NMP - February 2018 - 72

special focus on THE PURSUIT OF PAPERLESS a special focus on THE PURSUIT OF PAP

Building a New Mortgage 'E'cosystem
By Stanley Street

n nature, an ecosystem is a
community of living
organisms and their
environment interacting
which each other. In the
world of computers, an
ecosystem refers to the
"community" of hardware,
software and data that make up
the collective IT environments of all
the companies which
communicate and share data. In
either context, a healthy
ecosystem is one that is stable,
secure and balanced. Everything
works together in a sort of
harmony.
You could say the mortgage
industry itself is its own
ecosystem, with different parties
and inanimate components
interacting with each other. Yet the
mortgage ecosystem has been
through a lot of change over the
past 20 to 30 years. Modern
technologies and the accelerating

I

pace of innovation have
transformed an industry that once
relied on fax machines and rooms
of people to one that is now
dependent on automation, cloud
computing and the Internet of
Things-a trend that is changing
how entire civilizations live, work,
shop and play.
While no one can be sure
exactly how these changes will
play out for the mortgage industry,
one thing is certain: the future is
going to involve a lot less paper.
But for that to happen, there needs
to be a healthy industry ecosystem
in place that can assure digital
mortgages can survive. That
ecosystem is being built right now
and is very close to becoming
reality-so close that if you're not
getting ready, you should consider
this in your 2018 strategy planning.
An ecosystem in progress
What we know about digital

FEBRUARY 2018 n National Mortgage Professional Magazine n

NationalMortgageProfessional.com

72

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mortgages is that they must work
across every facet of the mortgage
process, from the application stage
to borrower verifications,
underwriting, conditions, closing,
warehouse and secondary market
delivery. A mortgage isn't truly
digital unless all of these aspects
are also "e-enabled." That
includes electronic signatures,
disclosures, notarizations,
closings, recordings and investor
deliveries, and most importantly,
eNotes.
All of these "e's" are part of the
eMortgage ecosystem. The
problem is, they do not yet fit
together in a way that enables
digital mortgages on a wide
scale. Like any well-balanced
habitat, a few things need to
happen to ensure the eMortgage
ecosystem has the resilience to
last.
One of those things is
significant technical
interoperability between disparate
digital systems. In other words,
systems must be able to talk to
each other. Unfortunately, this
doesn't always happen, even with
technology that's been around for
years.
Today, the different
components of the mortgage
process remain largely separated.
For example, the eClosing
process currently stands alone.
Borrowers must log in to a secure
environment to sign their
documents electronically. There
are tools that send a secure email
to verify the borrower's
credentials and give them
permission to perform the
transaction, but there is no
integration with a lender's LOS.
The CEO of a large lender may
look at this issue and think, "no
big deal-we'll just connect
everything," but the operations
team knows it's not that easy.
Why vendors matter
Of course, there are vendors in
the digital mortgage landscape
that can help with this
interoperability issue. However,
the industry needs scalable
solutions that can support the
large-scale production volumes
we currently see in paper
mortgage transactions. To
understand why, it helps to
understand eNotes and eNote

vendors, which are a critical piece
to creating actual eMortgages.
To conduct an electronic
closing, or eClosing, lenders need
a document vendor that leverages
either SMARTDoc v.1 or v.3
standards to create eNotes.
These standards leverage tamperproof seals and enable eNotes to
be registered on the MERS
eRegistry and stored securely in
an eVault. The benefits of eNotes
are pretty evident-they eliminate
the chance of paper documents
getting lost, misplaced or
destroyed, and are much faster to
create and deliver. Because they
are in a digital format, eNotes
also help all counterparties
achieve better data integrity and
lower risk. Mortgage bankers can
also turn warehouse lines faster
with lending partners that
purchase eNotes, which results in
lower costs and higher margins.
But finding an eNote vendor
and training your staff to use
eNotes isn't that easy, at least
not yet. Not all document
providers support a SMARTDoc
eNote in their library. Many
lenders who want to switch to
eNotes have trouble leaving their
costly yet comfortable paperbased processes behind. Another
problem is that there are more
than a dozen companies that
have the ability to execute and
deliver an eNote with the GSEs,
but they have only conducted
eNote deliveries on a small scale.
Lenders need a scalable solution
they can trust with higher
volumes of loans.
Another barrier: many
originators don't understand how
to handle eNotes. Some think
they must be notarized and
recorded, but that's not needed.
For those of us working to create
the eMortgage ecosystem, there
is an effort to make the process
feel as close to the paper process
as possible. The more similar the
steps appear, the easier eNotes
will be adopted.
The time to prepare is now
Barriers have limited the digital
mortgage experience for the
consumer to primarily the signing
of the application and initial
disclosures. To facilitate a
scalable digital mortgage,
lenders, settlement agents,
warehouse, investors and
servicers must integrate with new
technology solution providers that
support eNote, eClose and
eWarehouse. They will need to
work together to transition current


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Table of Contents for the Digital Edition of NMP - February 2018

Contents
NMP - February 2018 - Cover1
NMP - February 2018 - Cover2
NMP - February 2018 - 1
NMP - February 2018 - Contents
NMP - February 2018 - 3
NMP - February 2018 - 4
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NMP - February 2018 - Cover3
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