In just the past couple of years, servicers have had to scramble to keep up with the overflow of documents that need to be recorded in the nation’s more than 3,600 recording districts, each with its own set of rules, regulations, fees and penalties for noncompliance.
The aftermath of the housing crisis saw a huge influx of foreclosures and bank-owned homes (REOs), generating waves of mortgage assignment and lien release documents that servicers needed to record in a timely manner in counties across the land.
Servicers got really overwhelmed in 2011 with the Mortgage Electronic Registration System ruling that required servicers to prepare an assignment out of MERS’ name before initiating foreclosure proceedings. This was coupled with the huge jump in foreclosures.
Stir in a spike in homeowners refinancing as a result of the Federal Reserve’s zero interest-rate policy and you find servicers facing backlogs in recording documents that can lead to county recording deadlines being missed and fines being imposed on over-stressed servicers.
Document backlogs can delay loss mitigation efforts and increase servicer operational expenses. Delayed foreclosures from difficulties in publicly indentifying the chain of title can expose servicers and lenders to regulatory scrutiny, court actions and fines.
And deadlines aren’t the only factor. Servicers overwhelmed with filing lien releases and assignments can make mistakes in filling out the county forms or use the wrong forms that lead to filing rejections and possible penalties.
For example the wording in a lien release document must match what’s included in the mortgage document. One word askew and the whole document can be rejected. Multiply that by tens of thousands of documents and recording mistakes can be extremely costly for sizeable servicers. Many servicers without the aid of technology can’t adequately track their lien release and assignment documents, and find it hard to determine whether their documents were accepted and recorded on time.
For servicers to get a better night’s sleep without compliance nightmares surrounding document creation and recording, technology is providing great relief.
Workflow software for lien releases and assignments automates the recording process, allowing servicers to compliantly handle the torrent of lien release and assignment documents waiting to be recorded around the country.
Accuracy helps to ensure compliance. Technology that automates the document preparation system dramatically reduces manually created assignment and lien releases, nearly eliminating mistakes caused by human error. In fact, one of the major reasons county recorders reject lien releases and assignments is that the documents were prepared incorrectly, not conforming to a county’s standards and requirements.
By storing the differing margin, font, layout and other requirements of each recording district in the country, the software automates the document preparation process. And this type of software can constantly update all the county requirements so they remain current.
After all, the shifting landscape of county document fees, standards and requirements are nearly impossible for servicers to keep up with on their own.
Technology is requisite to ensure mistake-free document preparation, and with it, there is no need for servicers to maintain separate files and forms for every recording district in the country. Rules-based lien release and assignment software automatically assigns loans to queues based on recording deadlines.
You can naturally see that document turnaround times decrease significantly with the right software system, enabling servicers to avoid costly document backlogs and fines for missing recording deadlines.
By employing technology, servicers of all sizes can establish direct control over their lien release preparation processes and costs. With document preparation in their own hands, servicers gain peace of mind over compliance matters.
For more accurate document preparation, lien release and assignment software platforms should seamlessly integrate with a servicer’s own software system, which eliminates any need to re-key data, thus significantly lowering the number of errors that can result from a manual process.
Perhaps the most significant technological development over the past decade for fast and accurate document recording has been the emergence of electronic recording. Software now can electronically record lien releases and assignments in more than 800 recording districts in the 38 states that offer e-recording of lien releases and assignments.
Electronic recording capabilities dramatically reduce manual lien releases and assignments and increase recording efficiency. A recent lender analysis showed that up to 45% of servicers’ assignment and lien release volume, depending on their loan portfolio, could be transmitted electronically to recording districts.
New e-recording jurisdictions are constantly coming online expanding what is already a vast footprint. E-recording is gaining momentum at the county government level and among servicers and lenders around the country as they incorporate electronic recording into their business models. Local recording offices are upgrading their systems to meet the growing demand for greater automation.
The end goal of eRecording is for the lender and servicer to be able to receive notification to generate a document, verify that all the necessary information is available and included in it, and then transmit the document electronically to the recording office directly.
Servicers using e-recording in their software solution can process and record mortgage documents within 48 hours of payoff or settlement, compared to weeks or months when using only a manual, paper-based system.
With e-recording technology a servicer will receive confirmation that the document has been recorded within 24 to 72 hours, or receive a note specifying that there is a problem with the document and that it must be resubmitted. A return notification is provided on every single lien release or assignment when it is electronically recorded.
Recording data is returned almost instantly to servicers and lenders allowing them to stay up to date on the status of their portfolios, virtually in real-time. This cuts down on many of the compliance issues caused by the delayed recording of mortgage documents. Homebuyers and sellers are timely informed that the lien release or assignment process has been completed.
Today servicers must cope with a rapidly increasing volume of short sales as well as a steady flow of foreclosures and REOs.
The uptick in short sales should gather steam this year. According to housing analysts, there still are 12 million borrowers whose mortgages have a higher balance than the value of their homes. And those struggling with delinquent payments also are short sale candidates.
New Fannie Mae and Freddie Mac guidelines introduced in November have streamlined the short sales process, providing an incentive for lenders and borrowers to seek a short sale rather than falling into foreclosure. It’s therefore crucial that servicers have the right lien release and assignment technology to tackle the expected jump in volume of this loss mitigation scenario.
Regulators’ eyes can be drawn to potential compliance miscues resulting from the document backlogs, mistakes and errors caused by the breakdown of mortgage document recording systems.
Servicers don’t have to be overwhelmed by the volume of lien releases and assignments nor by the complexity of requirements in the more than 3,600 recording districts in America. Technology can have it all under control.
Aurora Marsh is chief executive officer of Rekon Technologies, a Pasadena, Calif.-based provider of advanced lien release, assignment processing and document preparation software for mortgage servicers.
