By the middle of the decade, digital mortgages will be the rule, not the exception. While the mortgage industry has been moving this way for more than a decade, the past year accelerated the evolution, and 2021 is poised to push lenders and consumers even further towards a fully digital mortgage.
Lenders embracing digital mortgage are no longer the lead innovators – these are table stakes to being competitive in the 2020s. A recent Forbes Insight survey from Freddie Mac found that 82% of the banking and lending executives surveyed say digitization is transforming key home mortgage processes. A wide range of industry participants—representing small and large banks and non-bank lenders, super regionals and regionals, and credit unions—view the advances in question as representing nothing less than a revolution.
The journey to a fully digital mortgage is a long one, but there are key milestones lenders can track as they continue to accelerate the home loan process. To help lenders deliver that dream, there are three important milestone achievements that they can pursue in 2021 that will greatly contribute to the digital mortgage revolution.
Milestone 1: Digital Documents and Dynamic Doc Generation
The first milestone is to move as many documents as possible to digital. Why focus on documents? In the lending process, customer experience is most impacted by the many documents a consumer must read, sign and deliver. From the initial application to disclosures to closing, making documents clear, accurate and easy to access can make the difference between a frustrated customer and a raving fan.
Digital documents are more than just a PDF or digital print of a physical document. With dynamic documents, the electronic forms come from the information inside the LOS, which eliminates errors. If the investor is known, everything down to the document stacking order will be built in and everything the borrower signs will be required. The borrower will never be asked to sign anything that is not required for the loan program or investor.
Milestone 2: eClosing
The second milestone is moving to an eClosing environment. When integrated with a dynamic document generation engine, all documents are digitized and intelligently sorted and tagged for eSigning. Borrowers can conveniently review the package, ask questions and eSign documents from anywhere, on any device. This mitigates the risk of missing signatures, incorrect information in documents, misplaced paper documents, among other manual missteps.
Reduced errors and stronger quality control accelerate document delivery and turn time. By turning loans faster, lenders remain more liquid and realize cost savings. Additionally, the electronic delivery of a loan to an investor equates to a higher probability of the loan being certified and funded within 24 hours of closing.
For decades, the only way to notarize documents was in person. Thanks to the pressures of the COVID-19 pandemic, state governments and the GSEs began more readily accepting Remote Online Notarizations (RON) to verify identities while also protecting the health of consumers and staff. Now, thanks to RON technology and growing acceptance of the process nationwide, lenders can notarize a document from anywhere using a computer or mobile device.
Milestone 3: Digital Post-Closing
Just getting to the closing table digitally is not enough. In a fully digital mortgage transaction, the third milestone is completing post-closing tasks electronically. Lenders can make moves to eRecord the security instrument, eVault the eNote, and verify the loan data.
In a fully digital mortgage transaction, the security instrument is recorded and notarized electronically. There is no need to print, scan, mail or manage other physical document logistics. Via integrations between LOS systems, eClosing platforms and eRecording service providers, this digital mortgage document can be executed, delivered to a lender’s loan file and eRecorded in a highly automated fashion. This connectivity not only accelerates the speed at which the document can move, but also establishes a high degree of transparency. In other words, if there are any issues between the execution, delivery and eRecording, the lender can find out right away and take action.
When it comes to storing eNotes, lenders need an eVault system in place to safe keep the loan documents. eVaults serve to reduce cycle times and optimize process efficiency through improved document management, security, and the ability to transfer, store and control electronic promissory notes and related loan documents. eVaults also allow documents to be shared both internally and externally with warehouse lenders and document custodians.
The MERS® eRegistry is the legal system of record for identifying the controller (holder), servicing agent (servicer), and location (custodian) for the authoritative copy of every registered eNote in the country today and is required by Fannie Mae and Freddie Mac. By registering an eNote in the MERS® eRegistry, the Originator who is the named payee on the eNote is identifying themselves as the Controller, or Holder, and Location of the eNote, establishing their copy of the eNote as the Authoritative Copy. When they sell that eNote, they will transfer Control and Location to the Investor.
One challenge in accelerating post-Closing has been the need to keep the LOS in sync with the eVault and eRecording transactions. That’s changing now that innovative mortgage software is making it easier to accomplish a two-way LOS data exchange.
There are three general forms of information that must move between the LOS and the document management software system during the normal loan origination process: the loan data used to create the documents, the loan documents themselves, and events – viewing and signing – that occur with those documents. It is the latter type of data sync that can really make life easier on lenders.
As the increasing implementation of digital mortgage technologies becomes the norm, lenders are recognizing the urgency to operationalize these technologies now or risk being left behind. Now is the time to digitize your mortgage origination process from point-of-sale through post-closing. Click below and let us show you how we can help you optimize your path to digital mortgages.