Key Takeaways:
The session will cover how to:
- Seize key trends: See how the mortgage industry has changed and what it means for your organization's closings.
- Manage constraints: Learn about the 5 key factors of e-Eligibility and how to account for them within your organization.
- Set your digital closing strategy: How to practically apply these factors to set an achievable digital closing strategy that meets your organization's goals.
- Leverage the Exchange: Learn what the MISMO e-Eligibility Exchange, Powered by Snapdocs is and how it can help your organization optimize the digitization of your closings.
Transcription:
Announcer (
Hello everyone. Welcome to session two for track four. it's an exciting one around, eligibility data and how it can change, the arc of digital closing adoption. with that I will pass it to Bonnie Cinok, who's moderating, from, National Mortgage News, and I'll let her do the intros. Thank you.
Bonnie Sinnock (
Hello and welcome to our panel today on how e eligibility can change the arc of digital closing adoption. I'm your moderator, Bonnie Cinok, Capital Markets editor at National Mortgage News. And with me today our Camelia Martin Vice President of Industry and Regulatory Affairs for Snap Docs and Jonathan Kerns Vice President product at Mismo, also known as the Mortgage Industry Standards Maintenance Organization. They may tell you more about their expertise and how it pertains to today's topic. As we go today, we'll be discussing questions such as, what is e eligibility? Why is the collection and aggregation of data important in achieving a digital closing? And what challenges are involved in the process? We'll also talk about why that process is fragmented and how lenders might be able to navigate it in such a way that they'll also be able to fit it into a variety of transactions that may be idiosyncratic. Camillia and Jonathan also plan to tell you about the five key factors of e eligibility, how to account for them, and how to apply these to set an achievable digital closing strategy. In addition, you'll hear about a resource their organizations are offering with the aim of helping you achieve a more efficient closing process. That brings me to the question of why digital closings are an important topic now, and certainly if they can deliver efficiencies in a market where profitability is not the given, it was over the past two years, they are the latest Mortgage Bankers Association. Numbers show us that the majority or 50% of companies in the business were profitable in the second quarter, but another 43% weren't. And, that means this is a business where everyone needs to put at least a little more stress on operating efficiently to be sure. Savings from technology implementation and process reengineering don't always materialize overnight. But anyone who knows the cyclical mortgage business probably knew the origination boom over the last two years wouldn't last forever and saved accordingly. And if they did, the slower time could be one in which there is bandwidth to add new automation. Another reason closing technology is important now is that survey show it has customer service value that is increasingly important in a market which mortgage lenders are competing to reach a shrinking pool of potential borrowers. National Mortgage News's Parent Company Horizon found in one study you may have heard about earlier today, that nearly half of borrowers think faster closings would improve the experience involved in getting a mortgage. In addition, separate research from Strat Mar Group and Snap Docs found that the closing process document collection and processing are responsible for 85% of mortgage customer satisfaction or lack thereof. And a growing number of players seem to be interested in those savings. I think Camillia might have some numbers she can share later on this, but they show, technology really did get a boost during the pandemic in this area. We saw e note registrations, for example, jump marketly over the last couple of years. Now, some of that, of course, was tied to the need to work remotely, but part of it also was the fact that the market is finding ways around a central challenge in digital closing adoption, which I think of as the, which came first, the chicken or the egg problem. We were preparing this panel. We talked a lot about this, and it's a problem that eNotes are a good example of prior to say 2019 enot. It's got a lot of buzz, but progress was limited because a lot of people theoretically wanted to get on board and adopt the technology, but not until everybody else did. So, it really took not only the pandemic, but a push from big players like Fannie Mae, Freddie Mac and Gny Mae to drive adoption. And digital closing could probably go a lot further if you could do to more to answer that question of how the heck do you get enough people to do something when they're all waiting for somebody else to do it? Camellia and Jonathan think they've come up with an answer to that question and they're gonna tell you why they believe a digital closing adoption is literally worth it. But before we get there, let's back up a minute and talk about what goes into making a loan e eligible and ready for digital closing in the first place. Camellia, can you fill us in on that?
Camellia Martin (
Yeah, absolutely. Thank you, Bonnie. So I wanna start by saying, I'm sure today you've heard lots of different, stats and anecdotes about cost savings associated with digital closings. these are now, well founded effectively, facts that we know that you can save in the hundreds of dollars regardless of the type of closing, the type of digital closing that you do. And enot are where we see a significant lift, in the multiples of hundreds. So you might be wondering why, why is adoption where it is today? Why are we still just under double digit percentage adoption of enote? Why do we even have all of these different closing types today when the technology has been around for, for such a long time? Why do we have hybrid digital closings? Why do we have hybrid with Enote in addition to full closings? And the answer is really one about policy. It it's not so much that the technology doesn't exist. It's not so much that lenders don't see the size of the opportunity or have made these investments in technology. But a lot of it comes down to you still have 40 different states with 40 different e notarization requirements. You have thousands of counties, counties with different requirements associated with re-recording documents that get e-sign or e notarized. Lenders typically have multiple counterparties that they sell loans to, that they use to fund those loans. And, all of those participants have different requirements associated with what they will or will not accept when it's digitally signed. And so for a lender at this stage of adoption, it's not so much about proving the value, but it's about figuring out how digital can I get with my closings, and then how can I optimize each and every closing? So, it's as digital as it possibly can be, the best borrower experience, of course, but also the most profitable for each and every single loan when each loan is going to have different characteristics, different states, different counties, different loan types, and a host of different counterparties that will need to interact with it. And, so when we talk about this concept of e eligibility, I promise we were not just looking for another word with, the letter E or multiple doesn't just roll off the tongue, does it? maybe for us, cause we talk about it so much, but, but there's really five factors. And these five factors can apply at, at an organization level. An organization can look at this from a, how e can my organization be? How do I set goals for digital closing adoption that takes into consideration my footprint, my counterparties, my loan types, but also at the loan level, at the transaction level. How can I make sure that all of these factors are being considered intelligently and it's being operationalized in a way that programmatically my staff is able to make the best closing type decision for each and every loan? That's where we talk about eligibility. So, there's five key factors. There's counterparty requirements. We, talk about that in the context of investors, servicers, warehouse lenders, GSCs, federal home loan banks, Anyone that's going to have an interest in those loans need to interact with those loans. Take, take that collateral in. Do they have, policies that are willing to accept those types of e-sign closing documents? have they operationalized their acceptance of e-closing? You have county recording. So, the supplies for documents that are e-sign and e notarized. So in that closing package, we know there's always, in addition to the security instrument, often one other doc that might need to get notarized, some of these docs need to be sent to the county recorder's office, the public land records for recording. But we still have counties that maybe they accept you recording, but they're not re-recording a mortgage or a deed of trust just yet. You have title underwriter restrictions. So, sometimes title underwriters will take a much more conservative position than let's say the lender or an investor will take. And so on top of, legal requirements for e notarization, you'll often have to take into consideration what the title underwriter will accept. And then of course there's e notarization regulations. Lots of lots of progress over the last several years, especially with covid. But you also have differences from state to state and certainly differences between remote online notarization and in personal electronic notarization. Last but not least, often the forgotten counterparty, is settlement agent. And we talk about this not in the sense of whether or not your settlement agent will accept a digital closing, cuz typically they won't have a policy that would prohibit it. They're usually following the title underwriters requirements or instructions that they receive from the lender. But it's really about how ready or capable or even enabled are your settlement partners to help facilitate your digital closings. This often comes down to experience that comes down to how well they've been coordinated and collaborated with. Or it can even be something as simple as they might have processed some closings, had a bad experience and got a little bit gun shy. So, this is all of the information though that needs to go into the E eligibility decision at a loan level. And so when we often look at why the arc of adoption has not progressed the way we all thought it would've, it really comes down to a lender's ability to be able to operationalize this and equip their staff with the information necessary to be as easy as possible on every loan.
Bonnie Sinnock (
So Jonathan, I wanna hand it off to you. Talk about MISMO and the work that we're doing.
Jonathan Kearns (
Thanks. So Camillia mentioned a lot of the criteria around that and what we hear in talking to lenders. So there are over 130 lenders who have done production eNotes, right? But we, we, so adoption, we've got over the adoption hurdle, but it's really about scalability. A lot of 'em have done five 10 a month that, but they're not doing a large percentage. There's still very few that are doing a large percentage of their volume in eNotes. And so when we talk to 'em about it, it's really two simple things. They're saying, I don't know how digital each of my mortgage can be. I know this one loan program I can do, I know this one over here, I can do, but I'm not sure whether, my correspondent over here does it, or this warehouse provider does it. And, so I need access to that information at a loan level of understanding, Hey, what can I do for this property, with these counterparties, with this settlement agent? And what we realized in looking at that to break down that barrier of scalability is all of that information is out there. I'm sure if you talk to half the technology platforms in there, right now, they'll say, Oh, we have that. And they do, they have a portion of it, but there wasn't a single repository with all of this information. There was all of these different areas, companies that had certain informations and associations that had this information. So what MISMO did in partnership with SNAP Docs is came together and built a centralized repository for all of that e eligibility criteria in a single source of truth. So, that way everybody in the industry can have access to it free of charge. So, you see a little bit of page on there, Oops, sorry. there, right now, there's available both via user interface. You can can come to the MISMO website and do it. And there's also the ability to integrate via api. So all of you technology platforms out there have the ability to integrate this into your existing platforms and provide this information to all of your customers free of charge, right? Every MISMO member gets it for free. And all of the MISMO innovation fee payers get this for free. Now, if you're a technology platform and you're MISMO member, your customers don't have to be MISMO members, you get that. You give that to them. So where do we get all of this data, right? We talked about centralizing all this. Well, we go straight to the sources a lot of the times. So when you talk about, e County recording data, we go to PRIA for settlement agent readiness, we go to ALTA, we have, NNA involved, we have MBA involved for their state run survey. So, all of that information is, is these associations already collect this information, but there was no centralized repository for it. So we've partnered with all these associations and then we're going straight to the source for all the counterparties. So we're going to all the title underwriters, we're going to all of the warehouse providers, all of the servicers. So this is a community, application. It's only as good all those contributors, It's only as good as the information they put in there. We just simply created a repository for us all to use to get that information in there. So, that's what e eligibility is in. And we have already had, we just launched it, we have about 15 platforms right now integrating into the API and we've had 500 unique visitors that have done about 2000 inquiries on it to date thus far. So that's just people coming to the website, entering their information. It's incredible to see the amount of information they're looking for and a lot of it's servicer right now, believe it or not. Right. We get more hits on servicer than anything else. Yeah.
Camellia Martin (
Interesting, yeah. So if, like, if you wanna talk about what this could look like in practice, I know that we just looked at the UI for example, but what Jonathan's describing is really the future of how these eligibility decisions can be made. So if you think about it at a certain milestone in your LOA, when you have the loan criteria to a certain degree of completeness, a tool like this could tell you in this state, in this county, for a loan that's intended to go to this investor, the borrower type is an individual. There's no POA. These are the available digital closing types for this loan. And that allows your team to feel better equipped when they're making these decisions better equipped when they're offering borrowers different closing type decisions. But no, and Jonathan and I talk about eligibility all day long and we study this a lot. No, human being that we've come across yet is gonna have the capabilities of memorizing all of these requirements. and more importantly, they're requirements that are changing. They're changing in the right direction, but the pitch alone also makes this incredibly difficult to manage. So in addition to, I think the comment you said about it not being available in a single source and it being dispersed, there's so many changes each and every month there's a new investor that's announcing accepted. So there's a new warehouse lender, and sometimes within those acceptance policies, there's exceptions, right? Or, often there's folks that are starting smaller and they're piloting. And so you can't always make an assumption that because someone is accepting eNotes, that they're accepting 'em for every loan type. And so it's this type of, more granular criteria that's really what's gonna fill that need.
Jonathan Kearns (
Yeah, that's a great point is that, it changes so rapidly. You have a bunch more correspondence coming online and you may have your team may have talked to them 12 months ago and they're like, well use Wells as an example. Wells is saying, Hey, I'm, not taking Ron now. They take e Ron and all e noters, after the last six months. So all of these different aspects, it changes so rapidly and, that's why if you integrate it into api, you can make those calls in real time and find out what's going on with that information. Right now it's so important and all the way through the life cycle of the loan. So today, right, we typically look up the, whether the e eligibility at the end of the process when we're ready for closing, but really we need to start it at the initial loan application. And then the underwriters need to understand it because there's in the life cycle of that, of the origination process, one person can stop it, right? The settlement agent may go, You know what? I have 10 closings today. I don't want to do these two E. And they weren't sure about it cuz it just got thrown on 'em that day. The underwriter may go, Oh yeah, I'm not sure about that. The closing, the post-closing QC say, Hey, we don't do e as long as it's in their processes and they understand that it's coming down the pipe before it's just thrown on them. Cuz it is a business process change in their world. So they need to be prepared for that. It's not the same process that goes on in the paper world. In fact, it's a heck of a lot easier when they're doing e So building it into all of the applications throughout the origination process is really the key. We always, in marketing, right, you talk about you need seven, you need to see it seven times before you remember. It's the same thing with this information, right? And it's changes every day.
Camellia Martin (
Yeah, that's another good point. I think we also have a tendency as human beings to think of things as black and white. Oh, it can be a digital closing or it can't. But back to the spectr I think having a tool like this, wouldn't you agree, Jonathan, that even if it's not eligible for a full e-closing, even if it's not a full digital closing with Ron or some form of e notarization, allowing the lender to understand this could be a hybrid with Enote and a hybrid with Enot closing is gonna still save your borrower an hour at the closing table and on average $300 for that loan for the lender. Those are significant savings. And I think the vast majority of eNotes that have been closed to date have not actually been full E closings. That's another myth. Most of them are in fact some form of hybrid where you have some documents that are wet ink signed and the enote and some other documents that are e-sign. So it really allows you, it's probably a horrible analogy, but not to throw the baby out with the bath water, even if you think you can't do a full e close.
Jonathan Kearns (
And I know on the last session they talked about the crawl, walk, run, but you can do it in different aspects because we are seeing a much more monetary savings aspect in the E-note. And so you can start the hybrid there of doing the e-note because just on your warehouse line, just on the float of that, the majority of the people have a large volume. They're seeing multiple days of being able to sell it. I was talking to a lender two weeks ago in their shop, their paper notes are taken four and a half days to perfect and close and sell, and their eNotes are half a day, right? So that's a huge savings on their line of credit for their warehouse lines. So those are easy numbers to do.
Camellia Martin (
Yep. E even with BestEx, I think a typical or common hurdle is, well I sell my loans best x I don't know where they're gonna go post closing. It's difficult for me to make a digital closing determination. You can still, typically most lenders that we worked closely with will still be able to say, based on certain loan characteristics, based on my historical delivery, these are loans that are going to go to this subset of counterparties and maybe not every single counterparty. And then take the most common denominator and say, well, all of them will accept a hybrid or all of them will accept hybrid with enote. And so you're still able to get as digital as you possibly can. And another interesting, actually some analysis that we recently did with another lender was when they looked back and saw, how they were processing a pool of loans and how they had delivered them, even if it wasn't best X pricing, they still saved more when they close it as an enot than when they, than when they had delivered it as best X. So sometimes that difference, not always, but sometimes that difference, it can be meaningful and you have to look at the true cost of how you're originating and closing that loan and not, simply thinking about it as like the actual pricing on the secondary market.
Bonnie Sinnock (
That's interesting cuz I've heard a lot from people about that being one of their big roadblocks and that, they aren't sure who they're gonna deliver the loan to. So they're, that makes the whole process more complicated. But it sounds like that's kind of your suggestion to deal with that situation.
Camellia Martin (
Yeah, it's not always as easy as I'm making it sound. Sometimes it can be more difficult, but more often than not, if you dig down, you can sort of confirm like, okay, this is a conventional loan. I'm always delivering these to the GSCs or to these other three aggregators. And more often than not, there's at least some commonality amongst those policies. So, but it's keeping you from then just reverting to what, which is what the tendency is when you're not exactly sure and you don't have that information at your fingertips.
Jonathan Kearns (
Like I said for the tool, so there's multiple uses for this tool, right? Is one, is the ability to provide the information to the lender community of what's going on. But the other one is when all the API integrations are complete and we're getting more inquiries back, we can utilize that data to go out to the counterparties and say, Hey, did you know that you're getting? Cuz sometimes you'll get, especially in the warehouse side, you'll get people saying, Nobody's asking me for it. Well, they got, they got tired of asking you for it, right? Your sales people didn't want to do it. So now we have real data of what people, how many lenders are inquiring about does this warehouse provider do it, does this service or do it? and so we've already got some of that data, but once we really get an API, instead of having, 2000 inquiries, we're gonna get 3000 a month, 4,000 a month, then we can really provide value to the counterpart saying, See, these are the people that are looking to do business with you in an e manner. So, that's where power of this e eligibility exchange will really come into play is it'll open up that liquidity market, it'll open up the title underwriter, insurer ability. It'll open up the settlement agent readiness, all of those aspects, it'll help open those doors up.
Camellia Martin (
Reminds me of a conversation. I think Jonathan, you and I have had multiple times, which is we all sort of wish we didn't need a tool like this. And eventually a tool like this won't need to exist because there hopefully will be enough uniformity and acceptance where at least how we're talking about it today becomes obsolete. But it's no different than like what we were talking about with, every other milestone event in the loan production life cycle. We're using data to make better, smarter decisions. We do it with underwriting, we do it with appraisal. this is really no different. And if you look at the potential for a cost savings, the potential for a better bar experience, it's an investment that, that I think can be a meaningful one for lenders, especially as you're at the very beginning of trying to do digital closings. Just understanding alone how EU can be at an organization level is the first step.
Jonathan Kearns (
Yeah, absolutely. The goal of this tool is to make itself obsolete, right? So that way we don't have to think about this, that everybody's has it option to do E no matter what they're, what, where they're going to sell it, what program, loan program they're utilizing, whether it's conventional, whether it's, FHA, whether it's in the non QM market, like you shouldn't have to think about it. And so that's what this tool is gonna provide. But, that criteria is hugely important. Understanding all of that information that is on there, right? Because there's a lot of touch points in the ecosystem of an origination process from the time you, from the time you close it to the time you sell it, there's a lot of counterparties that are involved in that. So to get to understand all that, and that's when you talk to settlement agents, they're like, Oh, I don't get why we're not doing all digital run. They only deal with one side of it, right? There's all these parties that are involved and if one doesn't work, then you have to go to the path of least resistance.
Bonnie Sinnock (
What do you see, the role of, sort of the big three, Fanny, Freddie and Jenny being in this new, effort that you're involved in.
Jonathan Kearns (
So, all of them have been very supportive of it, right? They are. In fact, it's helped Jenny look at where, so we have liquidity issues in the FHA market. Jenny's open for business, right? They reopened up all of their, E digital mortgage collateral, program. And so they're open for business. But what, when talking to lenders, we're finding that the liquidity of those notes because of not allowing co-mingling, really, really puts the basis points up there higher on the pools. So, this was able to give Jenny that information and provide that feedback to them of, okay, yes, we've got all these people, but that's why you're not seeing the volume. So, those are the type of things that we're looking at. I think with Fannie and Freddy, getting their ability to provide the information around, closing times and savings on just doing enot, right? That's a vast departure where we were for 20 years, right? I implemented, prior to Mismo, I implemented elosing platforms for 20 years and we took that crawl, walk, run, do your hybrids first. But what we're really seeing is, okay, if you do the hybrids and you don't see a lot of people don't see the efficiencies gained in the monetary, the money gained, then we're not gonna go onto the next step. So if you do eNotes first, you instantly see, the gain in financial aspect. And so, so it's easier, it's a much easier pitch to go fully digital then.
Camellia Martin (
And I think Fanny, Freddy and Jenny were among our first investor contributors. So, that support was of course, very meaningful because it sent the right signals to the market that this is a valuable and beneficial tool. and I think, that is fair to say that like, it could be used, you talked about Jonathan, some of the different uses outside of just from lenders, if I'm an aggregator, if I'm a warehouse lender, it is an opportunity to see like, how do I fall? Where do I fall in comparison to my peers? Am I falling behind in terms of my acceptance policies? Is this becoming an area where I need to become more competitive and make sure I stay ahead of the curve? there's a lot of curiosity often about what people's competitors are offering and accepting and are you aligned? and I think this is again, another value add that that's sort of a forcing mechanism to say, this information is it's always been out there, it's always been public, right? But it's never been in one place and so readily accessible.
Jonathan Kearns (
And not only did the, did the agencies and the GSE see it as a benefit, but look how many associations we had. Like, there was no question about, they're like, this is, this makes sense. It's brilliant, we offer today, but not many people are utilizing it. So, everybody came together, right? Like I said, the four main associations in our industry all came together and provided their information to do that and committed to keeping it updated, right? Cause that's the key is listen, it's not perfect and it changes every day, so to keep it updated, was a commitment on their part as well. And all of them were willing to do that.
Bonnie Sinnock (
Is there anything else folks need to know about kind of how to sign on to get involved with the time commitment's? Like, that kind of thing?
Jonathan Kearns (
I'd say so, try it out. Go, to MISMO's website right now. There's a link up there for e eligibility or it's eee.MISMO.org. You're, your credentials for either MISMO or MBA will work to get into it. No problem. If you're a technology solution provider, there's an email on there, but it's info eee.org as well
Bonnie Sinnock (
Told you we like those.
Jonathan Kearns (
EEE, and we'll get you signed up free of charge. If you wanna see it today, there's Megan sitting back there at the back waving her hand right now. She can do a little demo. She's, she's the Mismo resource, the Mismo facilitator for the E eligibility exchange. She's the one who gets you all integrated and signed up. There's no reason why not to do it. It's free of charge. We're not looking to charge, We don't believe this data should be a competitive advantage. This data should be accessible to everyone. It's what you do with the data that should be a competitive, competitive advantage.
Bonnie Sinnock (
You mentioned co-mingling, which I think is an interesting topic. Do you, it sounds like some of the folks working with Jenny are kind of open to do doing that. There's some chance that might be on the horizon. I don't know if you have a sense of how quickly that may or may not occur.
Jonathan Kearns (
We do and they've stated publicly, so they definitely want to do it. They understand it's a challenge. They it's a technology challenge for them right now, right? They can only see pool level information and so they're working on new applications that are gonna be out sometime in 2023. So it's as far as they'll commit, but they feel with some level of confidence that they will be able to do co-mingling pools in 2023. Now it's a 12 month thing, but at least it's a date. but it goes with the upgrade of their, if you've heard them speak about it, it's their technology enhancements and that's gonna allow them to have loan level detail. So, and I've heard Lynn Chandler say that multiple times in public forumso I don't think I'm saying anything out turn.
Bonnie Sinnock (
Okay, thanks. I think that covered.
Jonathan Kearns (
They have a lot of great information on their website. Jenny Maye, like, they put out a lot of bulletins. They just, a lot of people don't get the information. So go to Jenny's. All that information is on Jenny's website as well.
Bonnie Sinnock (
Right. Great. I was just gonna ask you if you have any parting comments before we leave?
Jonathan Kearns (
I would say the one thing in addition to this, right, we're all here to make digital mortgages more of a reality. We've tried to, as we've done with the e eligibility exchange, we've created a digital mortgage resource center on Mismo. And all it is is a bunch of links to everything else that's out there. So fannie's requirements, Jenny's requirements, Freddy's requirements, all of the e-mortgage certifications that are out there and who's certified. So it's a single source again, to go out to get all of the information, some of the, white papers that Camillia was talking about with the cost savings, all that good jazz. It's just a central repository. So it's a good place to start if you're looking for information.
Camellia Martin (
Yeah, and I think if you're, especially if you're a lender in this room and you're looking at this and you're seeing a lot of value or a lot of potential in your ability to use it, I'd definitely say go check it out. But see who's listed on there, as actively contributing and see who's not, your voice will certainly be the loudest. And I think it's important for this to be truly useful and as effective as it can be, we need broad, adoption by, every type of contributor from warehouse lenders to investors, aggregators. I know we have the federal humble banks that have recently agreed to also participate. but it's a great opportunity for you to have a conversation and see, especially if you know that they're already accepting digital closings. this seems like something that there's no reason not to participate there. Like Jonathan said, there's no cost and really there's only upside for everyone involved.
Bonnie Sinnock (
All right. Thanks so much. That's, our panel for today. we're not taking questions, but thanks.
Camellia Martin (
Thank you. If you have questions, see us afterwards.