Standardized Electronic Delivery to Investors is a Must

Investors like Freddie Mac and Flagstar have delivered their e-mortgage specifications in recent months. Fannie Mae and Countrywide have had specs for some time. Lenders wanted more e-delivery choices when selling loans on the secondary market but how do they keep up?

"The industry needs an e-delivery platform that offers a standardized user experience," said Ruth Thompson, president and CEO at Desert Document Services. "We also need early adopters to embrace this movement and incentive programs to help them along."

Standards bodies like MISMO are actually working toward this end to provide both consistency and clarity. "The problem in going electronic is that related parties like auditors don't understand the electronic world. They want paper," said Adam Hall, vice president, process and technology at IndyMac Bank. "We actually have a loan delivery spec as part of MISMO but nobody is using it. We need adoption.

In fact, MISMO is in the process of updating the e-delivery standard. "MISMO's secondary loan delivery dataset version 2 went into the 30-day review stage," said Ed Ransden, director of product management at Desert Document Services. "It should be in final approval by March. The standardization was based on getting away from proprietary coding.

"Fannie and Freddie were driving this for the past two years. The goal was to get to one spec. However, there are certain nuances to the Fannie and Freddie specs, but for the most part it is standardized. There will be exceptions, but they will be minor.

"It used to be that all the correspondents had to write to Citi or Countrywide or Fannie or Wells or Freddie, etc. So, they wanted them to pick one spec, which is why MISMO as updated this standard."

But will the industry adopt it? "It's hard to implement all of the e-delivery specs at once," answered Layne Sapp, MILA founder and chief executive officer. "You'll still have to deliver the recording docs to each county, which is difficult. We're working on different technology to make e-signatures possible online.

"We'll be able to authenticate and sign disclosures online in the end," he continued. "It will happen as fast as the counties will move. It would be great if there was a clearing house to take in all the loans and have them work with the counties. I'd like to see us there over the next five years.

"We can electronically deliver the entire file now," pointed out Mr. Sapp. "In the next year everything but the closing docs will have e-signatures. You have to understand that notaries, title, etc., have to come together at closing. There are a lot of moving people involved at closing. The front end of the process on the other hand will move really fast."

Regardless of adoption, collaborative workflow vendors like Alpharetta, Ga.-based Advectis are ready to move on e-delivery regardless. "Our goal is to get investors added to our network," said Advectis president Greg Smith. "We have a full-time person on our staff dedicated to getting these investors online. Our goal is to have 75% to 80% of our customers electronically sending files to investors. Our goal is to go from Main Street to Wall Street whereas most investors only focus on post-closings.

"Part of the act of delivering a whole solution is having the right players wired up," he said. "If we don't have our clients' partners hooked up and they have to paper out, we're not doing our job. We were part of the initial group of vendors that wrote to Flagstar's initiatives.

"Countrywide started this a year-and-a-half ago and now we're seeing a stampede," said Mr. Smith. "Right now there isn't a lot of structure behind the guidelines, which will be fine over the next two years, but when greater than 20% of loans are done electronically, there will have to be standardization and we'll be right there with a catcher's mitt."

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