Technology has evolved how almost all business is done in today’s economy. Yet, the mortgage industry has been a bit slower to evolve than most other industries. It still requires a lot of paper pushing with so many documents to print, sign and notarize between all the parties involved. It makes one wonder how far we are actually away from fully digitized “eMortgages.”
Buying a home (or any type of real estate) is the biggest purchase that most Americans will ever make. So, it is somewhat easy to understand why the legal contracts and documentation are so in-depth. However, there has been more and more of a push lately to make the mortgage lending process as digital as possible. The technology is out there. Perhaps it’s about time we use it.
Recently, the Government National Mortgage Association (GNMA, aka Ginnie Mae) announced it was moving forward with a pilot program that would accept eNotes (electronic promissory Notes) for mortgage loans. Ginnie May is the government agency that issues mortgage bonds which are backed by Department of Veterans Affairs (VA) or Federal Housing Administration (FHA) loans.
Hold That Thought…
It is a significant step forward, but Fitch Ratings is suggesting that a fully digital mortgage system (eMortgage) is still probably several years away. Fitch Ratings is one of the “big three” credit rating agencies along with Moody’s and Standard & Poor’s. Naturally, they have their finger on the pulse of the mortgage market, and eMortgages have been a big topic of discussion in recent years.
There are mortgage lenders like Quicken Loans (under the guise of Rocket Mortgage) who have been able to successfully digitize the mortgage application process. However, that’s only the very front-end part of the mortgage lending process. You can apply online, but there is still plenty of paperwork that will be produced before the actual loan is finalized.
The Challenges Facing eMortgages
There are numerous challenges that the mortgage industry is facing when it comes to full digitization. The biggest is perhaps the use and acceptance of eNotes. Traditionally, a promissory note is a paper document that requires notarization. It’s not hard to produce digital promissory notes, but there is still some gray area regarding the legal enforceability of them as binding contracts. Another concern is privacy. Data hacks and scammers could be a serious threat to a completely digital mortgage system.
Major players like Ginnie Mae, Fannie Mae, Freddie Mac, Wells Fargo and Quicken Loans have been pushing eMortgages and digital loan documents. At the same time, not all states or counties support eMortgage technology. Only about 30 states and 60% of U.S. counties can currently support digital mortgage contracts.
“Despite the industry’s enthusiasm for automation, widespread eMortgage adoption remains several years away, slowed by several obstacles,” according to a report released by Fitch Ratings. “While the mortgage industry focuses on borrower-facing automated technology, full eMortgages have remained elusive in the non-agency space. Originators and servicers will need to address concerns regarding enforceability, required technology, system security and showing borrower consent.”
What Do You Think About the Idea of eMortgages?
There is a lot to like about the idea of a fully digitized mortgage lending system, but clearly there’s still a lot of work to do before eMortgages are a widely accepted form of mortgage loan transactions.
What do you think about the idea of eMortgages? Let me know what you think at firstname.lastname@example.org or call Transparent Mortgage today at (619) 701-3906 for help with your traditional mortgage loan. After all, sometimes it’s nice to talk with a real person who can help you make the right mortgage decisions. That personal touch is something that will certainly be missed if eMortgages become the norm.