Digital mortgages slowly making their way into servicing

Servicers are still trying to figure out how they can best take advantage of the growing use of electronic notes and other digital mortgage tools by lenders and the secondary market.

Broader use of third-party data sources and automation to streamline origination processes creates new opportunities for servicers to rethink their internal operations, as well as their interactions with borrowers.

"It's all about the ecosystem. A lot of this is driven by the originators, but for this to work out everybody has to be on board," Simon Moir, senior vice president at vendor eOriginal, said during a panel at the IMN Residential Mortgage Servicing Rights Conference in New York.

But so far, servicers are following the lead of their peers in originations.

"The big thing that's driving this is the originators, they are the ones that are moving into this space and everyone is going to need to support them," Moir said in a follow-up interview. "It's not the magic wand for the servicer. It's not going to solve all the problems for them. It's just going to solve one piece."

Mortgage lenders have originated nearly 350,000 e-notes since they became legal in the early 2000s, compared to about 1 million transactions per month in other forms of lending, noted Moir, whose company provides e-note, e-signing and e-vault technologies.

But with large players in the business encouraging the use of digital mortgage technologies — including lenders Quicken Loans and Mid America Mortgage, as well as secondary market giant Fannie Mae — e-notes are gaining momentum in housing finance, he said.

Also, subservicers are showing more willingness to work with master servicers approved for Fannie's e-notes, said Shane Hartzler, director of e-mortgage strategy and operations at the government-sponsored enterprise. Cenlar, Flagstar, Dovenmuehle and LoanCare all do this, according to Fannie's website.

But some servicers and lenders remain resistant to automating the closing process and everything that comes after it because manual processes are still required for reasons that include differences in jurisdictions' requirements for closings, recording and security instruments.

One common concern is having a partially automated process will be more difficult than a manual one, but "there really isn't that much of a difference" between the two, and the latter may have more advantages, Brian Webster, a senior vice president at Wells Fargo, said during the panel.

Wells is one of five approved e-note servicers listed on Fannie's website. The others are Flagstar, Ditech Financial, Mr. Cooper and WEI Mortgage Corp.