The mortgage industry is at a crossroads, navigating the transition from traditional paper-based processes to embracing digital innovation. One pivotal question arises: Is jumping on the eNote bandwagon worth it if parts of the process are still reliant on manual methods?
Investing in Technology for Long-Term Growth
Conditions are challenging for lenders in today’s down-market cycle, which is leading many mortgage finance institutions to feel pressure to cut costs and pause technology investments. This approach, however, can lead companies to trail behind their competition when the market returns. To remain competitive, successful lenders future-proof their operations by staying focused on executing their technology strategy.
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While eClose solutions in the mortgage finance industry have been around for many years, the challenges of the pandemic in 2020 accelerated the appeal among lenders. Since then, the desire to have eClose options available has continued to grow, with more and more lenders recognizing the competitive advantages these digital solutions provide.
A full eClosing occurs when all closing documents are electronically signed and notarized online; including the eNote and security instrument. There are variations such as hybrid eClosings, where only certain parts of the lending process are brought online. Based on a recent study of Notarize customers conducted by MarketWise, implementing eClosings (whether hybrid or full) has shown the most impact on ROI for lenders — saving them time and improving loan quality and customer satisfaction.
As you plan for 2022, we understand the increasing focus on digitization and automation to combat margin compression. Likewise, the role of eClosing continues to be a priority to improve the customer experience, reduce costs, and close more loans faster. Historically, eClose functionality has been directly tied to a lender’s document generation engine. However, now you have the flexibility to quickly implement a hybrid eClosing process, regardless of which document generation engine you use.
A closing package for a mortgage loan is comprised of many different documents that serve varying purposes. There are disclosures mandated by state and federal law or investors that are provided to inform the borrower about important terms of the transaction. There are documents that are given by custom or tradition that serve many different purposes that are usually required by the lender. Then there are the most important documents in the loan package, the promissory note, and the security instrument. The promissory note is crucial because it is the physical manifestation of the borrower’s promise to repay the holder/lender. The security instrument is important because it is the agreement that creates the property interest that gives the lender the legal right to take possession of the property or collateral if the borrower defaults on their promise to pay.
Every discussion regarding the legality of electronic signatures in the United States inevitably refers to the legal framework established by the Electronic Signature in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transaction Act (UETA). The ESIGN Act is a federal law that was enacted into law on June 30, 2020 and became effective on October 1, 2020. UETA is a model law that was proposed and approved by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in July of 1999.
The history of notaries public (aka notaries) is interesting and varied, including origins that can be traced back to the ancient Roman law, or to the 13th and 14 century English common law. In Roman times, notaries were public officials that were often traced back to Senate or to the court where their function was to record public proceedings. In England, early notaries were appointed by a representative of the Pope and were often members of the clergy. In the United States today, notaries are usually commissioned on a state-by-state basis and are generally utilized for validating signatures, administering oaths, and authenticating the execution of certain documents such as deeds.
In May, Senators Mark Warner (D-VA) and Kevin Cramer (R-ND) reintroduced federal legislation designed to expand the use of Remote Online Notarization (RON) on a nationwide basis. The Securing and Enabling Commerce Using Remote and Electronic Notarization (SECURE) Act of 2020 was originally introduced in March of 2020. The original version of the bill stalled out and never made it past an initial introduction. There is hope that the reintroduction of this bill will gain more traction on Capitol Hill due to experience with difficulties entering into many transactions requiring notarization during the COVID-19 pandemic.
