Aug. 5, 2015--Sorohan, Mike firstname.lastname@example.org
MBA NewsLink recently posed questions to Harry Gardner, vice president of eStrategies with Ellie Mae, Pleasanton, Calif.
Gardner leads Ellie Mae’s strategy and execution around eMortgage and eClosing capabilities. Most recently, Gardner was president of SigniaDocs Inc., a Software as a Service provider of legally compliant loan documents and eMortgage technology. Prior to SigniaDocs, he served as vice president of industry technology with the Mortgage Bankers Association.
For more than a decade, Gardner has held various leadership roles with MISMO, including president and chair of its Residential Governance Committee. He is currently a member of the organization’s board of directors. Mortgage Banking magazine named Gardner to its eMortgage All-Star list, and he received Mortgage Technology magazine’s Steve Fraser Visionary Award in 2012. In 2014, he received the MISMO 2014 Chairman’s Award for his career-long contribution to industry data standards.
The company’s website is http://www.elliemae.com/.
MBA NEWSLINK: You’ve been in this industry for a number of years. How would you grade the industry as a whole on its adoption of mortgage technology so far?
HARRY GARDNER: The industry has come a long way, but we still have much more to do. Loan origination systems have grown tremendously in scope and capability, and they provide the core foundation for originating legally compliant loans today. During the early 2000s we developed, within MISMO, the standards and guidance for electronic mortgages and the SMART Doc electronic document format. In 2005, we saw the MERS eRegistry come online to facilitate the registration and transfer of eNotes, and eMortgages started gaining momentum. Then the foreclosure crisis hit in 2007 and that momentum halted as lenders struggled to survive.
Now we’re moving forward again. Not only is there renewed interest in eClosings, but there is widespread recognition that eDisclosure and eClosing technology provides key benefits to meeting the Loan Estimate and Closing Disclosure time requirements of RESPA-TILA. There is also a resurgence of interest in eWarehouse lending, using eClosings to accelerate the warehouse lending process and multiply the effective dollar value of a warehouse line of credit.
NEWSLINK: Where has the industry gotten it right?
GARDNER: Technology has advanced the mortgage process on many fronts. Borrower qualification and property verification are easier, faster and more accurate today than ever, while technology has been leveraged to continuously evolve and improve fraud detection and compliance.
The current evolution from client-server to cloud-based web applications also makes sense. Data can be centralized, secured and backed up more efficiently and updates can be rolled out seamlessly while reducing the burden for each lender to maintain such a significant IT back end.
NEWSLINK: You were an early advocate of MISMO adoption, as both an MBA employee and as a MISMO officer. Are you happy with the progress toward MISMO standardization?
GARDNER: Very much so. Since its inception in 1999, MISMO has provided data standards that help industry partners communicate information in a consistent, predictable way. The MISMO Logical Data Dictionary provides the business definitions for many thousands of data elements, each definition vetted by industry experts in each business process area, so that everyone knows exactly what a given term means when they communicate back and forth.
We brought the standards to a new level of capability with the Version 3.0 release in April 2009, after more than two years of concerted effort by a volunteer army and the MISMO support staff then at MBA. The success of the V3 Reference Model structure has been demonstrated by the strong industry adoption since then. For example, Fannie Mae and Freddie Mac use it as the foundational basis for the Uniform Mortgage Data Program. The Consumer Financial Protection Bureau has also been a strong proponent of MISMO, using Version 3.3 to standardize the data for the new Loan Estimate and Closing Disclosure forms under RESPA-TILA.
NEWSLINK: What can lenders do to improve their eClosing processes?
GARDNER: Educate themselves. There's a wealth of guidance that MISMO published in the early days of eMortgage standards development that is still valuable today, and it’s all available on the MISMO website. Lenders should question eClosing vendors, too. For example, does a potential eClosing solution provide a true SMART Doc eNote with integration to the MERS eRegistry? How do they provide eRecording and eNotarization capabilities?
Most of the improvements needed in the eClosing process are not within the lender’s control, unfortunately. Despite the fact that the ESIGN Act passed in 2000 made eSignatures legal in all 50 states, we still have a patchwork of eSignature adoption and acceptance--even within the federal government that enacted ESIGN. There's still way too much caution and paralysis by analysis. The most important questions for all participants to ask when considering any electronic signature process is, “How does this compare to my current paper-based process, and am I holding the eSignature process to an unreasonably higher standard than what I readily accept in the paper world today?”
NEWSLINK: What do you see as the next key phase in electronic mortgage adoption?
GARDNER: For the industry to move forward and finally reach that tipping point of mainstream adoption, we need several key pieces to fall into place. First, and most importantly, we need broad investor acceptance. eClosing is already a different process for the lender (although more seamless LOS-based solutions will soon fix that), but lenders need to be able to originate loans for best execution without having to worry about which investors will accept an eNote.
Second, we need all 50 states to support eNotarization, without making it unnecessarily complicated or burdensome. A notary is still a notary, whether they're witnessing ink signatures or eSignatures. The growing trend toward remote (virtual) notarization appears to be a disrupting factor that will accelerate this.
Third, we need all 3,585 recording jurisdictions in the U.S. to support eRecording. We're getting there--more than 70 percent of the country's population is now covered by eRecording.
Finally, I believe that the full benefit of eMortgages will be achieved when the industry adopts a single, common, intelligent electronic document format, so that all eMortgage documents can be seamlessly interchanged among business partners. MISMO SMART Doc Version 3 provides the flexible structure to do that.
NEWSLINK: Where do you see the mortgage industry in a year? Five years from now?
GARDNER: In one year, we will see steady growth in all of the key pieces I just mentioned. Within three to five years, I believe they will all fall into place, and we will finally have mainstream adoption of eMortgages.
As I said, there’s still a lot of work left. But as long as the industry continues moving forward, we’ll eventually reach the tipping point and eMortgages will go mainstream. When they do, we’ll all reap the benefits of a cheaper, faster and much improved lending process.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor does it connote an endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions; articles and/or Q/A inquiries should be sent to Mike Sorohan, editor, at email@example.com.)