For well over a decade, the industry has made steady progress in digitizing mortgage closings. As a result, closings today fall on a spectrum of digitization, with benefits that increase with each component that is digitized and each document that is electronically signed (eSigned).
On one end are traditional wet-ink signed closings, where all documents are signed in ink. At the other are fully digital closings, where all closing documents are eSigned and documents requiring notarization leverage some form of electronic notarization (eNotarization).
In the middle of this spectrum are hybrid digital closings, where some closing documents are eSigned and others are wet-ink signed. The term “eMortgage” refers to a hybrid or full digital closing where the promissory note is electronically signed (eNote).
With eMortgages, when the most critical component of the loan file – the note – is digitized, it allows lenders to expedite the delivery of loan collateral to their investors or warehouse lenders.
And when lenders’ trading partners receive an eNote in lieu of a wet-ink signed paper note, they can readily automate the certification of collateral. This creates both operational and capital efficiencies, and ultimately accelerates the secondary market execution of these loans.
“Digitizing any component of the closing process creates value for lenders, but eMortgages are where lenders stand to see the most return on their digital closings investment,” said Camelia Martin, Head of Industry and Regulatory Affairs at Snapdocs.
While the benefits of eMortgages are apparent, adoption of the technology is just beginning to take off in a significant way. According to Martin, although eMortgages currently represent less than 10% of loans, adoption has nearly tripled over the past few years.
eMortgage challenges
According to Martin, eMortgages require lenders to have the ability to generate SMART Doc eNotes and have an eVault to store, manage and help them transfer copies of eNotes. These components are not typically native to most lenders’ core technology platforms. Or, if they are, they aren’t agnostic to lenders’ loan origination systems, point of sale systems, document prep providers and other components that may already be working well for a lender.
While technology is an obvious and critical component of eMortgages, that’s not necessarily what’s holding the industry back from broad scale adoption.
One of the biggest challenges lenders face is that eNotes require a great deal of change management.
“eNotes impact processes both upstream and downstream from the closing itself,” Martin said. “They impact the delivery processes to warehouse lenders and investors. In addition, there are differences in servicing and default processes too. These changes need to be understood and fully incorporated in change management plans to give lenders the confidence that they can scale eMortgages efficiently without compromising compliance.”
Lenders also have to go through individual eMortgage approval and onboarding processes with certain counterparties, such as investors and warehouse lenders. These processes can be taxing on a lender’s internal resources, as they require significant coordination to facilitate the execution of approval forms, agreements and testing required to obtain approvals.
Lastly, lenders will still experience some variation across their counterparties’ eMortgage acceptance criteria and policies.
Martin added, “Through e-Eligibility tools and other processes, lenders need the ability to account for these differences early in the loan production process to better inform LOs and optimize how digital each closing can be, while also ensuring that a loan isn’t closed in a way that restricts its ability to be sold or transferred to a particular counterparty.”
Snapdocs eMortgage Quick Start Program
Snapdocs recently launched a new program to specifically address each of the challenges lenders face when implementing eMortgages.
The Snapdocs eMortgage Quick Start Program helps lenders in three ways. First, by providing access to technology needed to support eMortgages. Second, by offering change management and implementation support to streamline lender’s operations and quickly scale eMortgages. Third, by providing eEligibility tools to determine precisely how digital each closing can be, early in the loan production process.
The program leverages the expertise Snapdocs developed by helping hundreds of lenders implement digital closings to provide the lenders with what Martin called an “unparallelled, white-glove eMortgage implementation framework.”
What makes the program unique from other implementation offerings is that it expands far beyond standard technical implementation support and leverages the power of collaboration and eMortgage expertise from an ecosystem of investors, warehouse lenders, servicers and other lenders’ counterparties.
The first investor to participate and offer its expertise to the program is Freddie Mac, one of the leading eMortgage investors in the U.S. Snapdocs and Freddie Mac will also begin co-facilitating a forum as part of the program, providing a venue for lenders and their counterparties to discuss the latest eMortgage developments and share best practices with other program participants and partners.
Lenders participating in the program benefit from streamlined implementation processes between counterparties, and access to tools, resources, and best practices to recognize and effectively address common challenges with eMortgage adoption.
“Digital closings and eMortgages are an evolving space, and every participant has unique and valuable experience and perspective to offer,” Martin said. “This program is anchored around the collaboration and innovation necessary for us to move eMortgage adoption forward together, as an industry.”
For more information on the Snapdocs eMortgage Quick Start Program, click here.
