The evolution towards true end-to-end digital mortgages becoming a reality is gaining increasing momentum with new recommendations from the U.S. Department of the Treasury. Mortgage technology has evolved over the past two decades to include automated underwriting tools, digital document generation, eSignatures, eVaults, and mobile and online loan point-of-sale platforms. The Treasury recommendations address the critical need for more investor acceptance of eNotes for true broad-based use of digital mortgages.
While lenders have embraced much of the innovations paving the way to eMortgages, there have been roadblocks – often in the form of outdated regulations and technologies, as well as lack of support from investors that drive much of the mortgage industry’s secondary market.
To address the need for a more modern mortgage industry, The U.S. Department of the Treasury issued a July 2017 report, A Financial System that Creates Economic Opportunities: Nonbank Financials, Fintech and Innovation, which promoted the need for a regulatory foundation to handle widespread acceptance of eNotes and end-to-end digital mortgages.
“My sense right now is that the industry is really at a tipping point in terms of adoption of digital mortgages or e-mortgage technologies,” MBA’s chief economist Michael Fratantoni told National Mortgage News. “The technology is there, the industry desire is there, but there are some regulatory hurdles, and the Treasure report identified some of them.”
A key section of the report highlighted that while borrowers have helped drive the adoption of digital mortgage tools on the front end of the loan process, the support for eNotes and secondary market support is patchy at best.
On the positive side, Fannie Mae transitioned to a modern eVault system in 2017 to accept eNotes and currently is the largest holder of eNotes in the country. On the other hand, Ginnie Mae and the Federal Home Loan Banks (FHLB) cannot currently accept eNotes , which limits the options of lenders working with these entities.
To encourage the adoption of modern technology, The Treasury Report recommends that Ginnie Mae pursue acceptance of eNotes as outlined in the organization’s 2020 Roadmap and that the FHLB explore ways to move towards accepting eNotes on collateral pledged to secure advances.
The Treasury also recognizes that the regulatory framework from Washington must adapt to support the capabilities of innovations that lenders and consumer alike demand. The report states, “Policymakers should address regulatory challenges that …inhibit the adoption of technological developments with the potential to improve the customer experience, shorten origination timelines, facilitate efficient loss mitigation, and generally deliver a more reliable, lower cost mortgage product.”
At Docutech, we cheer the recommendation the Treasury is giving the Federal Agencies to modernize their infrastructure to better enable a true end-to-end digital mortgage process. And, we applaud the innovative lenders that are embracing new technologies to not only improve the front-end application process but also streamline the back-end operational process and deliver a better experience for borrowers.