Nearly 20 years after the federal government made it legal to transact business electronically, COVID sent the mortgage industry into high gear. In the space of just a couple of years, adoption of eClosings skyrocketed. Now, we’re seeing a similar increase in the adoption of eNotes.
Even so, many lenders still have questions about eNotes and how they can be integrated into their eClosing process. As things are changing quickly in this part of the business, we provide this useful collection of FAQs.
Q: What’s driving the increase in lender adoption of eNotes?
A: As more lenders move into digital closings, competitors must keep pace. Others are attracted to the idea of fewer errors in the files transferred between third parties, such as title partners and mortgage servicers. Still others are ready to see fewer closing conditions on their files and the ability to clear warehouse lines faster. Finally, lenders are finding that they can re-task employees in their post-closing departments because they don’t need that department to be so large.
Lenders are seeing lower costs -- nearly $450 less per loan for some lenders -- and faster turn times with eNotes.
Q: How are lenders seeing their staffing changing after adopting eNotes?
A: Lenders are going on the record, saying that prior to eNotes a good post-closing department would employ more than 20 staff members. After eNote, they can do the same amount of work with 2 or 3 people in the department. One lender told us recently that a post-closing department staffed by two professionals is now handling seven hundred closed loans months.
Q: How are investor relations changing with eNotes?
A: So many of the problems lenders and investors have faced together simply go away with eNotes. These documents never get lost, they never get incorrectly signed or dated and they can be delivered to the investor instantaneously. If a note must be corrected, there is no need to find the old paper document and invalidate it. The record is changed and the old note is no longer a part of the deal.
This is why so many investors are lining up to buy eNotes, including Wells Fargo, Chase, Mr. Cooper, PennyMac, and of course Fannie Mae and Freddie Mac. As you can see from this online list, companies are lining up to accept eNotes!
Q: How are warehouse lenders dealing with these changes?
A: Initially, warehouse lenders were wary as the industry was unsure of the ultimate impacts these changes would have -- reduced cycle times for loan originators can potentially reduce revenue under warehouse lenders’ pricing structure. But loan originators are telling us today that warehouse lenders are dealing effectively with the changes eNotes have brought to the business.
And not all of the changes have been negative. It’s virtually impossible with eNotes for the warehouse lender to get doubled noted, so their risk is lower.
Q: What do regulators think about eNotes?
A: Federal regulators, including the CFPB, have been active proponents of both eClosings and eNotes for some time now. They understand that this is a better process and that it’s better for consumers.
They view electronic notes as a much more secure, compliant element of the mortgage process. They’re right. The eNote has eliminated all of the risk in that process. So, they are embracing it.
Q: What impact does eNotarization have on the lender’s transition to eNotes?
A: None at all. There is no notarization required on mortgage notes. Whether the other documents are notarized electronically or even remotely has no impact on the creation of an eNote.
In fact, you can still be closing with a hybrid process, where some of the documents are still wet-signed and notarized on site and still produce and sell an eNote for that transaction.
Q: What is the best technology for eNotes?
A: Lenders who are using DocMagic for eClosing with eNotes are calling it “shockingly easy.” Everything the lender needs is included, but third-party tools are already integrated into the process. Lenders can set up their eClosing environments and start generating eNotes for borrowers in all 50 states in as few as three days.
Q: What’s the ROI for eNote adoption?
A: Lenders are having trouble calculating the ROI because the numbers are very large. Given the low costs involved in setting up the eClosing environment and the significant cost savings that accrue to the lender immediately afterward, some lenders are telling us that they have recouped their initial investment in 15 days and estimate their return after six months of operation to be in excess of 1000%.
This is a significant evolution in the loan origination process and lenders who embrace it are seeing significant ROI very quickly.
Have additional questions? We’re here to answer them. Reach out to us today and find out how you can be selling eNotes by next week.