Moody's Signals Potential Positive Outlook of eMortgage Impact on RMBS Transactions

Moody's, one of the big credit agencies, appears to be telegraphing initial consideration of providing more favorable credit ratings to RMBS transactions where the underlying asset is an eNote generated from an eClosing.  

From its March 7, 2017 report RMBS-US: E-Mortgage Growth Will Benefit Loan Quality if Implementation Addresses Legal Requirements, Moody's writes that RMBS “transactions (will be improved) by improving data quality and loan documentation…. A fully electronic mortgage origination process can enhance the quality of mortgage loans by helping borrowers become better informed by allowing them access to mortgage documents prior to closing and improving loan data quality by reducing the number of transcription errors and missing documents that result from manual origination processes.”

While there are not yet sufficient data points for a more formal ratings analysis (yet), a major credit agency signaling a potential willingness to provide a more favorable credit rating to RMBS securities populated by eNotes generated via a digital mortgage process-- or 'eMortgage,' as Moody's uses the term-- could provide material pricing incentives on the Street and in the secondary markets to encourage more widespread market adoption.

Stay tuned...

--Matt Hunoval.   Our firm performed North Carolina's 1st end-to-end eClosing on May 5, 2017.