The Digital Mortgage Ecosystem: Lenders, Investors and Custodians Ready for the eNote Transition

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I’ve just returned from the 2016 Mortgage Bankers Association’s Annual Convention and Expo that was held in Boston. It is obvious that the mortgage industry continues to push toward widespread digital adoption. However, never have I seen so much interest around taking the “digital mortgage” experience all the way to the closing table with the creation and signing of an eNote.

On this topic, the discussions have moved from a small pocket of interested parties to a much broader group across the entire mortgage ecosystem – lenders, title companies, settlement agents, investors, custodians and what some thought would be be the longest holdout, warehouse lenders.

Promotion by GSE’s and Supporting Case Law

Continued market acceptance and case law regarding the validity and enforceability of eNotes are extremely encouraging and reiterate what eOriginal has been saying all along.

For instance, in support of eNotes, Fannie Mae states, “As lenders are focused on competitive advantage, operational efficiencies, and faster delivery to the secondary market, electronic mortgages are a viable solution. Servicing eNotes for your lender partners helps them achieve those goals.” Both Fannie Mae and Freddie Mac are actively promoting the transition to eNotes. For the full eMortgage overview list, please click here.

In addition, as noted by Margo Tank, partner at Buckley Sandler, LLP, “Two separate court decisions have recently set the precedent that electronically signed promissory notes secured by real property (eNotes) are legally enforceable by lenders. These decisions address many concerns held by investors about buying eNotes and suggest further clarity may have to come from case law as the digital mortgage industry matures.”

TRID: Work Smarter, Not Harder

Although TRID is firmly engrained in the mortgage industry, there are still lenders and title companies that struggle with the implementation of more efficient processes to support compliance. However, TRID requires lenders to keep an electronic audit trail of all documentation associated with the mortgage for regulatory audits. As a result, lenders that have not yet made the transition to digital are now forced to maintain hybrid systems, resulting in more time, money and staffing to guarantee compliance.

In addition to regulations, increasing pressures from consumers continue to set the stage for electronic mortgage. It is time for lenders who are still bound to paper to take the steps to embrace the digital mortgage process. The benefits of electronic processes continue to grow – not only are workflows more efficient, but processing is accelerated and inaccuracies are eliminated.

Fannie Mae outlines the benefits and features of electronic mortgage under the categories of improving risk management and enabling process efficiency. I couldn’t agree more. Let’s take a moment to look at the benefits of eNotes:

Improving Risk Management:

  • Automates QC process; less risks/costs when settling in secondary market
  • Utilizes MISMO and secure data standards
  • Increases data integrity
  • Eliminates lost original notes or unrecorded assignments
  • Simpler/transparent identification and transfer of security interests
  • Allows for automated reviews and exception-based processing
  • Eliminates note endorsement errors (no endorsement required)

Improves Process Efficiency

  • Reduces warehouse cycle times
  • Reduces and/or eliminates shipping and storage costs
  • Streamlines note certification process
  • Enables faster delivery to the secondary market
  • Reduces preparation of documents in post-closing
  • Reduces loan origination timeframes
  • Minimizes key-stroke errors

Fully digital mortgages are supported by the courts and by industry heavyweights such as Fannie Mae and Freddie Mac and are gaining momentum with others. Regulations and building pressure from consumers have set the stage for electronic mortgage to become the industry standard. Clearly, the time to embrace eNotes is now. Don’t get left behind.  If you’re in need of a digital transition and would like chat, please click here to schedule a meeting.


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