Harry Gardner is executive vice president of eStrategies for
Docutech, a leading provider of compliance and documentation technology. He assists in the development of Docutech’s
corporate and product strategy to proactively align with the
digital-transformation needs of the lending industry. Gardner
also has held various leadership roles at MISMO, including
serving as chair of its residential governance committee
and as a member of the group’s board of directors. Reach
Gardner at email@example.com.
Closing in on an eMortgage Standard
A future with fully digital loans is not far away
By Harry Gardner
Establishing the eMortgage as a standard practice has long been a highly sought-after goal for the mortgage industry. Lately, there have been a lot of promising developments
happening in the world of the eMortgage — so many
that it can be difficult for mortgage professionals to
keep up with the industry’s progress.
It’s important to keep an eye on the progression
toward an eMortgage future to ensure continued
movement toward this beneficial goal. Given the
recent advancements in technology, the industry
is now in a better position than ever to make digital
mortgages the standard.
To appreciate where we currently stand in the effort
to establish eMortgages as the transactional standard,
however, it’s important to understand the significant
progress the industry has made toward digitizing the
complex eClosing process.
The first step to accommodating full eClosing was
the establishment of the necessary legal and process
infrastructure. Two crucial developments were the
adoption of the Uniform Electronic Transactions Act
(UETA) and the Electronic Signatures in Global and
National Commerce Act (ESIGN) in 1999 and 2000, respectively, which set the groundwork for e-commerce
and electronic signatures. The creation in 2004 of
the MERS eRegistry as a method for establishing the
legal ownership of an electronic note was an essential
factor in confirming the note’s validity.
Support from the government-sponsored enterprises (GSEs) also bolstered early eMortgage momentum. Fannie Mae, for example, began buying
electronically closed loans in the early 2000s and more
recently rolled out its Day 1 Certainty initiative to help
facilitate digital lending.
Finally, the MISMO Version 3 standards can help
ease the industrywide shift to eMortgages. MISMO is
a standards-development group serving the mortgage
The MISMO Version 3 format ensures consistent data
standards across all sub-processes of the mortgage
transaction to make collaboration easier for all parties
essential to the process. In addition, the SMART Doc
Version 3 structure provides a universal intelligent
electronic-document, or eNote, format.
Full eMortgages, those that are entirely paperless, offer
the maximum benefit to lenders and other mortgage
professionals. The eClosing is a crucial part of that
process but has, historically, presented the biggest
challenge to the industry. Even with promising recent
developments, fully electronic closings are still few
and far between.
The eClosings taking place today are mainly hybrid
in form, meaning they include at least one paper-based
sub-process. There have been a few entirely paperless
closings completed in recent months, but they’re still
the exception rather than the rule.
It is time for the industry to look forward to finally
making the dream of a mainstream eMortgage a reality.
The most substantial challenges remaining include
enabling remote eNotarization, creating clarity around
the legal structure, advancing the technological environment and dispelling common misconceptions
The eNotarization process has been the most challenging aspect of the eClosing. The difficulties in executing
a proper eNotarization stem from uncertainty in the
legal environment and over what’s required to ensure
that electronic notarizations are valid, especially for
mortgage professionals and lenders working in multiple states.
The uncertainty is a result of a patchwork of laws
across the U.S. that can be difficult to navigate.
Although some states simply enforce the legality of
electronic notarizations through ESIGN and UETA,
others have enacted state-specific laws and still others have yet to clearly state whether they’ll recognize
Further complicating the matter is that some
states — Virginia and Montana being two examples
— have taken eNotarization a step further to legally
recognize remote eNotarization. During a standard
eNotarization, the notary witnesses the closing ceremony in person and then notarizes the necessary
Remote eNotarizations take essentially the same
form, except that the notary witnesses the ceremony
and confirms the signer’s identity over a webcam
instead. Remote eNotarizations add further conve-
nience to the closing process, because borrowers do
not have to coordinate meeting in person with the
notary to complete the transaction.
Although remote eNotarization should be legally
recognized because of state reciprocity, many in the
industry have been hesitant to get on board with this
practice. Perhaps most hesitant are title underwriters,
who fear that a discerning county recorder may refuse
to record the loan if they see that it was remotely
eNotarized, leaving ownership in question.
The GSEs have been supportive of remote eNotarizations, actively working to help the industry feel more
comfortable conducting this practice. Both Fannie
Mae and Freddie Mac have proclaimed that they will
accept remotely eNotarized mortgages from the states
where they are legally recognized, further fueling
The tech landscape
There are eClosing solutions now available to mortgage professionals that are more robust, comprehensive and flexible than ever before. In fact, mortgage
com-panies need not wait for states to pass legislation
to make the closing experience better for the borrower.
With the right technology on hand, mortgage originators can already begin transferring much of the
mortgage process to a digital setting to extend more
convenience and flexibility to their borrowers. It’s
already possible, for example, to utilize eNotes and
eRecording with nearly every loan destined for GSE
The ideal technological infrastructure for eClosing
is a fully integrated solution that can support the key
aspects of the process within a singular platform.
Mortgage professionals should be able to generate
electronic, data-driven documents through direct
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“Given the recent
industry is now in
a better position
than ever to make