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Hybrid E-Mortgage Notes Catching on with Lenders

While county recorders continue to stall greater electronic mortgage adoption, lenders are taking a hybrid approach to gain the same efficiencies until the counties catch up.

For one, Fremont Bank here portfolios a lot of their loans and has been focused on converting to SMART Docs for the past two years. They've successfully made the transition and are now in the process of getting approved by Fannie Mae for their first mortgages.

"We're doing a hybrid closing where any document that doesn't need to be recorded is electronically signed," said Tami Fuller, manager of system development and administration at Fremont Bank. "Unfortunately the counties in our area are not ready to take electronic deed of trusts. We do upfront disclosures as well, but we're focusing on closing.

"We generate docs from our system and Encomia converts them to the SMART Doc format through an integration from our LOS. We use our technology for the signing and their GUI for customer presentation and a tablet PC for the e-signing," she noted.

"I was tasked with this assignment two years ago and did a lot of research. I found that most vendors didn't build their technology for e-closings. They would start with the disclosures and try to bring in the e-closing," said Ms. Fuller.

"With the solution we chose, all we had to do was install a print driver and do some XML integration. We could have had it up and running within 60 to 90 days, but we had operation concerns trying to get our investors to approve us and were also in the process of switching our LOS," she pointed out.

However, for the most part, Fremont has found that investors are open to e-mortgages. "Our investors have been responsive," said Ms. Fuller. "We started with HELOCs because we portfolio them and we're now in the process of getting approved with Fannie Mae."

"Fannie Mae's policy on e-mortgages is not we're open for business, but rather e-mortgages are business as usual," added Andrew Dubinsky, CEO at Encomia. "They've been that way for a few years. Now we're working with Fannie to accept Fremont's e-mortgages. We have other lenders that use our system to achieve e-mortgages that we're working on behalf of as well."

"Once we get up with first mortgages with Fannie Mae, we expect 70% to 80% of our loans to be electronic by mid next year," Ms. Fuller noted. "We're still in the process of converting to the new LOS so our resources are split. We act as our own closer so we don't have to worry about the title end because we have notaries employed by Fremont that we send out to do the signings at the borrower's house."

What made all of this possible at Fremont was executive buy-in, according to Ms. Fuller. "My CEO went to a conference two years ago where Navy Federal Credit Union did a presentation about e-mortgages and he came back and said that he wanted to do this and that I should figure out a way to get it done. It's been great because I've always had executive support.

"This process requires greater education about E-SIGN and UETA. You have to map it out within your organization and get the key players to buy into it. Just between e-storage and getting rid of paper alone there is huge ROI," she advised.

"Fremont is representative of what you would see in a regional lender," pointed out Mr. Dubinsky. "With this size lender they have small IT infrastructure and need just a straightforward integration. With bigger lenders there are more pieces that have to be addressed because their network is more complex.

"Nonetheless, we're seeing demand across all lender segments," he said. "When you get to large correspondents and above, you're seeing a lot of industry interest. I'm not sure if this year is going to be the year of the e-mortgage for the industry, but for our clients it is.

"There are a lot of us going down the e-mortgage road now, but a lot of people are waiting to see how it works out," Ms. Fuller said. "The industry is waiting for the newbies to try it out. I think we'll see mainstream industry adoption of e-mortgages next year." (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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