February 2017 - Making Millennials Move

TheMReport — News and strategies for the evolving mortgage marketplace.

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30 | TH E M R EP O RT FEATURE according to Martin. The GSEs purchased the first two eMortgages on the secondary market way back in 2003. Rated E for Efficiency N ecessity is the mother of invention, it's been said. Compliance, collaboration, and convenience are strong demands in the mortgage marketplace, and more and more industry players are discovering that an eMort - gage can speed those needs. "There really is a groundswell around eMortgages now compared to any other time in the industry," says Scott Babin, EVP of Operations at Michigan Mutual, parent compa - ny of MiMutual Mortgage, crediting govern- ment endorsements of and mandates for the electronic transmission of documents. Lenders included these highlights of digi- tal mortgages in their commentary to Fannie Mae: operational efficiencies and cost savings, increased data quality, improved risk manage- ment, quicker warehouse inventory turnaround times and faster liquidity in the secondary market. "There is great margin pressure to cre- ate operating efficiencies," adds Babin. The rate environment and increased regula- tory burden since the housing crisis did not help the industry's 'e-volution,' if you will. Those things changed but, as mentioned above, the firm focus on efficiencies and sav - ings by financial institutions never does. "In today's environment of rising rates and compressed margins, lenders will seek avenues to increase efficiencies and widen margins," says Martin of the Richardson, Texas-based Warehouse Bank. "[The digital mortgage] can be an effective tool to achieve this goal." Despite the challenges, Martin expects that the continued adoption of full digital mort - gages, including the eNote, will propagate over the next few years. Linn Cook of LendingQB credits PayPal, ApplePay, and other electronic payment platforms, as well as DocuSign, for boosting consumer acceptance of signature-less transaction technology. Hybrid home mort - gages have helped, too. "Hybrid eClosings [or digital mortgages] have been taking place for many years now and based on results from [the 2014] Consumer Financial Protection Bureau pilot program, consumers see a number of benefits, including a better understanding of the docu - ments, a more efficient process and feelings of empowerment or more control over the clos- ing process," Martin says. "Driven by consum- er sentiment, digital mortgages will continue to be embraced by the mortgage industry and the process will evolve over time." Babin seconded the point about technology creating a better consumer experience, a major focus of most mortgage originators in today's market. The Michigan Mutual executive vice president also pointed out that with recent government adoption of eSignatures on key mortgage documents, such as 4506Ts and FHA 92900As, some lenders have implemented an ap - plication process that only papers out at closing. Radius Financial Group Inc. touted one of the industry's first comprehensive "eClosings" in October 2016, where the note/collateral was au - tomatically registered with MERS, then securely sent to DocMagic's eVault, and within minutes rather than days Fannie Mae had the full collateral package. The Norwell, Mass.-based mortgage lender said that eMortgage ease of use will especially appeal to millennials, which will make up 61 percent of new homebuyers in 2017, according to Martin, the Texas Capital Bank executive, broached some benefits that digital mortgages afford to warehouse banks. MERS, which serves as the legal registry for eNote location and own - ership, facilitates the immediate recognition of a warehouse bank's security interest in a particular promissory agreement. Digital mortgages also provide for a more streamlined process from the receipt of the note at the closing table to its eDelivery to the secondary market. "The delivery of eNotes, which in most cases are received by the warehouse bank and delivered to the secondary market investor on Digital Mortgages: What's in an eName? There still seems to be some confusion about what constitutes a full eMortgage and even whether to call it that versus electronic closings or eClosings, which involve eSignatures on closing documents in often a hybrid, digital-paper process. Bob Rice, co-founder and CEO of World Wide Notary, a pioneer in elec- tronic signatures dating back to the mid-1990s, says that the term eClose has always had a very broad defini- tion. According to Dominic Iannitti, president and CEO of DocMagic Inc., a WWN partner, a digital mortgage means that all documents, both lend- er and title, are eSigned, eNotarized and executed electronically. "The differentiating factor is that there is no papering out for notary documents that are then wet-, i.e., ink-, signed, commonly referred to as a hybrid eClosing," he says. Corporate Settlement Solutions agrees with Fannie Mae's definition of eClosing but favors digital mortgage over eMortgage when referring to a fully paperless, end-to-end electronic mortgage process. "This term offers a fresh start from the confusion surrounding the intertwined usage of eMortgages, eClosings, fully electronic and hybrid closings," says Jerome Jelinek, CEO and General Counsel of Cleveland area-based CSS. "The term 'eClos- ing' simply refers to the process of affixing electronic signatures to loan closing documents. This is a subset or component of the broader digital mortgage process." According to CSS, a digital mortgage must feature paperless initial disclosures, paperless collec- tion and underwriting, electronic loan documents, including a true "eNote," electronic signing and notarization of closing documents, electronic deliv- ery of the eNote to MERS, electronic delivery of the loan to the secondary market, and storage of loan docu- ments in an eVault. In hybrid closings where a mort- gage document is papered out, wet- signed and recorded in the traditional hard-copy way, "The remaining mort- gage documentation, however, may be completed electronically, including the eNote," Jelinek adds. "As a result, the digital mortgage process remains mostly unchanged, and the benefits of a digital mortgage are still received by the lender and the consumer."

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