Welcome to the era of digital transformation in the mortgage industry. As more lenders use eClosing strategies to complete faster closings on higher-quality, error-free loans, the choice for many lenders is clear: evolve with technology or risk being left behind. To meet customer expectations for seamless experiences, forward thinking lenders are turning to innovative solutions to streamline their processes.

In this post, we’ll explore why eNotes are a critical eClosing feature that many lenders should take advantage of—even if they aren’t ready for an end-to-end remote closing experience.

A History of Success

Implementing eNotes is a strategic move towards a fully digital mortgage experience. In short, eNotes function as the digital counterpart to the traditional paper promissory note. The authoritative version of the eNote combines with the MERS® eRegistry system, along with eVaulting technologies.

Starting with hybrid eClosings then transitioning to eNotes and, eventually, to paperless closings is a natural progression that many lenders choose. Experts like those on DocMagic’s eClosing Team offer years of expertise in guiding lenders through this journey, ensuring a seamless transition and maximizing efficiency gains.

The momentum for digital mortgage adoption began at least 20 years ago with the beginning of the MERS® eRegistry in 2004, gaining traction as consumers demanded easier and more secure mortgage experiences. The pandemic acted as a catalyst, propelling the industry towards more comprehensive digital solutions. Today, eNotes stand out as a critical component in digitizing mortgage processes, offering advantages over traditional paper-based methods.

The Benefits of eNotes

Here’s why embracing eNotes is essential in providing your mortgage business a competitive edge in delivering exceptional customer experiences:

• eNotes offer efficiency, compliance, and enhanced security in mortgage operations.
• Digital adoption in the mortgage industry is accelerating, driven by consumer demand for convenience and security.
• eNotes streamline loan origination and closing processes, reducing costs and improving productivity.

eNotes, in effect, finally allow borrowers to sign all important documents electronically. This not only reduces costs but also enhances security and ease of transaction. With eNotes, errors are minimized, and workflows become more productive.

Choosing the Right Partner

When selecting a vendor for eNote adoption, experience and client-focused flexibility are key. Look for a provider with a proven track record in successful eClosings and the capability to scale alongside your business’s growth. Prioritize vendors offering end-to-end digital solutions, including eSignatures, eNotes, and secure eVault technology.

By leveraging eNotes and an eVault like DocMagic’s SmartSAFE® eVault technology, lenders can unlock a world of benefits.

Don't wait to embrace eNote technology. Schedule a personalized demo with us to explore how DocMagic’s solutions can transform your mortgage operations and drive success in the digital age.

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Today, we're proud to reveal that Brian D. Pannell, our Chief eServices Executive, has been honored with a prestigious Vanguard Award by HousingWire. This recognition, now in its ninth year, celebrates visionary leaders in the housing and mortgage finance industry, acknowledging their exceptional contributions and forward-thinking initiatives. Pannell's remarkable achievements in advancing eNote adoption among lenders have not only earned him this distinguished award but also propelled DocMagic to new heights.

A Trailblazing Technologist

Upon receiving the Vanguard Award, Pannell expressed his honor and commitment to DocMagic's role as a leader in innovative eMortgage technologies. He emphasized the company's dedication to advancing fully automated originations alongside paperless eClosings, thereby propelling the mortgage industry into the digital age.

“I am truly honored to receive HousingWire’s Vanguard award,” said Pannell. “The entire team at DocMagic is focused on maintaining our role as a leader in innovative eMortgage technologies. I am excited to be a part of this major movement and help DocMagic lead the charge for years to come.”

Pannell has long been a driving force behind eClosing adoption within the mortgage industry. His unwavering dedication and hands-on approach have led to increased efficiency for DocMagic's lender clients—one notable project spearheaded by Pannell resulted in a significant surge in eNote adoption among federal banks, investors, and lenders.

In fact, thanks to Pannell's tireless efforts, DocMagic has achieved a nearly 40% increase in eNote adoption among its banking clients in the last year alone.

This achievement aligns seamlessly with our overarching mission: to eliminate paper from the mortgage process and digitize workflows, from origination to closing. Considering Pannell's focus on the efficiencies of eNotes for eClosing, below, we'll focus on eNotes themselves and just why they've been such a focus for clients in the past year.

The Power of eNotes

Traditional paper notes are slow, costly, and vulnerable. Typically stored in fortified vaults to withstand disasters, paper notes require costly retrofits, such as fireproof walls and waterless sprinkler systems. One critical weakness of paper notes is that there's only one original copy, with no backup concept. Losing the original note renders any copies worthless, akin to a lost endorsed check.

Also, each time a paper note is shipped, the risk of loss or damage multiplies significantly. It passes through several physical handovers, from the warehouse lender to the investor and finally to the custodian. With each shipment, the expense and risk increase substantially.

In contrast, eNotes eliminate these risks. They cannot be lost because there's no single original record to misplace. Additionally, eNotes can be securely backed up, virtually eliminating the risk of loss.

Instead of worrying about holding the original note, in an eMortgage workflow, the concept of an authoritative copy is introduced. While multiple copies of an eNote can exist simultaneously, only one is designated as the authoritative copy, akin to the original paper promissory note. The MERS® eRegistry system, in conjunction with eVault technologies, determines the authoritative copy of the eNote. Specifically, the copy of the eNote stored within the MERS®-designated "Location" Rights Holder's eVault is considered the authoritative copy, ensuring the security and integrity of the digital document.

These security and efficiency reasons—alongside many more—are why Pannell has guided his clients to further eNote adoption, leading to this prestigious award and recognition from HousingWire.

Celebrating Innovative eMortgage Solutions

Pannell's impressive credentials and extensive experience underscore his ability to forge critical technology and business relationships within the industry, leading clients to the perfect eMortgage solutions. DocMagic's industry-leading solutions include a variety of digital lending products, from ClickSign®, eNotary services, and eClosing to eNote generation and secure eVaults, such as SmartSAFE®. 

HousingWire's annual Vanguard awards recognize leaders across various sectors of the housing economy, including residential mortgage lending, servicing, real estate, and fintech. The 2023 Vanguard winners, including Pannell, will be honored at a ceremony during this year's HW Annual Conference in Dallas, Texas in mid-October. Their achievements will also be featured in the October/November issue of HousingWire and will continue to receive recognition on HousingWire.com.

Pannell's recognition with the Vanguard Award serves as a testament to his outstanding leadership and contribution to the mortgage industry's digital transformation. Under his guidance, DocMagic continues to lead the charge in innovative eMortgage technologies, shaping the future of mortgage origination and closing processes.

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• 100% Digital, 100% Delight: eClosing means great customer experiences (9/07/2023)

When a lender comes to us requesting a digital mortgage closing transformation, we often recommend a “crawl, walk, run” strategy: in other words, we encourage them to transition through various stages of hybrid electronic closings (eClosings) before going 100% digital.

This phased approach is often helpful for newly digital lenders, but we still have clients who approach us with a desire to go full eClosing from the start.

Our eClosing Team expert, Leah Sommerville, firmly advocates for a phased approach to implementing eClosing for all lenders—particularly the adoption of hybrid eClosings with an experienced vendor. In this interview, Sommerville shares the reasons why lenders should consider the phased approach, and we delve into various forms of hybrid eClosings and provide insights into measuring your ROI as you implement hybrids.

Q: First things first. Would you still recommend a phased eClosing approach for lenders, and why?

A: I wholeheartedly endorse the phased approach for all lenders. Waiting indefinitely for the perfect moment when every aspect of lending can be electronic is, unfortunately, a flawed strategy. The reality is that not every loan can be purely electronic due to some lingering investor restrictions, geographical limitations, and other constraints.

However, a hybrid eClosing allows lenders to enjoy digital benefits now. They can see the increased efficiency, the quicker closings, and the increased cost savings. Borrowers today also expect a digital experience, from online applications to e-signing initial disclosures, and lenders should strive to align with these expectations.

Q: Why should lenders consider hybrid eClosing before going to 100% eClosing?

A: There are several compelling reasons why the phased approach, starting with hybrid eClosings, is a good choice.

1. Empowering borrower document review: Hybrid eClosings allow borrowers to review documents ahead of the closing day, aligning with their digital journey and giving them more confidence in the process.
2. Facilitating internal team familiarity: Implementing eClosings all at once can overwhelm internal teams within lending institutions. A phased approach eases the transition and allows teams to adapt gradually.
3. Navigating compliance and MERS® membership: Setting up MERS® membership, a prerequisite for eNotes, can take 3-6 months. During this period, lenders can become accustomed to the digital workflow if they’re already using the first category of hybrid eClosing (see below).
4. DocMagic's eDecision tool for compliance: If they’re using DocMagic to generate digital documents, lenders can start using our eDecision audit, described in our Loan Detail Report, to assess where notarization can be applied in advance of actually deploying an eNotarization solution. This ensures compliance and streamlines the evolution toward a complete eClosing workflow once they scale up.
5. Meeting borrower expectations: Modern borrowers conduct most of their mortgage-related activities online. Providing a digital experience up to the closing stage is essential.

Q: What types of hybrid eClosings does DocMagic provide, and what do those categories involve?

A: DocMagic offers a spectrum of hybrid eClosing options tailored to diverse lender needs:

With the first category of hybrid eClosing, eSigning (with DocMagic, that’s covered by our ClickSign® tool) is the focus. Borrowers can preview the closing package as soon as it’s generated, with about 90% of the package available for electronic signing. Notarization and wet signatures are still required for the promissory note and select documents, but they usually only amount to 3-4 pages as opposed to dozens.

Building on the first level, the second category of hybrid incorporates electronic notes (eNotes) stored in an eVault, facilitating quicker funding and seamless transfer to investors or warehouse lenders through integration with MERS®.

In the last category of hybrid, ancillary documents can be eSigned but eNotarization is also possible, reducing the need for wet signatures. Typically, only the promissory note requires wet signing in this type of hybrid. Also—and this is not always done, but it’s still possible—since the note doesn’t require notarization, the borrower could even print out the note at home, sign it, and re-upload it into the lender’s eClosing portal, facilitating an even faster certification process.

Each of these hybrid eClosing options offers varying degrees of efficiency and digitization, helping lenders transition gradually to a more advanced eClosing workflow.

Q: What are some key indicators that lenders can use to measure the ROI they want from hybrid eClosings?

A: Lenders can gauge the ROI of their hybrid e-closings by considering several metrics.

First, if eNotes are part of the hybrid workflow, measuring how quickly they are funded can show lenders just how significantly an eNote impacts efficiency and cost savings.

Evaluating the time borrowers spend at the closing table is also crucial. Hybrid eClosings often lead to much shorter sessions at the closing table, indicating a smoother process even without a 100% digital workflow.

Another strong ROI indicator is a decrease in undersigning errors, oversigning errors, and missed documents when lenders receive documents from the settlement agent. Less human error translates to cost savings and quicker closings overall.

Lastly, assessing borrower satisfaction with the hybrid eClosing experience is vital. Satisfied borrowers are more likely to recommend the lender's services and spread the word about quick, convenient closings.

Q: What recommendations do you have for lenders who still want to implement 100% digital eClosing from the start?

A: Definitely appoint a strong project stakeholder. A dedicated and experienced project stakeholder will lead the transition to full eClosing from planning to implementation. This individual should be the driving force behind the project, ensuring it reaches successful completion.

Also, be mindful and recognize that some benefits of eClosings may not be fully realized until reaching the 100% eClosing stage—therefore, know that lenders starting with hybrid may gain these benefits right away, while lenders going 100% digital may have to wait for MERS® approval or other independent organizations.

In the end, Sommerville emphasized that staying on track and avoiding delays is essential. It’s better to progress and adapt than to wait indefinitely and potentially fall off track—so whether you choose a phased approach with hybrid eClosings, or whether you pursue 100% digital from the start, getting started is the most important action to take.

• 100% Digital, 100% Delight: eClosing means great customer experiences (9/07/2023)

• Compliant IRS transcript requests: Adapting to changes in form 4506-C (8/17/2023)
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Dominic Iannitti, President and CEO of DocMagic, answers questions about eNote adoption — as well as how far the industry, DocMagic and its clients have come using the DocMagic platform. This Q&A was originally featured in HousingWire.

Where does the industry stand in terms of digital adoption, and more specifically the adoption of eNotes? 

Many lenders were considering, or at least researching, digital implementations when the pandemic hit, putting industry adoption on the fast track.

These days lenders are seeking to leverage mortgage technology to streamline the loan process. Many have digital capabilities in place already and with so many warehouse lenders ready to fund eNotes and servicers ready to support them, along with increased expansion in the investor space, the popularity of eNotes is growing.

Talk to us about DocMagic’s setup process for lenders to get started with Total eClose, eNotes and a secure eVault.

We’ve partnered with many lenders who started with a hybrid model and then made the transition to utilize eNotes and, in many cases to completely paperless closings.

eNotes are a game-changer for risk reduction, processing speed and overall efficiency. By leveraging both eNotes and DocMagic’s award-winning eVault technology, lenders can quickly begin to experience an array of eClosing benefits. Our eVault technology has been the industry leader for many years, giving us the expertise to implement and support the critical aspects of eNotes.

DocMagic’s eClosing Team has personally supervised thousands of eClosings. Whether it’s getting set up with MERS®, implementing an eVault to securely store notes, partnering with eNote-ready investors and e-warehouse lenders or servicing eNotes, we wrote the playbook on how to make it happen for lenders and their supply chain partners.

What are some of the efficiencies of eNotes, and how will lenders that implement eNotes now benefit compared to those that wait?

The expediency of eNotes carries through the entire process, from originator, to warehouse, investor, custodian, and servicer in a matter of seconds. Your workforce is more productive, moving loans forward through the pipeline at the speed of a click.

Errors in quality are costly, but especially in this environment. Having everything signed electronically and dated correctly is critical. The eNote can be registered immediately with MERS®, allowing loans to be delivered within minutes of closing — that’s real efficiency.

Organizations that implement eNote technology will gain a competitive advantage over those that wait. The efficiencies, benefits and ROI of eNotes are not a nice to have, but a must. This is positively where the industry is heading.

What should lenders be looking for in a long-term eClosing vendor/partner?

Lenders should start by choosing a vendor with the experience of thousands of successful eClosing transactions. An inexperienced vendor may not have all of the necessary components in place to do business with other providers in the space.

Lenders should also select a vendor offering all hybrid and fully end-to-end paperless eClosings. The best option is a one-stop shop that provides every element of an eClosing. Why go to one vendor for document generation and another for eNotes?

Finally, look for a vendor that can scale to your future growth. DocMagic offers a fully cloud-based service layer and flexible technology designed with capabilities adaptable to every conceivable eClosing option.

Read the original Q&A on HousingWire here.

If you’re interested in exploring eNote adoption for your organization, click here to set up a demo with us. We’re happy to answer all your questions and give you a personal look at how our platform saves time and money.

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Welcome to Ask the eClosing Team, an ongoing series where DocMagic’s eClosing pros tackle real questions that we’re hearing from lenders. Today’s responses are drawn from a recent interview with eClosing Team member Leah Sommerville. We’ll be sharing some more exciting insights from Leah in an additional article next month.

Leah Sommerville, DocMagic’s Sr. eServices Account Exec and an expert from our eClosing team, sat down with American Business Media, publishers of National Mortgage Professional, at the 2023 New England Mortgage Expo to talk about the current state of digital lending. Watch the full interview here.

The Journey To Widespread eClosing Adoption

Below are some additional responses Leah provided on the topic:

Are we still seeing eClosing adoption?

The National Association of Realtors confirmed that 97% of buyers shop for their homes online and more than half of buyers ultimately purchase their homes online. Lenders are embracing eClosing to meet borrowers’ expectations of a digital closing experience. They are realizing that it doesn’t make sense to employ a paper process during the last touch point they have with borrowers… the closing table.

What are the specific benefits driving eClosing implementation?

Borrower expectations, eNote acceptance, and the evolution of eNotary legislation have persuaded many lenders to embrace eClosings. Loan originators appreciate eClosing’s opportunity to allow all participants to review the entire closing package (as often and as long as they’d like) in advance of closing day, provide the borrower a 15-minute closing experience, streamline the closing for all stakeholders (including the Settlement Agent’s automated invitation with access to their eClose console, which includes the entire closing package and opportunity to add title docs for eSignature), eliminate shipping/printing costs, and offer immediate access to all documents post-closing to expedite funding.

Are eClosings a fad?

Absolutely not. Is shopping for homes online a fad? Nope again. 87% of lenders agree that eClosing is faster as well as cheaper than traditional closings.

Almost all lenders are offering Hybrid 1 (eSigning, paper note, paper notary) eClosings at a minimum because there is no impediment to adoption. Hybrid 1 eClosings are very similar to eSigning the initial disclosure documents, which most lenders have already implemented. Hybrid 1 eClosing is possible in every state and for every loan type, and is supported by all secondary market participants. We’ve also seen increased volume for eClosings, which include eNotes, as the GSEs, Ginnie Mae, and the Federal Home Loan Banks began funding eNotes in the last several years. Last, but certainly not least, COVID and the constraints on personal interaction affected almost all real estate closings in the past several years—drastically evolving eNotary legislation. In fact, there are now only 2 states that don’t allow for eNotarization.

As long as consumers expect digital experiences and lenders continue to save $444 per loan with RON (Remote Online Notarization) and eNotes, eClosing is here to stay.

As Leah mentioned in the interview, demand has pushed the industry to a place where lenders who want to future-proof their business should provide a digital closing experience. Borrowers accomplish so much online—even borrowers who aren’t traditionally viewed as part of a tech-savvy demographic.

Digital closings are faster, cheaper and more convenient. They are, unequivocally, the future.

To talk to Leah or any of our other experts about eClosing adoption, send them an email at eClosingTeam@docmagic.com.

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Alabama-based mortgage banker Barr Group Mortgage completed the first eNote transaction through Click n’ Close’s non-delegated correspondent eNote program. Others participating in the transaction included the MERS® eRegistry (the mortgage industry’s approved eNote system of record), Ameris Bank as Barr Group Mortgage’s warehouse lender and DocMagic as the eClosing and eVault tech provider.

“We have been blown away by the non-delegated correspondent eNote process offered by Click n’ Close,” said Elizabeth Moore, Chief Operations Officer at Barr Group Mortgage. “Working with Ameris Bank’s warehouse division SVP Jill Gainer helped ensure the set-up process was straightforward, and our first two loans were purchased the day after closing. Using eNotes has eliminated the need for allonges, overnight shipping costs, note corrections and chasing down lost notes.”

Through the eNote program, non-delegated correspondents can decrease turn times on their warehouse line to 48 hours or less, ultimately saving them money in the form of reduced interest charges and enabling them to turn over their warehouse lines far more frequently. Click n’ Close has established partnerships with multiple warehouse lenders, such as Ameris Bank, to expand warehouse line access to qualified program participants previously financially ineligible for these lines of credit. The approval process for program participants captures most of the relevant financial statements and insurance exhibits requisite to the warehouse approval process, thus materially accelerating the warehouse approval timeline.

“We are thrilled to have our first eNote executed in such efficient timing – less than three weeks from application to closing – and with such renowned partners,” said Click n’ Close Owner and CEO Jeff Bode. “Our non-delegated correspondent eNote program provides emerging mortgage bankers with a tremendous opportunity to incorporate incredible agility and operational efficiencies into their business from the get-go and enables them to differentiate themselves with their customers, as well as their title and real estate partners, through a convenient digital closing experience.”

As Click n’ Close’s primary technology partner, DocMagic played an integral role in the success of this first transaction. Total eClose is DocMagic’s comprehensive eClosing system that provides everything necessary for a paperless eClosing. DocMagic’s powerful end-to-end technology provides an intuitive interface that all participants — lenders, settlement service providers, notaries and borrowers — can use immediately, without a steep learning curve.

“Every lender is on the path to digital with the goal of closing electronically and delivering eNotes into the secondary market, but there are many challenges facing smaller lenders,” said Brian D. Pannell, Chief eServicing Executive at DocMagic. “Click n’ Close, a long-time client, had been seeking a way to support their correspondent lenders who don’t have the resources nor the relationships to support conducting transactions with eNotes. We’re proud to have been part of their solution.”

Related Content:

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Nearly 20 years after the federal government made it legal to transact business electronically, COVID sent the mortgage industry into high gear. In the space of just a couple of years, adoption of eClosings skyrocketed. Now, we’re seeing a similar increase in the adoption of eNotes.

Even so, many lenders still have questions about eNotes and how they can be integrated into their eClosing process. As things are changing quickly in this part of the business, we provide this useful collection of FAQs.

Q: What’s driving the increase in lender adoption of eNotes?

A: As more lenders move into digital closings, competitors must keep pace. Others are attracted to the idea of fewer errors in the files transferred between third parties, such as title partners and mortgage servicers. Still others are ready to see fewer closing conditions on their files and the ability to clear warehouse lines faster. Finally, lenders are finding that they can re-task employees in their post-closing departments because they don’t need that department to be so large.

Lenders are seeing lower costs -- nearly $450 less per loan for some lenders -- and faster turn times with eNotes.

Q: How are lenders seeing their staffing changing after adopting eNotes?

A: Lenders are going on the record, saying that prior to eNotes a good post-closing department would employ more than 20 staff members. After eNote, they can do the same amount of work with 2 or 3 people in the department. One lender told us recently that a post-closing department staffed by two professionals is now handling seven hundred closed loans months.

Q: How are investor relations changing with eNotes?

A: So many of the problems lenders and investors have faced together simply go away with eNotes. These documents never get lost, they never get incorrectly signed or dated and they can be delivered to the investor instantaneously. If a note must be corrected, there is no need to find the old paper document and invalidate it. The record is changed and the old note is no longer a part of the deal.

This is why so many investors are lining up to buy eNotes, including Wells Fargo, Chase, Mr. Cooper, PennyMac, and of course Fannie Mae and Freddie Mac. As you can see from this online list, companies are lining up to accept eNotes!

Q: How are warehouse lenders dealing with these changes?

A: Initially, warehouse lenders were wary as the industry was unsure of the ultimate impacts these changes would have -- reduced cycle times for loan originators can potentially reduce revenue under warehouse lenders’ pricing structure. But loan originators are telling us today that warehouse lenders are dealing effectively with the changes eNotes have brought to the business.

And not all of the changes have been negative. It’s virtually impossible with eNotes for the warehouse lender to get doubled noted, so their risk is lower.

Q: What do regulators think about eNotes?

A: Federal regulators, including the CFPB, have been active proponents of both eClosings and eNotes for some time now. They understand that this is a better process and that it’s better for consumers.

They view electronic notes as a much more secure, compliant element of the mortgage process. They’re right. The eNote has eliminated all of the risk in that process. So, they are embracing it.

Q: What impact does eNotarization have on the lender’s transition to eNotes?

A: None at all. There is no notarization required on mortgage notes. Whether the other documents are notarized electronically or even remotely has no impact on the creation of an eNote.

In fact, you can still be closing with a hybrid process, where some of the documents are still wet-signed and notarized on site and still produce and sell an eNote for that transaction.

Q: What is the best technology for eNotes?

A: Lenders who are using DocMagic for eClosing with eNotes are calling it “shockingly easy.” Everything the lender needs is included, but third-party tools are already integrated into the process. Lenders can set up their eClosing environments and start generating eNotes for borrowers in all 50 states in as few as three days.

Q: What’s the ROI for eNote adoption?

A: Lenders are having trouble calculating the ROI because the numbers are very large. Given the low costs involved in setting up the eClosing environment and the significant cost savings that accrue to the lender immediately afterward, some lenders are telling us that they have recouped their initial investment in 15 days and estimate their return after six months of operation to be in excess of 1000%.

This is a significant evolution in the loan origination process and lenders who embrace it are seeing significant ROI very quickly.

Have additional questions? We’re here to answer them. Reach out to us today and find out how you can be selling eNotes by next week.

Related Content:

• Industry Investors and Warehouse Lenders Supporting Origination of eNotes (4/22/2022)

• SimpleNexus enables fully digital loan closings with DocMagic’s eVault, eNote tech (9/29/2021)

• Ask the eClosing Team: Why are eNotes better than paper notes? (and other burning questions) (8/18/2021)

More lenders are moving beyond hybrid eClosings to a fully digital eNote closing process. As of April 6th, the MERS® eRegistry reported over 1.6M unique registered eNotes. The list of organizations that can originate, fund, and purchase eNotes continues to grow and now includes 23 investors.

Recently, DocMagic invited Jeff Bode, President and owner of Mid America Mortgage to discuss his organization’s experience with eNotes on a recent eClosing webinar.

More choices than ever

“When we first started, nobody accepted an eNote, except Fannie Mae and Freddie Mac,” Bode recalled. But as time progressed, Bode said his company had more options, so much so that the real trick was determining who was going to get the note to deliver best execution.

“We had to know, what's going to be our best execution to deliver that loan? Is it an aggregator who is going to pay more or is the value of the servicing we can retain higher if we sell it to the GSEs,” he said.

Today, Mid America sells eNotes to about seven different investors, including Wells Fargo, Chase, Mr. Cooper, PennyMac, Freddie Mac, and Fannie Mae. This increased adoption of eNotes by the industry is exactly what Fannie Mae said was happening in its 2021 White Paper “Unlocking the power of eNotes.”

“eMortgage adoption was increasing before the pandemic. And then — nearly 20 years after Fannie Mae purchased our first eMortgage — the past two years introduced the unprecedented adoption of industry participants who now support and accept electronic promissory notes (eNotes). Now, private investors, funding providers, servicers, and technology service providers are starting to increase their focus on eNotes, too, clearing the path for widespread adoption.”

Watch the webinar: True Stories: Hybrid, eNote and RON implementation

Warehouse lenders come to the table

When Mid America first started originating eNotes, finding a warehouse lender who understood the value of the product was not easy, according to Bode.

“We had been working with a warehouse lender for about five years and told them that we were considering eNotes,” Bode said. “They told us they would never fund those products. As it turned out, that was the company that funded our first eNote because they didn't wanna miss out on the business.”

Today, Bode and his team work with four warehouse banks and won’t consider working with a warehouse lender who doesn’t understand the product.

The MERS® eRegistry now includes 30 warehouse lenders funding eNotes. As lenders continue their unique processes of digital transformation, investor support for eNotes can no longer be considered an impediment to their forward progress.

DocMagic’s Total eClose™ solution facilitates eNotes, hybrids, and full eClosings. To get started with eNotes, request a demo with our eClosing Team!

Related Content:

• SimpleNexus enables fully digital loan closings with DocMagic’s eVault, eNote tech (9/29/2021)

• Ask the eClosing Team: Why are eNotes better than paper notes? (and other burning questions) (8/18/2021)
• 3 reasons why your post-closing department loves eClosings and eNotes (6/24/2021)

Welcome to Ask the eClosing Team, an ongoing series where DocMagic’s eClosing pros tackle real questions that we’re hearing from lenders. Today’s response is supplied by eClosing Team member Leah Sommerville.

What components do you need to produce a full eClosing, including an eNote?

More and more lenders are interested in offering eNotes, which are skyrocketing in popularity due to their many benefits — especially post-closing, when it comes to selling the note instantaneously.

"The process for paper notes includes many manual steps that add time, enhance risk, and add additional shipping costs,” Sommerville said. “eNotes, by comparison, can be delivered instantly to the secondary market, reducing time to funding and including full audit capabilities.”

Ask the eClosing Team: Why are eNotes better than paper? (and other burning questions)

Many lenders, however, still want clarity about what’s needed to deliver a full eClosing process. Sommerville boils it down to four necessary components:

1. e-Enabled Docs

To reach the finish line and provide completely electronic eClosings (the nirvana of every stakeholder’s experience), lenders must first be able to provide e-enabled documents for eClosing processes such as eSignature, eNotarization, eNote generation and eDelivery. Every eClosing process requires e-enabled documents. Fortunately, all of the documents in DocMagic’s eDocument library, which has more than 300,000 documents, are available in an e-enabled format.

The eNote specifically requires the SMART Doc file format determined by MISMO, the mortgage industry’s voluntary standards setting body. (Although SMART Docs have been around for about 20 years, the 1.02 SMART Doc version is the current requirement for eNotes, even as the industry also works towards a 3.0 verifiable version.) A SMART Doc locks together its data and visual presentation in a way that can guarantee the document’s integrity. It also includes a Tamper-Evident seal that is applied to the document to maintain its integrity as copies of the eNote are transferred from one MERS Member to another.

DocMagic’s Document Generation solution has the advantage of being able to produce e-enabled documents as well as generate a SMART Doc eNote.

For lenders currently unable to generate e-enabled documents, DocMagic’s proprietary AutoPrep Solution can instantly e-enable any document package for eClosing. In those cases, DocMagic’s robust digital lending platform can also generate the Category 1.02 SMARTDoc eNote to include in the AutoPrep eClose transaction.

2. eNotary technology

More lenders are using eNotary technology, and remote online notarization (RON) in particular, to conduct eClosings. A RON platform should have some specific elements, including:

• Ability to store the RON Notary’s digital notary seal. “You want your document signature platform to have the capability to track the time and date stamp with the user’s IP address as each electronic signature is applied, but also to digitally apply a notary stamp/seal to electronically notarized documents,” Sommerville said.
• The ability to maintain video recordings for a specific period of time, based on the various states’ laws as they pertain to document retention, along with the capability to produce a full audit trail.
• Identity validation tools such as credential analysis and knowledge-based authentication (KBA).
  
  

3. eVault technology

Once the eNote has been generated, lenders need an eVault in which to store it. DocMagic’s eVault — which was built using proprietary technology that allows our eVault to seamlessly connect to our full suite of solutions — can store not just electronic documents, but also audio files of RON recordings.

Additionally, all of the lender’s partners need their own eVault if they’re going to purchase, service or maintain the eNote. The eNote’s authoritative copy (the eNote equivalent of the original paper note) can be instantly transferred from one stakeholder to the next, as well as having a copy eDelivered along the mortgage chain to the next stakeholder’s eVault.

Sommerville noted that many prominent mortgage institutions and investors already use DocMagic’s eVault, with many more slated to be in production soon.

4. MERS eRegistry connectivity

Every eNote has to be registered with the MERS eRegistry utilizing a unique Mortgage Identification Number (MIN) from MERS. The MERS eRegistry was set up to track which digital copy of the eNote is the authoritative copy and who has permissions to conduct life-of-loan edits to the eNote’s status. Although the MERS eRegistry is the system of record for eNotes, MERS does not actually store eNotes, which is why a dependable eVault is vital to any completely electronic eClosing process.

DocMagic’s close working relationship with MERS is crucial here. Lenders can sometimes find the setup process overwhelming and may lose momentum for their eNote efforts if any roadblocks pop up.

"DocMagic's eClose Team works closely with lenders to guide them not only through the necessary technology adoption, but also through MERS eRegistry setup (as required for eNotes),” she said. “We also work through successful adoption for the lender's business partners to ensure the best experience possible for all stakeholders."

A single-source solution

DocMagic’s Total eClose solution — which facilitates both hybrid closings and full eClosings — is one of the few eClosing platforms that can provide all four of these components. Most tech vendors in the mortgage space only provide one of two of these components, forcing a lender to contract with multiple lenders to produce an eNote.

The eClosing Team can be reached at eClosingTeam@docmagic.com.

Related Content:

• Did You Know: A basic eSign hybrid is easier than you think? (9/15/2021)
• Did You Know: You can get all your eClosing needs met by one vendor? (6/16/2021)
• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)

SimpleNexus is integrating DocMagic’s eVault and eNote technologies with its Nexus Closing eMortgage solution, a move that will allow the company — which offers a homeownership platform that connects loan officers, borrowers, real estate agents and settlement agents — to generate eNotes, deliver them to a secure eVault, and register the eNotes with the MERS eRegistry.

“A fully digital closing, complete with eNote and eVault, is the last hurdle lenders must clear before offering borrowers and investors the myriad benefits of an eMortgage. We’re pleased to now offer these capabilities via our integration with DocMagic,” said SimpleNexus Chief Product Officer Shane Westra. “In a market cluttered with half-baked solutions, we’ve made it our mission to assemble the most comprehensive and singularly exceptional homebuying experience in the business.”

Case Study: Why one lender skipped eSign hybrids and went straight to eNotes 

In addition to DocMagic’s eVault technology, Nexus Closing comes with integrated remote online notarization (RON) and eSigning. It is certified to meet both Fannie Mae and Freddie Mac’s technical requirements for eClosing, eNote and eVault functionality and is compatible with their eNote delivery systems.

eNote registrations have grown dramatically over the past few years, rising from 17,000 in 2018 to more than 460,000 in 2020. eNotes are more secure and accurate than their paper counterparts and can be delivered instantaneously to the secondary market.

DocMagic’s certified eVault gives lenders the ability to access, manage and store eNotes and other electronic mortgage records on a short- or long-term basis. By offering proactive, real-time control of electronic loan files, eVault technology reduces cycle times and improves process efficiencies throughout the mortgage life cycle.

“To stay competitive in this market and future markets, lenders need to adopt eClosing solutions that allow them to generate, sign, store and deliver eNotes as part of a complete eMortgage transaction,” said Dominic Iannitti, DocMagic’s president and CEO. “We’re pleased to offer these capabilities to more lenders through our integration with SimpleNexus.”

Related Content:

• Ask the eClosing Team: Why are eNotes better than paper notes? (and other burning questions) (8/18/2021)
• 3 reasons why your post-closing department loves eClosings and eNotes (6/24/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)