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After 12 Years, E-Mortgage Misconceptions Persist

JUN 28, 2012 2:08pm ET
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My neighbor Dave and I have watched our daughters grow up together, and our youngest daughters just graduated from high school last week. We were chatting at their graduation party and he told me he’s selling a house in Pittsburgh. Knowing of my involvement in e-mortgage technology, he told the lender that he could connect them with someone who could help them implement e-signatures and save time and money—to which the lender replied, “Oh, we’re not allowed to do that in Pennsylvania!”

I keep my hair fairly short these days, so thankfully I couldn’t grab enough to yank it out.

Let’s review: UETA, the Uniform Electronic Transactions Act, was passed in 1999. It was a state model law, meaning that states could choose to customize it and adopt it as desired. In 2000, realizing that electronic signatures and e-commerce would not move forward very quickly without a nationwide legal infrastructure, the Clinton administration passed ESIGN, the Electronic Signatures in Global and National Commerce Act. Both laws say that e-signatures are legally valid, if done properly, and ESIGN says that they’re valid in all 50 states, even if they have not yet adopted UETA.

The MISMO E-Mortgage Workgroup was formed in 2001, and has published numerous white papers and guides on e-mortgages and their value proposition. The MERS eRegistry went into production operation in April 2004, and over 260,000 e-notes have now been closed, signed and registered there. The MBA Residential Technology Forum has published letters to industry CEOs encouraging e-mortgage adoption, with studies of the potential cost savings. MISMO, the American Land Title Association and the Electronic Signatures and Records Association jointly published “Case Closed: eNotes Are Legal—An Analysis of eNote Enforceability Nationwide” back in 2008.

Clearly, there’s no shortage of information on the legality of e-mortgages. But maybe the lender was referring to an inability to do electronic recording in Pittsburgh, so I checked with Mark Ladd at Simplifile, who’s been monitored the progress of e-recording adoption in the nation’s 3,585 counties and recording jurisdictions for years.

He quickly replied, “There are 24 counties in PA that are e-recording (out of 67), including Pittsburgh’s Allegheny County. That represents about 68% of the population.”

When it comes to e-recording, it’s important to look at population coverage as well as the number of counties, because some counties are very densely populated and others are sparse. In fact, the top 20% of U.S. counties contain about 80% of our country’s population—the 80/20 rule in action.

But the bottom line is that despite 12 years of education to the industry, there are still a lot of misconceptions out in the trenches about what e-mortgages are and where they can be used. The Pittsburgh lender represents a classic example of that lack of understanding.

Both MISMO and the MBA’s ResTech Forum continue to focus on e-mortgage adoption and education. In fact, ResTech just started a new subgroup to help increase e-note investor acceptance.

You can help spread the word and clear up the fog with these simple facts:

—E-notes are legally valid in all 50 states

—E-mortgages have been foreclosed on just like paper mortgages, and the foreclosure process has never been prevented due to the loan being an e-mortgage

—E-mortgages can provide significant savings in costs and efficiencies

—E-recording is accepted in over 700 counties nationwide, covering over half of the US population

—In counties that don’t yet accept e-recording, you can still use an e-note for streamlined delivery to Fannie Mae, Freddie Mac or Wells Fargo, and use paper for the rest of the closing package.

What are your thoughts? How can we get the message out to the right people, to spur adoption and truly bring e-mortgages into the mainstream?

Comments (2)
We used to use e-sign applications for our customers, but all of our investors now prohibit e-sign applications for FHA and VA tranactions.
Don't know why.
Posted by Chris S | Thursday, June 28 2012 at 3:35PM ET
Great article Harry. Why not mention the cost savings, immediate ROI. compliance benefits and tamper-proofing offered to prevent fraud (doc manipulation, back-dating, etc.)? As pioneers we all have the arrows in the back but the fact that this makes so much sense keeps us getting up every morning more excited than the day before. We realize that someday this will become the norm but the Industry clearly lacks 'early adopters'. As one wiseman once mentioned at a MISMO meeting "the mortgage Industry has been around for 100 years and we still don't have a single set of uniform docs." Keep up your great work and leadership!

Best, Rick www.settleware.com
Posted by | Saturday, June 30 2012 at 1:47PM ET
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