While there is plenty of talk about digital mortgages, much of the work that has been done so far is on front-end technology. We sat down with Simon Moir, senior vice president and general manager of digital mortgages at eOriginal, to talk about the importance of the eNote, which affects not only the borrower experience but also has implications for the secondary market.
HousingWire: What does the current digital mortgage landscape look like?
Simon Moir: When the mortgage industry began its digital transformation, the first phase largely focused on front-end applications that both improved the borrower experience and accelerated the capture of accurate supporting data. It started with Quicken coming on the scene with Rocket Mortgage, and then several front-end technology companies, such as Blend, Roostify and BeSmartee entered the space to offer similar capabilities — delivering to the market what is now so popularly known as “digital mortgage.”
Tech-savvy non-bank originators continue to lead the way in the digital space — a week doesn’t go by without another announcement. However, a true digital mortgage is so much more, and we’re seeing major mortgage ecosystem stakeholders moving to the second phase of digital mortgage, which focuses on eClosings and the creation of an electronic asset. With this move, originators are able continue the path of an incredible borrower experience but add to it the creation
Although originators are a major force for this second phase, other key players are ready to support the move. Both GSEs are actively buying electronic notes (eNotes). Fannie Mae recently invested in new technology infrastructure, and both Ginnie Mae and the Federal Home Loan Banks are now engaged in industry discussions. We are also seeing the adoption curve accelerate with warehouse lenders, custodians and aggregators joining the digital mortgage ecosystem. It’s an exciting time for the industry.
HW: Why is the eNote so important in the digital mortgage process?
SM: The eNote is the most critical component as its validity and enforceability is essential for the downstream life of the loan on the secondary market. The eNote solves many issues for the industry around reputational risk, regulatory and compliance risk, operational risk and financial risk.
Originators can digitally create the promissory note and securely manage it as an authoritative copy with delivery to secondary market. For instance, by sending the note digitally from the originator to a warehouse lender, the risk of a lost note or shipping are eliminated. Thanks to technology, the eNote is delivered and transferred instantly, with data that can be instantly validated. This advancement accelerates the time between origination and the replenishment of capital.
HW: How does eOriginal’s experience in different asset classes provide confidence for lenders and investors as they adopt this new process?
SM: eOriginal has been enabling trusted transactions of high-value digital assets for over 20 years. With over 350 clients and upwards of a million transactions being executed on our platform per month, we are the leading provider in digital transaction management across all asset classes and our proven technology and network removes uncertainty in how these digital assets are created and maintained, providing the confidence, visibility and compliance lenders and buyers need.
As a pioneer in the space, major financial institutions, leading law firms and credit ratings agencies have validated and rely on eOriginal as a trusted partner for Digital Transaction Management. Although the mortgage industry is in the process of ramping up volume, the demands are no less. We’re talking about a high-value asset whose trade is critically important to the highly-regulated financial services market.
HW: What needs to happen to encourage broader adoption throughout the industry?
SM: The technology has existed for years. In fact, eOriginal conducted the first electronic mortgage back in 2000. To encourage broad adoption throughout the industry, title and settlement parties, aggregators, warehouse lenders, servicers, and investors (outside of the GSEs) need to be on board.
I believe Quicken is a catalyst for this adoption. Originators need the stakeholders mentioned above to connect the dots. Essentially, it’s a multiplier effect — first two parties come on, then they bring two more, then four bring eight, etc. Once these players are in place, digital mortgage will scale exponentially.
Additionally, MERSCORP Holdings, the owner and operator of the MERS eRegistry, which is the national mortgage registry, identified several gaps that needed to be addressed to increase eNote adoption. As a result, MERSCORP Holdings has recently launched the MERS eNote Solutions, part of the MERS eSuite. By leveraging an existing vendor relationship with MERSCORP Holdings, the solution, which is powered by eOriginal, will enable thousands of originators to realize the benefits of a digitally executed promissory note at the closing table. This will increase eNote adoption exponentially by enabling mortgage originators to accelerate entry into the digital mortgage ecosystem.
Fortunately, it is easy to move into the digital mortgage ecosystem with relatively low investment when compared to the benefits that digital enables.
HW: eOriginal is the digital mortgage partner for large companies like MERSCORP Holdings, Fannie Mae and Quicken Loans. But what about smaller companies — is there a benefit for them as well?
Great question. First, we’re bringing eClosing capabilities to the masses by providing an open platform that includes integrations with leading loan origination and document vendor providers. We believe that originators should be able to select the best eClosing solution for their needs and “flip the switch” with an out-of-the-box integration that fits their existing technology landscape.
Second, MERS eNote Solutions is really opening the market for smaller companies to realize the benefits of the eNote. The solution enables the creation, execution, registration and management of the eNote to mortgage originators across the industry, regardless of size.
Great progress has been made with helping document vendors get their documents ready to support eClosings. One area in particular we’ve found the industry craving is a trusted source for the MISMO SMARTDoc eNote. We now provide this capability to over a dozen technology companies and are proud to say that we are the first provider to support the latest 3.4 version released by MISMO.
Our digital mortgage solution supports an array of eClosing strategies that meet the various needs of our clients. While a full eClosing involves signing all documents electronically, another option available is a hybrid closing. In a hybrid close, only a portion of the documents are signed electronically. This approach can be used to achieve scale and enable a large portion of the benefits of a digital transformation.
The hybrid close can start with the eNote, which can be signed in every state across the country and is accepted for purchase by the government-sponsored enterprises (GSEs). Beyond the eNote, lender documents from loan origination and document preparation platforms that don’t require notarization can easily be incorporated.