FHFA Credit Initiative: Five Areas of Lender Impact



For additional information on how Falcon Capital Advisors can support your advocacy and transition contact Phil Bracken at [email protected] or Jim Voth at [email protected].

Jim Voth of Falcon Capital Advisors on Digital Mortgage Adoption

Jim Voth leads the Digital Mortgage practice at Falcon Capital Advisors, Washington, D.C., where he manages digital transformation engagements for GSE, government, and banking clients. He can be reached at [email protected].

Q: Conventional wisdom is that digital mortgages thrive in a refinance environment, and less so in a purchase market. Is this in fact the case, and has the pivot to purchase resulted in a big drop in eNote origination?

JIM VOTH: Certainly, the prevailing view is that most of the progress to date with digital mortgages has been on the refinance side of the business. Not surprising really since the nation’s largest originator, and by far the biggest source of eNotes registered on the MERS Registry has been a refinance powerhouse.  At the moment there is no industrywide source that specifically tracks and publishes the purchase and refinance split for eNotes. However, there are other large lenders, including the one we’ve already mentioned, who are doing eClosings for purchase as well as refinances.

That said, overall eNote volume was down in the first half of 2022, according to the MERS eRegistry. As a percentage of total originations, however, eNotes are tracking at 6% of all originations, slightly ahead of the 5% they were at in 2021. There are simply fewer of them because overall mortgage volume is down. Purchase loans now make up more than 50% of overall volume, which suggests that lenders are creating eNotes using purchase loans.

The logistics for a full digital closing are easier in a refinance transaction because the lender has more control over the settlement and notarization methods.  But at the end of the day, the manufacturing process for digital mortgages is the same for both purchase and refinance loans.

That doesn’t mean that there aren’t some cultural and logistical challenges when it comes to fully digital purchase loans where the note, security instrument and other loan documents are signed electronically. In a purchase transaction, the seller, or more often the Realtor®, selects the title company. To do a fully digital mortgage, the title company must have access to an eClosing platform with in-person electronic notarization (IPEN) or remote online notarization (RON) capabilities, and of course access to an eNotary. Not all of them do, but this is rapidly changing. The lender can also provide the title company access to these tools via their digital mortgage vendor relationships.

Another challenge is that traditional in-person closing ceremonies are often encouraged by loan officers and real estate agents for purchase transactions. But there is no reason why these can’t remain traditional in-person ceremonies but with electronic signatures and eNotarization (i.e., IPEN).

Q: In a smaller, way-more competitive purchase market, is it wise for lenders to try to introduce eClosings to the borrower experience?

VOTH: One of the benefits of technology is that it gives consumers more options. Viewed from this perspective, lenders aren’t trying to shoe-horn borrowers into a single path. Many borrowers select lenders based on their promise of making the origination process faster and less painful. You know what’s not fast and not without its pain points… being given a pile of important legal documents on the day of closing to read through for the first time and sign while a settlement agent, notary, and potentially others wait on you. I think most people would agree that a much better experience is when you are given a chance to carefully review those documents in the comfort of your own home and, in some cases, sign them before coming to the closing ceremony, which by the way is now shorter because you’ve already reviewed and signed many of the documents beforehand.

In addition to offering a more modern customer experience, eClosings have significant economic advantages for lenders. Recent ROI studies have found that fully digital mortgages can save lenders and title companies over $400 per loan. Given that the most recent MBA numbers show that in Q2 the average lender lost $82 per loan, a gain of a few hundred dollars is not insignificant.

Not everyone will be persuaded immediately, which is why it will take a while before the majority of mortgages are fully digital. But make no doubt about it, those who think we’re going to scrap digital innovation to stick with ink are betting the wrong way.  Fully digital is the future and the benefits are too great to pass up.

Q: What can lenders do to make the eClosing process more “purchase mortgage friendly”?

VOTH: As we’ve mentioned, they can offer borrowers more options. This could include fully remote closings, hybrid closings (i.e., where one or more of the closing documents are signed electronically, be it remote or in-person)) or fully in-person closings ceremonies but with digital signatures. For the foreseeable future I think many borrowers will still want a traditional in-person ceremony for purchase transactions.  That’s why we anticipate an increase in IPEN to enable this latter option.

Q: What can lenders do to ensure adoption of a digital mortgage program across both purchase and refinance?

VOTH: There are several factors that a lender should consider to ensure the successful adoption and scaling of a digital mortgage program. Best practices include executive sponsorship of the digital transformation effort, clear transformation strategies, managing to objectives and milestones, and dedicating resources through full adoption. Not getting stuck in pilot mode is also critical.

Our conversations with lenders, as well as other recent industry research, has shown that internal resistance to change is one of the biggest challenges to digital mortgage adoption. One proven way to move the culture forward is to make eClosing the default setting in the origination process. In addition, a phased roll-out beginning with hybrid digital mortgages where some of the closing documents are eSigned can be an interim step to introduce change more gradually.

Falcon Digital Mortgage View

“To Measure is to Know” – Lord Kelvin

One of the hurdles that advocates of digital lending have faced in convincing their companies to undertake a major digital transformation has been the ability to show hard ROI. Everyone believes in the potential of digital – faster, cheaper, more efficient – but there’s been a lack of hard numbers to prove it – until now. Recently two different surveys, commissioned by Notarize and ICE respectively, drilled down into the benefits of eClosing solutions and put hard numbers against them. Notarize’s study found that lenders can save up to $444 per loan and title agents up to $100 per loan when using an eClosing solution. ICE’s study found that lenders can save 70 minutes per loan and shave 2 days off the loan cycle using the company’s hybrid eClosing system.

The bottom line is that with an eClosing solution in place lenders can close loans faster with fewer errors and save more money than with an in-person or legacy paper process. These studies are an important step for our industry, and something we look forward to helping our clients understand. – Armando

Wolters Kluwer Acquires IDS

Wolters Kluwer recently announced the acquisition of IDS. IDS will become part of Wolter Kluwer’s Governance, Risk, and Compliance Group, a leading provider of compliance software for U.S. banks, lenders, credit unions, insurers, and securities firms. The acquisition further builds out Wolters Kluwer’s presence in the eClosing space. At the end of 2020, the company also acquired eOriginal.


MISMO Looking to Create Standards for eVaults

MISMO has issued a call for participants for its new development workgroup (DWG) focused on creating eVault standards that improve the current process, enhance digital mortgage scalability and help ensure the seamless transfer of eNotes to facilitate their sale to investors. The new eVault Standards DWG will work with industry participants, government agencies, and other stakeholders to create a single set of standards to streamline eVault operations.


Your MERS Annual Report is Coming

It’s never too early to start planning for your MERS Annual Report. Although it is not due until December 31, MERS servicers can submit the Annual Report beginning in June. Falcon Capital Advisors is one of a handful of approved Annual Report third-party review firms. We can schedule our review of your organization’s MERS policies and procedures to occur any time in the year and then work with you during the submission window to submit your Annual Report to MERS. Contact us at [email protected] to get started.


Servicers Going Digital with eModification

In a recent interview with DS News, Tim Anderson, the President of Evolve Mortgage Services‘ eMortgage Division discusses the benefits of eModification for servicers. Anderson said, “With an eModification, the entire loan modification process – including notarizing the new loan – can all be done online. An eModification enables servicers to process loan modifications more quickly and easily than they would under traditional, antiquated, paper-based processes.”


Snapdocs First to Achieve MISMO Certification for eClosing System

Snapdocs’ eClosing platform, procedures, and policies have been certified as compliant with MISMO’s requirements. Snapdocs is the first, and at the moment only, eClosing provider to achieve this certification from MISMO.


New Hampshire Completes First RON eClosing

Summit Title just completed the first RON eClosing in the state of New Hampshire. As consumers are increasingly demanding fully remote access to facilitate loans and mortgages, states are establishing or expanding RON measures, New Hampshire passed RON into law last year. Summit used Stavvy’s digital closing and RON tools.


Brief Takeaways from MISMO’s Winter Summit By Tim Cooper, Manager, Digital Practice

MISMO’s recent Winter Summit in Clearwater, FL attracted a like number of in-person and virtual attendees: 154 vs. 154. (Full disclosure: I was scheduled to go but at the last minute tested positive and had to go virtually)

Based on the sessions I attended, the overall mood of the conference was upbeat. There was a fair amount of discussion about new people coming into the digital mortgage sector and generally positive outlooks of increased adoption in the new year. For the first time since the pandemic began, representatives from the GSEs were able to attend in person, and they reiterated their goal of keeping everyone focused on the digital mortgage initiatives.

In terms of new technology, the community saw a demo of a new eVault validation tool for eNotes. The project, which was funded by MISMO, was well received by the attendees who felt it will help address interoperability issues.

An update was given on the status of the approval of MISMO version 3, the expectation among the MISMO community was that the doc form would be fully approved by Q2 and most likely would initially be used on other document types besides eNote: for example, closing estimates, appraisal forms, HELOC agreements.

From a government news perspective, Lynne Chandler of Ginnie Mae discussed the investors new APM on eModifications of paper notes.

10.26.21 – Update: New Date for HUD-Held Vacant Loan Sale 2022-1 (“HVLS 2022-1”) – Now December 1, 2021.

The U.S. Department of Housing and Urban Development (“HUD”) has announced an update to the date for the upcoming HUD-Held Vacant Loan Sale (“HVLS 2022-1”). The new date for this sale is now December 1, 2021, which replaces the previous sale date of November 10, 2021.

The sale will consist of due and payable Secretary-Held loans. The loans are first liens secured by 1 to 4-unit, vacant residential properties where the last surviving borrower is deceased. This sale will include increased bidding opportunities for non-profit and state & local government purchasers.

Entities interested in participating can contact the Office of Asset Sales Single Family Transaction Specialist at 1-844-709-0763 or email [email protected] for more information.

For prospective bidders to this sale, please refer to the section on this webpage entitled, For Prospective HUD Asset Sale Bidders, to become a qualified bidder and receive the Bidder Information Package for HVLS 2022-1.

09.16.21 – Announcing the HUD-Held Vacant Loan Sale 2022-1 (“HVLS 2022-1”).

The U.S. Department of Housing and Urban Development (“HUD”) has announced the latest HUD-Held Vacant Loan Sale (“HVLS 2022-1”).

On November 10, 2021, HUD will offer multiple residential mortgage pools consisting of approximately 1,700 notes and a loan balance of approximately $417 million.

The sale will consist of due and payable Secretary-Held loans. The loans are first liens secured by 1 to 4-unit, vacant residential properties where the last surviving borrower is deceased.  This sale will include increased bidding opportunities for non-profit and state & local government purchasers.

Entities interested in participating can contact the Office of Asset Sales Single Family Transaction Specialist at 1-844-709-0763 or email [email protected] for more information.