By Mike Sorohan
The Mortgage Bankers Association's Residential Technology Forum recently created an eWarehouse Workgroup to inform and educate originators and warehouse lenders on the benefits of supporting an eClosing process and the secondary marketing efficiencies it provides.
The eWarehouse Workgroup has been hosting monthly calls (the next call is Wednesday, Sept. 9) toward that goal. "We are encouraging collaboration and participation from all counterparties to develop industry standards for eWarehouse business processes, based on electronic exchange of data and documents, which improve operational efficiency among lenders, document custodians, investors and warehouse lenders," said Rick Hill, MBA vice president of industry technology.
Hill said the Dodd-Frank Act, along with new Consumer Financial Protection Bureau requirements, such as Qualified Mortgages, Ability to Repay and the upcoming TILA/RESPA Integrated Disclosure rule (slated to go into effect Oct. 3 ) "almost mandate that all parties implement an electronic process in order to prove compliance and defend against future audits or challenges." With the new regulations, all parties now must retain electronic evidence for a minimum of five years to prove that they met all compliance and regulatory requirements.
The eWarehouse group was created by MBA, operating within ResTech, to support industry education and raise awareness for adoption of an electronic funding process (eWarehouse) as part of the overall eClosing initiative. Further, eWarehouse will expand the acceptance and increase the volume of eNotes sold into the secondary market.
Brenda Clem, CMB, eWarehouse director with Street Resource Group Inc., Cincinnati, and Tim Anderson, director of eServices with DocMagic, Saint Johns, Fla., are co-chairs of the eWarehouse Workgroup.
Clem, who was first exposed to warehouse lending back in 1996 when she worked for Provident Bank, said eClosing technology is critical to warehouse lending compliance and success, noting that the warehouse industry has slowly recovered after the financial crisis in 2008. Before the crash, she said, more than 150 warehouse lenders were in operation; after the crash, that number fell to around 20 and has slowly improved to 70 today.
"When we look at where the CFPB has focused--on eClosings and the integrated disclosures and the electronic audit trail being collected--the person sitting in the middle of those transactions is the warehouse lender," Clem said. "Fannie Mae and Freddie Mac are willing to buy eNotes, but we need others to buy eNotes as well. For those of us who want greater efficiencies and want to move the industry forward, we have to move forward with the eClosing process. Currently, Merchants Bank of Indiana and ArcLight Financial are soliciting eNote business from interested parties. Having warehouse lender participation will broaden the Investor market for acceptance and purchase of eNotes, expand the securitization market for eNotes and reduce cost and risk to all counterparties."
Clem said participation in the monthly eWarehouse Workgroup calls has averaged about 60 attendees. "About three-fourths [of participants] have been lenders who want to learn more about what eOrigination looks like; some want to learn more about warehouse lending," she said. "We have also had strong participation from Fannie Mae, Freddie Mac and MERS. We want more independent mortgage banks and more warehouse lenders. We want to emphasize not only what the benefits are, but also create awareness of who else will buy these notes."
Anderson said interest in the eWarehouse Workgroup picked up after CFPB Director Richard Cordray held an eClosing forum earlier this month.
"A lot of people are now connecting the dots with the upcoming TRID deadline and three-day delivery rule," Anderson said. Many see the advantage in cutting down the delivery time from (six to ten days) with Mailbox Rule Vs advantage with eSign/eConsent to assure 'receipt of delivery' three days prior to consumption. Lenders and title companies/agents say 'If I can do this with the one document, (electronic delivery of the Closing Disclosure) why can't we do "all" the closing documents three days prior to closing?'"
Anderson also noted increased interest from major warehouse banks on board now to start buying eNotes to differentiate themselves in the marketplace by providing a "new and better way of doing business" as well offering better execution and efficiencies on funding. One of the significant benefits of eClosing is ensuring that all the data and documents are current, compliant and correct prior to closing so you don't have to incur the time and costs of re-underwriting the loan post closing prior to funding. "Another benefit of eClosing is to have a full electronic audit trail to show proof of compliance, (electronic evidence) around eDelivery, eAcknowledgement and eConsent of receiving the disclosure from application to closing which travels with the documents," he said.
Anderson expressed concern that the overall preparedness of warehouse lenders and originators in meeting new eClosing requirements is still "minimal." "The purpose of our eWarehouse workgroup is to create education and adoption by knocking down still long-held misunderstandings and perceptions that have been out there for a long time," Anderson said.
The next eWarehouse Workgroup call takes place Wednesday, Sept. 9 from 2:00-3:00 p.m. ET. For more information on participating, contact Rick Hill at rhill@mba.org or 202/557-2718; Tim Anderson (DocMagic) at tim@docmagic.com; or Brenda Clem (Street Resource Group) at bclem@streetresource.com.
Clem said the eWarehouse Workgroup will also have a presence at the upcoming MBA Independent Mortgage Bankers Conference, Dec. 2-4 in Nashville, Tenn.; for more information, visit https://www.mba.org/store/events/conferences-and-meetings/independent-mortgage-bankers-conference.
As featured by MBA NewsLink, August 2015
