In December, Rocket Mortgage became the first lender to use eNotes in closing a Ginnie Mae-backed loan as part of a pilot program. Now, it says the market is set to see widespread eClosings of Ginnie Mae loans by the end of this year.
Ginnie Mae launched the pilot program in 2019, paving the way for the agency to accept eNotes as satisfactory collateral for its mortgage-backed securities.
Rocket Mortgage became one of the first lenders to enter Ginnie Mae’s pilot program in an attempt to transform its VA and FHA lending to a more digital process, a segment which the company says makes up about 25% of its originations.
“The strategy would be to continue to ensure that the process is solid, that it’s working appropriately, that consumers are enjoying the process, and then build it out to be at scale,” Rocket Mortgage Executive Vice President of Capital Markets Bill Banfield told HousingWire. “Eventually, I think what you’re going to see is the entire industry adopts this as a method of closing, because it’s really a better consumer experience.”
Banfield said he expects many more lenders to begin using eNotes for Ginnie Mae-backed mortgages by the end of 2021.
With no end in sight to record low rates and the increased loan volume, lenders must streamline workflows and accelerate time to close. Evolving from traditional closings to hybrid closings to full eClosings can help lenders process more loans at a faster pace without overwhelming their resources.
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Rocket Mortgage continues to test its capabilities and build out options for states across the U.S. to meet the various regulations, especially surrounding RON. It is also testing the process post-closing.
“What you’re going to see is over the coming months, we need to move on through the full cycle,” Banfield said. “So it’s not just the closing – it’s the moving the collateral through the entire process, making sure that if there’s any hiccups or anything that we learn, that Ginnie Mae will be satisfied with the outcome and that all parties feel that the collateral is exactly where it needs to be. From there, you’ll start to see it expand.”
He said that, especially after this year, consumer demand will push lenders to move toward greater digital adoption, and predicted that soon most Ginnie Mae loans will be on some version of an eNote.
Over the past year, Rocket Mortgage has become increasingly digital. The company’s data shows that over the first three quarters of 2020, 90% of all digital closings that took place with eNotes were done by Rocket. And in those three quarters, Rocket Mortgage and Amrock, its title and escrow sister company, more than doubled the number of digital closings they completed in all of 2019.
“It’s no secret digitizing the mortgage experience and removing manual steps in the closing process increases efficiency, ensures that every transaction is consistent and reduces opportunities for human error – such as missing signatures on the closing documents,” the company stated. “Adding technology to traditionally manual processes is a priority for Rocket Companies, and it has made great strides this year.”
Previously, eNotes couldn’t be used to close VA, FHA or other Ginnie Mae-backed loans. In fact, experts cite eNotes as the single greatest factor standing in the way of widespread acceptance of remote online notarization – often the final step needed to secure a fully digital closing.
In a guest blog for HousingWire earlier this year, Vice Capital Markets Principal Chris Bennett and Mid America Mortgage CEO Jeff Bode explained that even though the program is initially being limited to a handful of applicants for a limited number of transactions, the move provides a vital source of eNote liquidity. This, combined with eNote acceptance by Fannie Mae and Freddie Mac, finally tips the ROI scales in favor of eNote adoption.