The use of eMortgages (a mortgage with an electronic promissory note) and other electronic closing documents is growing among mortgage lenders. According to a survey conducted by Stratmor last year, 40% of lenders had hybrid closings in place by the end of 2020 – and  the COVID-19 pandemic has only accelerated this trend.

90% of respondents to a Forbes Insight survey agree that consumer expectations for a more robust digital mortgage experience are rising dramatically.

However, many lenders have yet to adopt the practice, leaving them to incur the costs of unnecessarily slow, potentially error-prone and labor-intensive paper processes. While the eMortgage ecosystem continues to evolve, there are still some challenges, such as a lack of uniform adoption of eRecording at the county level, variability in counterparties’ digital closing policies and a lack of seamless integrations between technology vendors.

Common Obstacles/Solutions to eMortgage Implementation

Here are some of the common obstacles lenders face when adopting eMortgage practices and how to tackle them:

  • eMortgages are not accepted across all of a lender’s counterparties. This limits the number of eMortgages a lender can originate because it needs to ensure compliance and protect the liquidity of its loans across multiple counterparties. Lenders also lack the tools necessary to systematically determine the “e-Eligibility” of their loans, further limiting adoption.
    • Solution: Seek out a forum, comprised of peers, that have successfully or are currently adopting eMortgage, to share best practices for digital integration among counterparties. It’s likely your peers have gone through this process and can offer tips to ease adoption; this case study shows how one lender did just that. For additional resources, refer to the list of Freddie Mac approved eNote Warehouse Lenders and Servicers.
  • Lenders need eMortgage technology components that are not native to core mortgage platforms. While all digital mortgage closings require eSignatures and an eClosing platform, eMortgages require the use of SMART Doc® eNotes, eVaults, MERS® eRegistry and MERS® eDelivery. Lenders’ options to procure some of these additional eMortgage components are often limited due to a lack of integrations with their POS, LOS, or doc prep providers.
    • Solution: The Freddie Mac Reviewed eMortgage Vendor List is a great place to start to understand technology options that can help you with generating, storing, managing, and transferring eMortgages. The Freddie Mac team works closely with these technology providers to improve their integrations with POS, LOS, or doc prep providers. Email the team to request additional details.
  • Lenders must strategize to address business process impacts and change management tactics to effectively implement eMortgages. From a change management perspective eMortgages, of all digital mortgage closing types, have the most significant impact on lenders’ operations (e.g., warehouse lender delivery, investor delivery, servicing, foreclosure). These impacts cascade both upstream and downstream from the closing process. Most lenders do not have the experience with eMortgages to recognize these impacts or to incorporate the needed process changes into their existing workflows.
    • Solution: A phased and iterative approach to eMortgage adoption can help with internal process changes, as it allows time for tweaking the process based on lessons learned. Freddie Mac’s 5-step implementation roadmap can help you plan for your eMortgage rollout.
  • Lenders should coordinate eMortgage implementation processes with each of their impacted counterparties and technology providers. This includes eVault providers, MERS, warehouse lenders, servicers and investors. The variance across these counterparties’ and providers’ implementation processes creates a significant amount of complexity, causing resource constraints and delays.
    • Solution: A phased and iterative approach should help. As an example, some lenders have started with investors that allow comingling of eNotes and paper notes to minimize their operational complexity. Others have started with counterparties that are already approved by Freddie Mac to minimize delays in rolling out their eMortgage implementation.

To help overcome these obstacles, digital closings technology provider Snapdocs is now offering the eMortgage Quick Start Program. Freddie Mac, a pioneer in the eMortgage space, is supporting this program by providing the necessary expertise and best practices for eMortgage implementation and delivery.

Together with Snapdocs, Freddie Mac is solving the common challenges lenders experience in adopting eClosings by offering both the tools and support needed to effectively implement the use of eMortgage technology.

Start Delivering Today

Ready to get started? For more information please reach out to the Freddie Mac eMortgage team at [email protected] or click the link below.

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