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Simplifying Mortgage Closings: The Advantages of eNote and eVault Technology

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key points
  • The mortgage landscape is becoming increasingly digital.

  • The cost of not transforming is too high.

  • Learn more about digital closing.

Mortgage and capital markets are becoming increasingly digital. For lenders, eVault and eNote technology, combined with eClosings, are key requirements for moving collateral through the digital mortgage ecosystem.

Home buyers are also looking to remove the paperwork associated with getting a mortgage, without giving up the relationship and procurement aspect of getting a mortgage. Buying or refinancing a home remains the biggest financial decision of their lives. Seven in ten borrowers recently surveyed said that being offered an online application influenced their decision to work with a particular lender (70%).

Total loan production expenses are reaching new highs over $12K per loan in Q4 2022, and lenders are looking for more efficient ways to improve margins. With a digital mortgage platform, transactions can be initiated and completed faster, with fewer errors, and with lower costs. In 2023, A growing number of borrowers were influenced in their choice of lender by the option of using an online portal to upload documents (67%), and an online portal for signing and notarizing documents (67%). The more a lender invests in relationships with real estate professionals and in their eClose strategy, the more dramatic the ROI. The quality of your referral network could be the margin of difference. These solutions benefit both borrowers and lenders, lead to faster processing times and lower costs for everyone involved. Efficiencies can be increased, and the loan delivery process streamlined with the implementation of eMortgage solutions.

Getting to a digital-driven paperless model in a way that’s right for you.

As lenders are confronted with lower volumes, margins, and revenues, many are leaning into digital closing technology, like eNotes, to drive down mortgage closing times and manufacturing expense. In fact, more than half of all mortgage lenders have already adopted some form of eClosing technology.

A promissory note is part of the closing package and a legal document that outlines the terms and conditions of a loan. When used in the context of a mortgage, a paper promissory note can present several pain points and challenges for lenders, including:

  • Security: A paper promissory note can be lost, damaged, or stolen, which can create problems when it comes time to enforce the terms of the loan. An electronic promissory note (eNote) is the digital equivalent of a paper promissory note. An eNote includes the terms for repayment of the loan (e.g., interest rate, loan term, loan amount) and language that identifies it as eNote. An eNote must be electronically generated, presented, signed (eSigned), transferred and is tamper sealed right after the borrower has finished execution. The eVault provides a secure electronic repository for mortgage loan documents, including the eNote and enables correspondence of the eNote with MERS® eRegistry. This reduces the risk of data breaches, loss, or damage to important documents. An eVault streamlines the document management process, allowing lendersto access and manage loan documents, reducing the administrative burden and saving time at the critical closing stages.

  • Transferability: A paper promissory note can be difficult to transfer or sell, due to the time it takes to move the document, particularly if there are multiple parties involved in the transaction. With an eVault, lenders can move the eNote at a much faster pace, thus shaving off days the loan stays on the warehouse line, if used. eNotes offer the potential for increased liquidity due to shorter timeframes from origination to sale of the loan in the secondary market. The actual transfer of an eNote done via the eVault uses MERS® eDelivery – a mechanism used to electronically deliver a copy of the eNote.

  • Authenticity: There is always a risk of fraud or forgery with paper promissory notes, which can create legal and financial headaches for all parties involved. With eNotes and an eVault, the risk of losing the original paper Note is eliminated and so is the need for affidavits when Notes are lost. The use of eNotes reduce the associated delays in loss mitigation activities and the security instrument can be sold on the secondary market in as little as 24 hours. An eVault also identifies the Authoritative Copy of the electronic note. eNotes that are sold to Fannie Mae and Freddie Mac must be registered on MERS®eRegistry and this step is done via eVaults.

  • Accessibility: Paper promissory notes may not be accessible to all parties involved in the transaction, particularly if they are in different geographic locations. An eNote allows lenders to provide a seamless closing experience by providing borrowers with faster access to their loan documents and enabling electronic document signing. Working with title/settlement agents, warehouse lenders and vendors can help lenders drive the highest ROI in their readiness to support electronically closed documents.

  • Costs: There are costs associated with the storage, maintenance, and transfer of paper promissory notes, which can add to the overall cost of the mortgage. By reducing the need for paper and manual processing, eNote and eVault technologies can help save costs associated with printing, shipping, and storage of paper documents. Improved data quality with an automated certification process for eNotes. Data can be pulled directly from source documents, reducing the need for "stare and compare" and the potential for human error.

The time to go towards digital is now.

In summary, while paper promissory notes can be legally binding and enforceable, they also present several pain points and challenges in an age where electronic transactions are becoming more common and seamless at closing.

To learn more about the benefits of digital closings, the nCino team of mortgage industry professionals can help your financial institution establish a framework for lenders to track, measure, and evaluate the ROI of eClose technology.

eClose Savings per loan

To learn more about the benefits of eClose, download the latest infographic.