMO approved BREW standard. A comprehensive list of these current standards can be found on sharepoint at the following location.
6. Question 6: I have called into the BREW workgroup calls and here words like ontology, OWL, Rulesets, and RIF it sounds like a very technical bunch and I am more of a business person. Does it make sense for me to participate in the calls?
  
  Answer: Absolutely! We hear from a lot of MISMO members that the technical aspects of the BREW meetings makes the hard to follow or confusing and it seems to be aimed more at a technical crowd. While it is true we have a large technical group from leading mortgage related and rules engine related companies, we very much need people to participate who have business experience. It is the business experience that will really allow BREW to take things to the next level and make a change in the industry. We have create a glossary in an attempt to keep everyone on the same page from a terminology standpoint. This glossary can be downloaded from the following location on sharepoint. It is our hope that this will be a first step to bridging that gap between the technical participants and the business users on the workgroup calls.
7. Question 7: Where can I get an idea of what the BREW workgroup is working on? What are their immediate goals?
  
  Answer: The BREW workgroup has created a roadmap that outlines our initial goals. This roadmap will be used to keep us focused and move the group forward as quickly as possible. The roadmap can be download from the following location.
8. Question 8: I have a specific use case that may be able to benefit from an automated rules exchange. How can I submit it to the BREW workgroup?
  
  Answer: We are actively seeking use cases from the BREW workgroup itself and from the MISMO community as a whole. If you have a use case and would like to submit it to the BREW workgroup please call into a monthly call or simply upload it to Sharepoint and email the BREW list serve: mismo_business_rules@listmanager.mismo.org
Glossary (from MISMO Business Rules Exchange Workgroup Glossary)
1. Ontology- a data model that represents a domain and is used to reason about the objects in that domain and the relations between them. Ontologies generally describe:
  1. Individuals the basic or “ground level” objects
  2. Classes sets, collections, or types of objects
  3. Attributes: properties, features, characteristics, or parameters that objects can have and share
  4. Relations: ways that objects can be related to one another.
2. Business Rules/Business Rulesets-describe the operations, definitions and constraints that apply to an organization in achieving its goals. For example a business rule might state that no credit check is to be performed on return customers. Others could define a tenant in terms of solvency or list preferred suppliers and supply schedules. These rules are then used to help the organization to better achieve goals, communicate among principals and agents, communicate between the organization and interested third parties, demonstrate fulfillment of legal obligations, operate more efficiently, automate operations, perform analysis on current practices, etc.
3. Web Ontology Language (OWL)- The OWL Web Ontologoy Language is a language for defining and instantiating Web ontologies. An OWL ontology may include descriptions of classes, properties and their instances. Given such an ontology, the OWL formal semantics specifies how to derive its logical consequences, i.e. facts not literally present in the ontology, but entailed by the semantics. These entailments may be based on a single document or multiple distributed documents that have been combined using defined OWL mechanisms.
4. Use Case-a technique for capturing the potential requirements of a new system or software change. Each use case provides one or more scenarios that convey how the system should interact with the end user or another system to achieve a specific business goal. Use cases typically avoid technical jargon, preferring instead the language of the end user or domain expert. Use cases are often co-authored by Business Analysts and end users.
5. Rules Engine-a software system that helps manage business rules.

Business Rules Exchange

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Business Rules Exchange

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