eMortgages & eClosings: what you need to know

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  • July 16, 2018
eMortgages & eClosings
Everything is going digital these days, including home lending and home closings that used to require lengthy in-person meetings and signing with a pen in the physical presence of a notary. This could mean big changes for your real estate business.

According to the American Land Title Association (ALTA), more and more Americans are looking to eMortgages to meet their lending needs. As millennials who are accustomed to electronic access to everything enter the real estate market, their desire for remote access to compare, apply for and accept mortgages are driving the rise of eMortgages and eClosings.

What does this mean for realtors? Get Ahead of the Curve

If you are knowledgeable about eMortgages and eClosings, and have a system in place to utilize these options in your transactions, you can offer your clients more value. Having these options can save time, make scheduling more flexible, and allow clients to have more control over the entire process…something they’re likely to appreciate.

What You Should Know

What is an eMortgage?

As defined by Fannie Mae, an eMortgage “refers to electronically-signed closing documents paired with an original electronic promissory note (eNote) signed on an eClosing platform and registered with the MERS eRegistry upon execution.” eClosings result in eMortgages only if the promissory note is signed electronically. Note that the words “eNote” and “eMortgage” are often used interchangeably but eMortgage is the broader term for the electronic process that includes the eNote and the electronic security instrument.

What is an eClosing?

An eClosing is a closing that includes the execution and electronic signature of some key mortgage documents in a secure digital environment, while other key documents may be printed and physically signed (often in the presence of a notary).

The difference between an eMortgage and an eClosing is simply that an eClosing may or may not result in an eMortgage, but eMortgages, which result in an electronic promissory note, are always a product of eClosings.

What are the Benefits of e-Mortgages and e-Closings?

In an increasingly digital age, eMortgages and eClosings can have some major benefits for you and your clients.

Reduced risk of error

First, eMortgages and eClosings reduce the risk of errors by ensuring transactions are more consistent, transparent and accurate. Errors like missing signatures, misfiled or lost documents, and unpaid fees are less likely to occur, and if they do, can be caught more quickly. These transactions are also more secure thanks to standard protocols that have been implemented to keep data safe.

More streamlined, efficient process

Second, they make the mortgage and closing process more streamlined and efficient. More operational efficiency translates to money savings, and with more of the process automated, the timeline from origination to funding is truncated, as well. eMortgages also eliminate the need for printing, shipping and storing documents, which saves time and money (and reduces environmental impact in the process).

Positive impacts on the market

A third benefit to eMortgages and eClosings is the positive impact they can have on the real estate market. With quicker turnover time in the mortgage process, we see faster liquidity in the secondary market and quicker inventory turnover.

A Note about Online Notaries

Online notarization is a relatively new concept that utilizes audio-visual technologies and electronic signature methods to provide remote notarization for legal documents. It’s technologies like this that make eMortgages and eClosings possible. In fact, there’s even an app for quick and easy document notarization!

You may want to consider holding off on using services like this, though. While online notary technology allows for easy adoption of the eMortgage and eClosing process, there’s no regulation regarding online notarization in most states.

ALTA wants to change that and provide protection for those using remote notarization services. While ALTA doesn’t endorse online notarization, they are currently collaborating with the Mortgage Bankers’ Association (MBA) to develop model legislation that would serve as a framework for states to adopt a remote online notarization process. The model legislation would ensure uniformity across the country with regards to core principles such as security, data standards, privacy, and consumer choice.

For more details about the proposed model legislation and why it’s an important step, see ALTA’s website.

Takeaways

While the technologies are not yet accepted in DC or Maryland, now might be a good time to assess the lenders, notaries, and title and settlement companies you work with and ensure they’re capable of leveraging the benefits of eClosings and eMortgages. These options are where the market is going, so it’s best to be prepared for the demand.

By becoming an expert in the eMortgage and eClosing process, and offering your clients the many options that come along with this trend, you’ll have an advantage in working with millennials and clients who are living out-of-state and overseas but purchasing locally. And that could give your business a big boost!

Want to learn more about eMortgages? Check out Fannie Mae’s website for an eMortgage learning series, toolkit and more.

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