NMP - September 2016 - 82

Carpe Diem: How Digital Origination Strategies Can Support the Broker-to-Banker Transition By Jeff Bode or brokers looking to make the transition into mortgage banking, the timing couldn't be better. Depository lenders are increasingly giving up market share to non-bank mortgage lenders, and with the current rate environment, non-bank lenders are able to offer borrowers extremely competitive rates. What's more, advances in digital origination technology are poised to reduce the cost to originate, which eases the startup capital requirements needed to make the leap. These cost savings are significant, as one of the biggest challenges to making the broker-to-banker transition is establishing the necessary net worth to qualify for licensing and a decent warehouse line of credit. With access to the right technology, and the right correspondent partner, brokers can make this transition more easily than ever. For years, the mortgage F SEPTEMBER 2016 n National Mortgage Professional Magazine n NationalMortgageProfessional.com 82 industry has waited with cautious trepidation for the eMortgage to become a reality. Technology and regulation have finally caught up with the industry's vision, but many are still reluctant to take the leap. Part of this reluctance stems from the perception that investors and/or warehouse banks do not allow eClosings or won't purchase an eMortgage. This is false. There are numerous investors that have established guidelines for eClosing and eMortgages, and two of the biggest mortgage investors in the country, a.k.a. Fannie Mae and Freddie Mac, have been pushing lenders for years to adopt eMortgage strategies. On the warehouse side, most banks have been reluctant to adopt an eWarehouse strategy because the efficiencies inherent in the eMortgage process would reduce the amount of time loans sat on the warehouse line before being purchased, thus cutting into the bank's revenue from interest and fees. In recent months, several forward-thinking warehouse banks like FirstFunding and Merchants Bank of Indiana, have overcome this reluctance and are poised to provide funding for and purchase loans closed via eClosing and eNotes. Though the industry hasn't fully dived into the complete eMortgage, it also hasn't been totally reluctant to adopt digital origination strategies either. According to the 2015 Xerox Path to Paperless Survey, nearly 80 percent of survey respondents indicated they were utilizing eDelivery to send disclosures and other documents to borrowers. In addition, almost 75 percent said they had implemented paperless origination and underwriting processes, and just over 70 percent are incorporating eAcknowledgement and eSignatures with eDelivery of disclosures. More than 60 percent of respondents are Thousands of mortgage professionals pay just ½ % premium* for their state mortgage license bonds. Do you?      * premium rate based on bond amount and subject to underwriting delivering closing documents to their settlement agents electronically, and more than half are eDelivering closed loan files to investors. These numbers aren't that surprising as many lenders have adopted these strategies in order to comply with the TILA-RESPA Integrated Disclosure (TRID) timing requirements, and data from the survey backs that assumption up, as 92 percent of respondents said they expect to see an increase in their use of eDelivery because of TRID. However, there's a very clear point in the process where digital origination strategies drop off. Based on the survey, only five percent are utilizing eDelivery with eSignatures at the closing table (i.e., eClosing), and just four percent are executing a complete eMortgage where the promissory note is being signed electronically (i.e., eNote). For brokers making the transition to mortgage banking, this presents a significant opportunity to differentiate themselves in the market while also gaining much-needed efficiency. Expense management is a critical concern for emerging mortgage bankers. Start-up costs and overhead can quickly eat into available capital, which can have a negative impact on overall net worth and impede the ability to increase production. Using the full complement of digital origination strategies (eDelivery, eSignatures, eClosings and eNotes) eliminates many of the "sunk costs" inherent in the traditional closing process, such as shipping and labor expenses for the sole purpose of organizing and delivering documents to the investor. This frees up capital that can be invested in more missioncritical areas like quality control, underwriting and compliance. Speaking of compliance, this is another area that can torpedo an emerging mortgage banker. Anytime you are a http://www.NationalMortgageProfessional.com http://www.thebondexchange.com

Table of Contents for the Digital Edition of NMP - September 2016

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