Truliant FCU Helps Pave the Way to eClosings

Another milestone in the passing of paper came this year as a North Carolina credit union became the first to transfer a mortgage to the Federal Home Loan Bank of Atlanta as an electronic document.

Truliant Federal Credit Union of Winston-Salem, N.C. ($3.3 billion in assets, 270,834 members) transferred the first electronic promissory note (eNote) to the FHL Bank’s Atlanta region on March 26. It was completed on a video conference call using Truliant’s DocMagic eVault and the Mortgage Electronic Registration Systems (MERS) eDelivery system.

Lenders, buyers, sellers and real estate agents have long wanted to skip the paper fest of traditional mortgage closings, but COVID-19 gave the movement toward electronic closings more urgency. States provided special dispensations to limit in-person meetings.

Proponents said electronic closings help lenders streamline workflows and increase efficiency by removing manual steps and allow loans to close quicker.

Rob Kovach, FHL Bank Atlanta’s chief credit officer, said banks and credit unions have become increasingly interested in using eNotes as collateral. “This initial transfer demonstrates that we now have the ability to meet this growing demand,” he said.

Beth Eller, Truliant’s vice president of mortgage services, said credit unions have been able to send electronic mortgages they are selling to Fannie Mae and Freddie Mac for about a year, and Wells Fargo has begun buying eNotes.

However, credit unions tend to keep a large portion of their mortgages in their portfolios. To use them as collateral to receive funding from Federal Home Loan Banks, they have had to send paper documents.

Eller said the eNote transfer is significant because it means mortgages that credit unions plan to hold in their portfolios can now be closed without pen and paper through electronic underwriting, signatures and electronic vault storage.

When a closing is completed, the eNote is tamper-sealed and registered with the MERS eRegistry system, which also indicates the location of the authoritative copy. The eNotes cannot be altered without the change being recorded on a digital audit trail, and the note cannot be lost.

“You’re starting to get adoption across the industry from the big players,” Eller said. “The Federal Home Loan Bank getting into the game is huge. When you get their seal of approval, you know there is a safe way to transmit it.”

The FHL Banks have been working since 2017 to develop the many components necessary to allow their individual members to pledge eNotes. Atlanta is one of the first of the 11 in the system to reach the pilot stage, which is intended to test the infrastructure necessary to allow a limited number of FHL Bank Atlanta member institutions to report eNotes as collateral.

Eller has led the team developing the process for Truliant and worked closely with the FHL Bank Atlanta’s eNote program.

In order for the transfer to be effective, Truliant met a series of standards for eSignatures, eNote documentation, eClosings, eRegistry requirements, eNote vault requirements and servicing system requirements.

Eller said the barriers to getting a comprehensive system in place required some technology wizardry, especially around security. But much of the work over the past 20 years has also been around gaining acceptance from state regulators and developing protocols that were both effective and acceptable to lawmakers and government agencies.

For example, some states, including North Carolina, require an electronic notary system that involves a notary to visit the signer so they can actually see the person sign a special electronic tablet called an iPen. Some states allow a remote electronic notary system in which the notary and signer meet online with the signer’s identity being verified through a series of questions and a scanned photo ID, such as a driver’s license.

Truliant President/CEO Todd Hall said the successful transfer of Truliant’s eNote was the culmination of years of work by the state of North Carolina, FHL Bank Atlanta and “a dedicated team at Truliant.”

“Truliant completed its first end-to-end eClosing on March 27 of last year,” Hall said. “So, literally, one year later we are the first member to deliver an eNote to FHL Bank Atlanta. This final digital step makes the whole home-buying experience quicker, more accurate and secure.”