eMortgage Standards-The Road Ahead for Credit Unions

Ask any lender or homebuyer about the mortgage process and they probably agree that it’s a long, paper-intensive process. From the loan application all the way to the closing table and selling the loan to the investor, the process involves reams of paper, phone calls, overnight delivery of packages and waiting. Today the mortgage industry stands on the threshold of a new way of doing business entirely electronically, which can decrease the time from application to selling the loan, streamline processes and improve customer service. Soon the day will come when lenders and others routinely make the truly all electronic mortgage using digital signatures. Ultimately, an eMortgage is a mortgage where everything from the loan application to investor delivery data is created and stored electronically. This means an electronic process of applying, getting the appraisal, title, notary, closing documents and then signing electronically. And the loan could be electronically closed, sold, delivered and serviced without an actual piece of paper. The technology exists today to do this, and with the passage of ESIGN and UETA the legal framework is in place. Freddie Mac purchased its first eMortgage in 2000. But what’s currently taking shape are uniform electronic data and document standards for all real estate finance industry participants to follow. In January, the Mortgage Industry Standards Maintenance Organization (MISMO) released its eMortgage guidelines and recommendations, which include specifications for implementing paperless mortgages with digital signatures. The MISMO group has more than 500 industry participants, including Freddie Mac, mortgage insurers, credit reporting agencies, land title companies, mortgage lenders, flood insurers and tax service companies. These groups are all working together to agree on e-commerce standards for the industry. This includes building business data dictionaries so that when mortgage information is exchanged between suppliers, distributors and consumers the definitions are all the same; approving industry-wide XML document standards and eMortgage specifications; and promoting technology standards in the industry, such as those standards governing digital signatures. Working from standardized electronic document formats helps facilitate online transactions and enable all parties to share data and documents with each other electronically. The industry needs these standard formats to eliminate the re-keying of information by numerous parties and increase the integrity of mortgage data. Connectivity between a company’s various systems and those used by other participants that all follow the same standards makes it easier and more cost efficient to implement eMortgages. Over time if the majority of real estate finance industry participants adopt MISMOs standards, it will help accelerate the adoption of eMortgages, and lenders and consumers can reap the rewards of having access to information with just several clicks. Consider electronic property valuations, where lenders can electronically send relevant data from the loan application to appraisers, check status in real time and electronically deliver and store appraisals with a click of a mouse. Now numerous people can view it and email copies to whomever needs them, but the original appraisal documents remain where you electronically stored them. No more going to paper files, making copies, sending faxes or couriers to deliver documents to the appropriate parties. Or worse yet, realizing that a paper document has been misplaced, and then going on a fishing expedition in the office to find it. And then discovering that it was left in the copier or accidentally put into another loan file. Thus, electronic documents can result in an incredible reduction in time and frustration. Another benefit of the eMortgage is electronic document storage. One of the headaches for lenders is dealing with the physical storage of loan files after the loan closes. An alternative to the cost and burden of paper file storage is electronic storage. Electronic mortgage loan documents can be stored in an “e-vault,” allowing the consumer, the lender or any other authorized party to go back and examine the documents. The cost savings for a credit union is tied to their level of process integration. Integrating the data and the documents into an automated loan application, processing, closing and funding flow can lead to reductions in mailing, faxing and printing costs as well as increased efficiency in post closing quality control and document storage. With easier access to information credit unions can respond faster to customer requests and can see increased savings due to streamlined electronic processes. Besides supporting industry standards, Freddie Mac is also working with technology provider BCE Emergis to make available later this year electronic loan closing and electronic document access and storage capabilities. These tools will be made available on loanprospector.com as well as other technologies that will enable all parties in a mortgage loan transaction the ability to review and sign documents on-line. Then the electronic loan files can be stored in an eMortgage vault where they are accessible anytime, without the physical barriers of business hours or remote warehouses in both a secure and reliable manner. These services will also provide electronic loan file delivery between lender, servicer and investor; storage and real-time access to electronic loan documents and other file documents; and the ability to transfer ownership rights and servicing rights. Freddie Mac makes available to credit unions many electronic services to streamline their mortgage loan process. As part of Freddie Mac’s strategic alliance with CUNA Mutual Mortgage Corporation, credit unions can work with Mortgagebot – a leading provider of Internet-based mortgage loan origination systems. Mortgagebot will design, build and host private-labeled mortgage origination web sites for credit unions and other financial institutions with links to Freddie Mac’s Loan Prospector automated underwriting service. Credit unions can also take advantage of Gold Cash Xtra on the Web, Freddie Mac’s cash execution technology for selling servicing released or servicing retained mortgages directly to Freddie Mac. In addition, credit unions can use Freddie Mac’s loanprospector.com Web site which features automated underwriting and makes available integrated vendor services-an electronic fulfillment management service that allows lenders to order, track and receive results on appraisals, flood determinations, title products and property surveys from their service providers. Freddie Mac believes that making integrated tools available to the primary mortgage market furthers its purpose of providing homebuyers with continuing access to a stable, reliable and affordable supply of mortgage financing. The mortgage marketplace is increasingly witnessing what the Internet enables, and recognizes the positive impact it has on the home buying process. All in all, it means credit union members will have choices. Members will have the option of completing all aspects of a mortgage electronically, or all paper-based or a combination of both. Adopting industry standards that utilize enabling technologies and taking advantage of eMortgages gives credit unions another opportunity to enhance their member’s experience by making the process of obtaining a home loan easier, faster and more convenient.