A California mortgage lender says it’s the first to use a warehouse line of credit to originate a fully electronic mortgage and sell it directly to a government-sponsored enterprise.
San Ramon-based CMG Mortgage said its first two eNotes were originated with all-digital disclosures and e-signatures before it was funded electronically and sold to Fannie Mae, making it among the first non-depository mortgage lenders to write such a loan.
The benefits of e-origination are numerous, the company said. The process removes paper, and allows for the digital transfer of documents and signatures. By transferring the loan to the secondary market electronically, the time it takes to get the loan off the lender’s warehouse line of credit was reduced from two weeks to two days, improving the lender’s cash flow capabilities.
The road to e-mortgage functionality took 18 months, Marshall Griffin, CMG’s chief financial officer told Mortgage Technology. The company partnered with Cherry Hill, N.J.-based Cooper River Financial. The firm helped CMG integrate e-mortgage capabilities into its existing loan origination system, provided the e-mortgage-specific warehouse line of credit and establishing the policies, procedures and training to get the program started. Separately, CMG Mortgage applied and was approved to sell e-mortgages to Fannie Mae.
Both Fannie Mae and Freddie Mac have policies and procedures in place to purchase e-mortgages from lenders, with both purchasing e-mortgages in limited quantities from certain approved sellers. Griffin said that CMG is currently only approved to sell to Fannie Mae. But as it originates more loans, it plans to expand and seek approval from Freddie Mac. Griffin said CMG originates between $100 million and $150 million in mortgages across its retail and wholesale lending channels every month. The first two e-mortgages were written for a combined $800,000, Griffin estimated, adding that to start out, e-mortgages will account for a single-digit percent of the lender’s total originations.
CMG’s goal is to have 10% to 15% of its total originations funded through the e-mortgage warehouse line by 4Q11. To get there, CMG will expand its offering beyond its retail division and include e-mortgages in its wholesale division that are originated by third-party mortgage brokers. It will also simultaneously decrease its traditional origination warehouse lines and increase the e-mortgage warehouse line to handle more capacity.
While the mortgage industry is facing increased market pressure and uncertainty, CMG said the benefits of e-origination made it a good strategy to allocate the resources to this new business. Paperless mortgages are more convenient for customers, allow CMG to hold a written loan for less time on its books and improve other efficiencies.
“Given the opportunity and the way to bust down that door, we felt we were in a unique position with Cooper River to move forward,” said Steve Majerus, CMG’s director of national sales and marketing.
CMG originates loans in 40 states, with heavy concentration in the western region of the U.S., including California, Washington, Arizona and Colorado. With Silicon Valley in the corporate headquarter’s backyard, it wasn’t difficult for the lender to customers willing to participate in a paperless mortgage process.
“Once we got the word out, it wasn’t hard to identify consumers that wanted to participate,” Majerus said. “We believe that going forward that as this improves and we include it in the entire closing process, we think it will be a favored way for customers to close on their loans.”
