MReport December 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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26 | M R EP O RT FEATURE T he highly regulated mortgage industry has been slower to adopt digital processes than most. This is largely because a typical mortgage transaction involves the participation and alignment of multiple parties, from borrower initiation through loan close, and later to its sale on the secondary market. However, two converging market dynamics have acceler - ated digital mortgage adoption nationwide, both stemming from the COVID-19 pandemic: the surge in refinancing applications and the need for social distanc - ing. Refinance applications were up 479% in March 2020 from a year ago according to the Mortgage Bankers Association. And although the numbers have dropped slightly since March, refinance activity is still strong (up 176% year over year). Lenders need an action plan for digital closings that will support the immedi - ate need to minimize in-person contact but is robust enough to support a long-term scalable strategy that covers all forms of closings—from paper to hybrid to digital. The Need for Purpose-Built, Remote, and Contactless Lending T here is no doubt that COVID- 19 has impacted every single aspect of the mortgage industry. When I speak to lenders about how the virus is affecting them, at the very top of their list of concerns is keeping their busi- ness running and being able to continue to originate and close loans. Nine times out of 10, the discussion is focused on how they can move from today's paper-in- tensive environment to one that is digital and able to take advantage of all technology options so that business operations can continue. These issues are not specific to the mortgage industry; I am hear- ing this in other sectors that we work with too, including SBA, automotive, and personal loans. With all parties being concerned about being exposed or expos- ing others to COVID-19, some settlement companies have gotten creative with things like curbside closings. This solved an immediate problem, but the long-term solu- tion goes beyond creative problem solving to include technology such as remote online notary. The ultimate goal is to take the entire mortgage process online. Remote Closings— What's Holding Us Back? W hen we speak to clients about RON, which includes the notarization of documents online from a location other than where the borrower is, we typically hear about a few key challenges. The first challenge we hear about is the legality of RON across various states. At the start of 2020, only 23 states had legal - ized RON. With the advent of COVID-19, nearly all have enacted emergency authorizations making RON available; some are perma- nent decrees while others remain as temporary executive orders. Senators Mark Warner (D-Virginia) and Kevin Cramer (R-North Dakota) have introduced a bill that would allow RON na - tionwide, enabling consumers to close on a home without risk of COVID-19 exposure. The bill, en- titled the "Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020," would authorize every notary in the U.S. to perform remote online notarizations. However, there's no telling when and if it will get passed, and to- date legislation has been a slow- moving process. What remains is that every state has its own idiosyncrasies around RON. The second issue surrounds the settlement agent and borrower's technology readiness. Both the agent and the borrower need internet connected devices with an appropriate connection speed and screen size (no mobile phones please) with video capability to successfully complete an online transaction. This is not always readily available—but it's improv - ing every day. The third obstacle for origina- tors has been the concern that an eNote executed as part of a RON transaction will be accepted by the secondary market. Fannie Mae and Freddie Mac have both been accepting eNotes for several years. Most recently, other critical secondary market players have moved forward with accepting eNotes, including Ginnie Mae, the A Shifting Landscape for Mortgage With the realities of COVID-19, lenders must take responsibility for a new reality. By Simon Moir

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