Selecting a best-in-class eVault solution: What every mortgage lender needs to know
The COVID-19 pandemic caused many mortgage lenders to re-evaluate their lending processes, including how they leveraged digital technology to better serve borrowers. While the pandemic certainly accelerated the demand for a digital borrowing experience, mortgage lenders also reap the benefits of providing a faster, easier, and more transparent lending process.
Although financial institutions have primarily focused their digitization efforts on the front-end of the mortgage process, the closing process has remained mostly a paper-based manual process. But Ginnie Mae’s acceptance of eNotes in July 2020 will likely be the tipping point for eNote adoption across the mortgage banking industry.
However, whereas you can physically possess paper promissory notes, eNotes must be stored in a way that ensures they retain the same legal enforceability as paper. An electronic vault, or eVault is an electronic repository that provides the necessary controls to store and transfer eNotes securely. But to achieve an optimal return on your digital investment, mortgage lenders need to know what to look for in an eVault provider.
Why mortgage lenders need an eVault solution
In an increasingly complex regulatory environment, financial institutions face growing compliance requirements for digital assets associated with commercial and mortgage lending. Electronically signed documents require a higher threshold of security and accessibility and must remain protected throughout the lifecycle of a transaction.
In addition to delivering cost and time savings, a best-in-class eVault should help mortgage lenders manage compliance, mitigate risk, and ensure ongoing transparency.
- Compliance. Storing signed, verified, and confirmed digital documents safely is invaluable for physical data security as well as legal defenses. An eVault ensures specific processes are followed to guarantee electronically signed documents (and properly certified copies) remain enforceable, admissible, and negotiable.
- Risk mitigation. Mortgage lenders using an eVault benefit from better records management, faster access to documents, and a clear audit trail across for the document’s entire lifecycle. Having complete insight into the digital chain of custody ensures all stakeholders have access to asset metadata.
- Transparency. The eVault needs of mortgage lenders go far beyond the standard managing and secure storage of documents in the Cloud. To ensure compliance with the myriad legislative statutes that govern eNotes, lenders need an eVault solution to manage the entirety of the digital lending lifecycle.
Selecting a best-in-class eVault solution
Given the pressing need to secure, manage, maintain, and track critical documents, mortgage lenders should actively seek out a robust, purpose-built eVault solution that improves the digital lending process.
Unfortunately, not all eVault solutions are created equal. Here’s what you should look for to determine if the eVault solution you are considering is best-in-class:
- Encryption and tamper seals to ensure that all e-signed documents in the eVault remain tamper-evident, time-date stamped, and protected throughout their lifecycle. The tamper-evident seal should instantly identify and reject any changes to the document.
- An authenticated and secure audit trail that extensively tracks
every action taken throughout the lifecycle of the transaction, including:
- Any and all access to the document
- Any copies made, by whom, and for what purposes
- Any transfer of ownership or custody
- Any transfer of location
- An advanced, encrypted evidentiary package that ensures all electronic documents in the eVault have the most robust audit trail and chain of control should the document’s validity be questioned. It should also allow document owners and custodians to produce legally admissible print copies, if necessary.
- Access and rights management features to allow secure and enforceable third-party rights and privileges per the terms of the custodian and collateral control agreements. The eVault should also allow for transition and transfer rights based on status changes, cancellations, and other events without invalidating its tamper seal.
- Regular integrity checks to ensure there has been no alteration or degradation since signing, verifying the integrity of every document managed by the eVault.
- E-custodian services that grant internal or external parties access to individual collections or portions of transactions in the eVault without compromising the integrity of the originals.
- Compliance support for secondary market regulations that ensure documents reside within a secure, closed system with no copies existing outside of the eVault, along with electronic pooling and post-sale document securitization capabilities for new loan owners.
- Destruction and retention protocols that allow a lender to permanently destroy or remove the electronic original from the eVault while creating an enforceable paper version, as well as the ability to trigger the destruction of the electronic document after predetermined periods of time or status changes.
- Easy integration with existing systems, characterized by eVault-to-eVault transfer capabilities, Transfer of Location of Electronic Contracts (TOLEC) support, and seamless connection with a variety of e-signature solutions to enable the processing of even the most complex business applications.
It’s important to remember that transitioning to a digital lending strategy means more than just ditching a paper archive. As lenders rush to digitize their consumer-facing processes, an eVault solution is a vital component to establishing fully compliant and contactless mortgage lending.