Have you ever stopped to consider how gradual major change truly is?
Sometimes, we don’t see how drastically something like the digital mortgage has evolved when we’re deep in the weeds every day. While it may seem that we have been talking about the digital mortgage evolution for a decade, when we take a step back, we see just how far the industry has come in its adoption of digital lending processes.
Today, Lenders are at different phases of the digital mortgage evolution. The most effective approach to moving to a fully digital mortgage environment is to crawl, then walk, and then finally run.
Walk Before You Run
When lenders are just beginning their digital mortgage strategy, they often start with moving loan applications to an online point-of-sale and issuing electronic disclosures and other supporting documents.
As they realize the cost and time savings benefits of electronic documents, they then move to a hybrid eClosing environment. Even utilizing a hybrid closing environment can help lenders reduce the average time of closing from an hour to 10 minutes. Borrowers can review all documents ahead of time and address any issues or problems prior to the closing table.
From there, lenders begin to run when they layer in eNotes, the MERS eRegistry and electronic investor delivery. For states that have passed laws supporting eNotarization, lenders are then capable of reaching the Holy Grail of a fully electronic mortgage from application to post-closing secondary delivery.
Taking the First Step
Two factors have held some lenders back from jumping completely into the digital mortgage and eClose evolution. The first is eNote acceptance by investors. The good news is that more investors are finally coming on board. Fannie and Freddie are the largest mainstream investors accepting eNotes, and Wells Fargo has recently jumped on board as well. Last fall, MERS introduced the new Secured Party field in the MERS registry which should drive more acceptance by warehouse banks and other interim funders. To that end, other government-sponsored investors, such as Ginnie Mae and the FHLBs are working on eNote programs now which we expect to be available some time in 2020.
The other challenge is the acceptance of eNotarization. As more states adopt laws, acceptance will grow nationally, enabling borrowers to potentially apply, complete underwriting, and close a loan from the comfort of their home. As we speak, organizations like MBA, ALTA and ESRA are encouraging the federal government to provide broader support for Remote Online Notarization in all 50 states, as a safety measure to mitigate the danger of the coronavirus.
Already, some lenders are walking and starting to run. These lenders are seeing an ROI on every loan, optimizing and streamlining operational processes. As more lenders begin to crawl, then walk, the lenders who hesitate to evolve now will struggle to compete in the future. Lenders embracing eClosings and providing convenient eSign experiences from application through closing appeal to today’s borrower expectations and market conditions.