Recap: eClosings / Digital Mortgage & the 2017 American Mortgage Conference

Wrapped up the 2017 American Mortgage Conference on Friday.   The story told of North Carolina's 1st true end-to-end eClosing, on May 5, 2017 in Hickory, North Carolina was the successful culmination of a near-year-long collaborative effort of the participants of the North Carolina Secretary of State's eClosing Pilot Program.   Without the leadership & vision of Secretary of State Elaine Marshall, none of this would have happened.

As one of the architects of that effort, I was thrilled my law firm closed the state's 1st end-to-end eClosing.  More illuminating, however, was the perspective of those from different segments of the consumer mortgage ecosystem on my panel, who each discussed the benefit and challenges to adoption at scale to their respective segments that eClosings / digital mortgages would bring.   And if there was one common theme as to the challanges: scalability is essential for widespread adoption and for realizing the many benefits.

1) Dave Worrall, President of Loan Care Servicing.   Loan Care is a top-20 U.S. mortgage servicer.   

Benefits.  Attributed 80%+ of consumer complaints about mortgage servicers to bad data in the loan onboarding / offboarding process, and the expense associted with loss mitigation efforts in locating copies of hard media documens.   Nearly all problems and expenses associated with these two servicer-side items would be eliminated with ditigal mortgages and the liquidity of the MSR market would be greatly enhanced.

Challenges.  Until scale is reached, setting up two separate operational processes-- one for the pen & paper world and the other for digital mortgages, would inject organizational / process complexity.   Likely to be more expensive in the short run, with savings being realized at scale.

2) Ozie Stallworth.  Deputy North Carolina Secretary of State.

Benefits.  For originators contemplating adoption of eClosings, North Carolina is an ideal state to pilot efforts before expanding enterprise-wide.  The legal infrastructure and e-friendly environment is ideal: e-notarization has been legal for years, and nearly 95% of the state's population live in counties that accept e-recorded documents.

Challenges.   North Carolina now has a track record.   Getting the word out that 'the water is warm here in North Carolina, take a swim!' needs to be communicated.   Additional depth and participants among mortgage servicers and investors would be helpful.  

3) Mike Cafferky, eMortgage Program Manager, Fannie Mae.  

Benefits.  Many new regulatory / compliance elements of consumer mortgage  almost compel a more digital experience: TRID enforcement and associated penalties, the uniform residential loan application, dramatically increased HDMA data gathering & reporting requirements, both internal and external audit trail requirements, and many more.   The relative burden of these regulatory / compliance requirements, and exposure to regulatory / compliance enforcement penalties, becomes dramatically reduced with an enhanced ditigal mortgage.

Challenges.  Much greater inter-operability of the various e-Vendors / e-Solution providers is essential.   Without a willingness of e-Vendors / e-Solution providers to 'play in the sandbox together,' scalability and widespread commercial adoption will not be possible.   Common misperception that only a full end-to-end eClosing provides benefit.   As the market matures, a good starting place is a hybrid solution.

4) Ken Sykes, President of North State Bank Mortgage.

Benefits.   Enhanced consumer experience, market demand.   Dramatic simplification & efficiency gain on the back end, post-closing, from QC efforts in funding approval, to reduced warehouse lending costs, to increased utilization of existing capital due to 6x-10x reduction in time for sale & delivery to secondary markets.   All of this means reduced borrowing costs from warehouse lines, greatly shortened 'clear to close' funding of loans, more loan production capacity at same capital levels, reduced exposure on interest rate hedge, and more.

Challenges.   Scalability with enterprise cultural attachment to pen and paper.   Capable and ready partners in the settlement services / closing attorney space. 

Many, many thanks to those on my panel discussion to contribute and provide great insight into their respecitve areas of expertise and visibility.