The pace of digitization continues to accelerate, and the mortgage industry is no exception. The benefits of implementing a digital strategy are tremendous, as we’ve learned in the digital lending scenarios that emerged during the pandemic. A fully digitized mortgage process that includes eNotes gives customers a faster, easier, and more transparent borrowing experience and a better perception of your brand.
As we learned in Part 1 of our blog series, Ginnie Mae’s acceptance will likely be the tipping point for eNote adoption across the mortgage banking industry. Those that lag behind will find themselves at a distinct disadvantage to their nimbler competitors – and at risk of losing both customers and market share.
Let’s take a closer look at some of the more tangible advantages that issuing eNotes will deliver to your business.
Lenders have been leveraging digitization to drive down mortgage closing times for the past several years. In 2018, the average time to close a home mortgage was 43 days. In 2019, Chase Home Lending said it would pay $1,000 to any borrower whose mortgage it couldn’t close in 21 days. That same year, LoanDepot, the second-largest provider of nonbank direct-to-consumer loans, rolled out a “smart loan” that could close in just eight days.*
The desire to meet customer demand to deliver faster and more convenient mortgage processes has been elusive to lenders – until now. An end-to-end digitized process enabled by eNotes can accelerate both mortgage closing and securitization. Fully digitized signature execution and closing package processing can speed mortgage settlement and improve overall revenue potential. And effective technology, such as eNotes, allows lenders to create, manage, deliver, and transfer assets into the secondary market with greater efficiency.
eNotes enable you to use funds for shorter periods, turn credit lines more frequently, reduce the size of credit lines, and save on warehouse lending. Suppose you originate hundreds of thousands or even tens of thousands of units per year. In that case, even a small average cost reduction from a digitized mortgage closing can add up to significant savings.
Implementing eNotes can significantly reduce costs for acquiring and organizing loan documents and enhance post-closing quality control. With eNotes, lenders can ensure that the required documents are in place and signed in the required locations, reducing the changes of missing documents and inaccurate signatures. Originators can then move loans into the secondary market more efficiently, freeing up dollars on the balance sheet for additional lending.
Improved customer experiences
Digitized experiences also become table stakes as younger home buyers enter the mortgage marketplace. These “digital natives” are accustomed to an always-on, instant-response, Amazon-like transaction experience, and they’ll gravitate to lenders that meet their high expectations.
eNotes are an integral part of an end-to-end digital mortgage experience that allows borrowers to complete a mortgage closing from the comfort of their own home. Customers and settlement agents can avoid in-person contact on closing day while benefitting from an accelerated, simplified, and more accurate and reliable mortgage process.
Greater transparency and security
eNotes enable you to securely store and manage documents in a digital vault, giving you the ability to service the mortgage and move the asset to the secondary market with greater transparency. In addition, an effective electronic closing process provides lenders, borrowers, and settlement agents with a more cyber secure process with ID verification, encrypted communication, and a complete audit trail with more robust safeguards than traditional, in-person notarial transactions.
Ultimately, eNotes give lenders the ability to close mortgages more quickly, cost-effectively, and securely with a higher level of customer service and satisfaction. Moving forward, eNotes will become a competitive differentiator. Nonbank originators have already used digital mortgages to make significant inroads against traditional banks.
Moving forward with eNotes
Are you planning to issue eNotes for Ginnie Mae loans? There are two reasons why you’ll want to check whether your document custodian can service eNotes. First, not all custodians have invested in the infrastructure to store eNotes. However, as more lenders move to eNotes, custodians will recognize the potential return on investment (ROI) in the necessary technology. Second, not all custodians are qualified to service eNotes, even if Ginnie Mae previously approved them. That’s because every custodian must be specifically authorized as an eCustodian before it can accept Ginnie Mae loans or pools that involve eNotes.
Strategies for eNote success
Beyond their advantages for efficient mortgage closings, eNotes are crucial to the downstream life of the loan. eNotes can address numerous sources of compliance, operational, financial, and reputational risk in the secondary market. eNotes must be properly created, signed, and managed. To be legally enforced like a paper promissory note, each eNote much be created as an authoritative copy, adhere to the MISMO SMARTDoc format, and be registered in the MERS® eRegistry. To navigate these requirements, lenders need to work with a knowledgeable and experienced technology partner that offers a comprehensive eClosing platform.
The time to adopt eNotes is now. Organizations that are slow to act risk falling behind competitively as they fail to meet customer demand for an end-to-end digital mortgage process. Lenders who embrace eNotes today have an opportunity to realize a significant return on investment in costs, time savings, and enhanced customer experiences on every digitized loan.
* “Feeling the Need, the Need for a Speedy Close,” Wall Street Journal, March 2019