2020 has been a year unlike any other—and that includes for the mortgage industry, which faced some of the biggest changes the industry has ever seen.

DocMagic has been tracking these momentous changes on our blog. As we say good-bye to 2020, we highlight some of the biggest mortgage stories of the year:

#1: The rise of eNotes

In 2019, there were over 127,000 eNotes registered on the MERS eRegistry. In 2020, through November, the number skyrocketed to over 407,000—a 264% year-over-year increase. At the same time, the number of companies transacting on the eRegistry rose 121%. It’s official: 2020 was the year of the eNote.

Another major event took place in 2020 that also pushed eNotes forward: After years of planning, Ginnie Mae and three members of the 11-member FHL Banks system began accepting eNotes as collateral. The other members will eventually follow suit.

“The fact that both are now accepting eNotes is crucial because it just introduced a whole new level of participants to the eNote world,” said DocMagic’s Chief eServices Executive Brian D. Pannell. “So, between the FHL Banks and Ginnie Mae, there are a lot of advancements in the ability to make those eNotes saleable.”

#2: The rise of RON

At the beginning of the year, 22 states had a remote online notarization (RON) law on the books. In 2020 another seven states jumped on board—Hawaii and Pennsylvania were the latest to enact a law—bringing the total to 29 states.

On top of that, a Senate bill was introduced at the federal level that would have allowed RON use nationwide (though it didn't pass), and several other states permitted RON for the first time ever—albeit via temporary emergency orders that were passed at the height of the stay-at-home orders. Many of the emergency actions have been repeatedly extended as the pandemic drags on.

As a result, RON transactions have increased 547% in 2020, according to a new survey from the American Land Title Association of vendors working in the RON space.

RON had already been increasing—due to a host of reasons that have nothing to do with social distanced-based safety—but the events of 2020 have given the practice a huge boost.

#3: And don’t forget RIN

Even though the demand for remote notarization was high, several states weren’t yet ready to commit to RON. Enter remote ink-signed notarization, a lower-tech and less secure alternative in which borrowers use a videoconferencing program like Zoom or FaceTime to connect with a notary and wet sign a document that is then physically mailed to the notary for their stamp.

Several states passed emergency orders to allow RIN, even ones that already permit RON, like Michigan and Texas.

RIN has several drawbacks, however, and draws its legitimacy solely from emergency orders. In Michigan, some RIN closings were even at risk after the state Supreme Court ruled that the governor didn’t have authority to extend her emergency powers—which allowed RIN—without the legislature’s approval. The legislature had to later pass a law to ensure that RIN transactions were valid.

#4: The new URLA is coming—at last

Fannie Mae and Freddie Mac announced back in 2016 that they were unveiling a new Uniform Residential Loan Application (URLA) for all lenders who intend to sell their loans to the GSEs; the mandated use-by date was then pushed back twice, with the latest delay—from November 2020 to March 2021—taking place this year as a result of the pandemic.

It looks like the latest deadline will stick. If so, lenders need to be ready by March 1, 2021, but they can get started now—the new URLA’s earliest effective date is Jan. 1, 2021.

#5: DocMagic employees shine

It was a banner year for DocMagic employees, several of whom were honored with industry accolades. This included DocMagic CEO Dominic Iannitti’s Lending Luminary Award; Lori Johnson’s HousingWire Insiders Award; Leah Sommerville’s Top 40 Under 40 honor; Brian D. Pannell being named a Thought Leader and HousingWire Tech Trendsetter; David Garrett’s appointment to the MISMO Residential Standards Governance Committee; and Chris Lewis’s recent Trailblazer Award by PROGRESS in Lending.

Related Content:

• Survey: Homebuyers adapt to eSignings, remote closings during pandemic (10/29/2020)
• An eClosing Q&A with DocMagic's director of enterprise solutions (9/9/2020)  
• County recorders, eRecording, and RON—by the numbers (7/8/2020) 

The mortgage industry is undergoing unprecedented change, and lenders are weighing the move to eClosings—because in the current environment, it’s no longer a question of if, but when. Gavin Ales, DocMagic’s Chief Compliance Officer, shares his insights about the compliance issues these lenders are facing.

What is still needed to make eClosings—including eNotes—more mainstream?

eNotes and eClosings need to be more readily accepted by investors. Lenders need all or most of their investors to be willing to purchase the loans; otherwise, they’ll be forced to arrange specific transactions with specific investors. Lenders will be able to close a much larger number of loans electronically when they don’t have to do all the extra leg work of checking in with their investors to confirm that they’ll accept an eClosing.

Both eNotes—which are faster and more secure than paper notes—and eClosings require more global acceptance at county recorders’ offices. For example, a particular state’s law may allow an electronic notary on a mortgage, but if the recorder’s office won’t accept it electronically then that still presents a barrier. Lenders aren’t able to realize the full benefit of an eClosing if they still have to print it out and record a paper document.

The country is moving in the direction of digital mortgages; several states already allow electronic notarizations and more will be allowing the practice, but despite that, there is still the practical problem that not all county recorders have a process to electronically record a document. The laws have passed but the processes needed to carry them out are still not in place, so lenders may face a situation that even if a state allows eNotarizations, there may be recording offices that can’t process them.

What is one impediment to eClosing that is often overlooked?

One critical issue facing lenders is the availability of notaries who are able to conduct eClosings. In some cases, both the state and county recorder may be on board, but the difficulty may become finding an electronic notary. That’s something lenders aren’t thinking about. Having a ready and reliable supply of e-ready notaries would help lenders turn out eClosings just like any other loan. Even if a lender and investor are on board, an electronic notary still must be available. In a lot of states, electronic notaries must be specially registered, and the number of electronic notaries in those states are naturally lower.

What guidelines and regulations should lenders be aware of as they start to implement eClosings?

Lenders should first be aware of their own state laws as to what’s allowed and not allowed when it comes to notarizations. Some states require that lenders use a specific system or limit provider options to an approved list. Lenders also need to pay attention to investor guidelines, as to whether or not they accept electronic documents. Then the user must ensure that they have the full workflow covered, including setting up an eSign system, getting eVault access, and becoming a MERS member with access to the MERS eRegistry. Lenders also have to ensure their documents comply with Fannie Mae and Freddie Mac’s guidelines, such as having tamper-evident seals. Vendors such as DocMagic can ensure these requirements are met as part of our document generation solution.

From a compliance standpoint, how is RON an improvement over in-person notarizations?

Remote online notarization (RON) is a huge improvement over in-person notarization. Right now, there’s the obvious reason—in the middle of a pandemic, RON is far safer for people than being forced to meet in person to notarize loan documents. But even without a pandemic, RON would be the better choice, particularly when it comes to security. RON employs high-tech methods such as knowledge-based authentication and credential analysis to validate identification. In addition, the electronic document files must contain tamper-evident seals and the video of the signing session usually has to be stored for 10 years, both of which help to make the notarization process safer and more secure.

RON also makes it easier for borrowers to review loan documents ahead of the closing and for lenders to spot mistakes, such as missing signatures, sooner. RON is the culmination of a truly paperless eClosing.

Where is the state of eClosings headed next year?

eClosings will only grow in popularity. One look at eNote registrations is an indicator—they were already on the upswing, but the numbers have exploded compared with just last year. So far this year more than 400,000 eNotes have been registered, a 264% increase over last year, and the pace shows little sign of slowing.

The pandemic—and social distancing guidelines—have forced everyone’s hand. More companies are conducting business remotely and remote transactions have become more mainstream. Now that so many people are working from home, society is also moving away from the idea that everyone has to be in the same place when they’re working together. That mindset has also affected the mortgage industry, with more states allowing remote notarization and more borrowers wanting to conduct closings remotely. eClosings are just going to increase from here. The industry isn’t going backwards.

Related Content:

• DocMagic offers clients automatic audit of NMLS identification numbers (12/8/2020)
• IRS releases new form 4506-C (11/16/2020)
• CFPB's 5-year TRID assessment produces mixed results (10/15/2020)

DocMagic senior account executive Leah Sommerville, 33, was awarded a coveted spot on National Mortgage Professional (NMP) magazine’s annual Top 40 Under 40 Most Influential Mortgage Professionals list.

The list, now in its second year, seeks to highlight the “up-and-comers across the mortgage world who are actively scanning the profession with fresh eyes, and making it better, with enthusiasm,” according to the magazine.

The honorees, who are voted on by their peers, range from executives at large institutions such as Fannie Mae to presidents and CEOs running their own firms. They span all sectors within the mortgage industry, including compliance, loan origination, FinTech, and more.

Asked by NMP what she considers her greatest success in 2020—a year that presented multiple unique challenges, including the pandemic, social distancing requirements, stay-at-home orders, a refi boom, and new compliance rules—Sommerville said, “I’m proud to have been involved in helping many organizations make the shift to hybrid and completely digital eClosings.”

During the pandemic, she has been especially focused on helping lenders who are rushing to implement DocMagic’s 100% paperless Total eClose solution.

Over her career Sommerville has helped drive the digital processes for over 400 organizations; increased eClosing adoption among relevant organizations by over 300%; and helped execute more than 8,000 eClosings so far. A member of DocMagic’s dedicated eClosing team, her specialty is guiding lenders through the transition from paper to electronic mortgages, so much so that she’s become a subject matter expert on it.

“I was fortunate to begin my journey in the mortgage industry during a time when lenders began recognizing the importance of modernizing outdated paper processes with technology to increase efficiency and improve the borrower experience,” Sommerville told NMP. “My experience as a digital transformation coach has been especially exciting because I truly enjoy helping organizations reap the benefits of these technological advances.”

Related Content:

• Brian D. Pannell honored with HousingWire's 2020 Tech Trendsetters Award (12/4/2020)
• DocMagic's CEO honored with Lending Luminary Award (10/27/2020)
• Remote online notarization (RON) has several benefits beyond safety (10/22/2020)

DocMagic is offering an easier way for clients to automatically audit the Nationwide Multistate Licensing System (NMLS) identification number of every company and loan officer they interact with.

While individual borrowers may find it easy to check a loan originator’s NMLS number that way, DocMagic clients—who work with hundreds of companies and loan officers across thousands of mortgage transactions—may find the process of manually checking every stakeholder’s NMLS number cumbersome and time-consuming.

Now, however, they no longer have to do this process manually. Instead, DocMagic’s clients can request, as part of our document generation solution, that the process be automated so that every time we run an audit, we also check the NMLS number of clients’ partners to confirm that they’re properly licensed to conduct business.

If the NMLS number doesn’t register as licensed, clients can choose to make that option fatal within a DocMagic audit.

The NMLS was created in 2008 by the Secure and Fair Enforcement for Mortgage License Act, also known as the SAFE Act. A response to the mortgage meltdown, the SAFE Act aims to boost consumer protection, cut down on fraud, and increase accountability by establishing minimum standards for the licensing and regulation of mortgage loan originators.

To receive an NMLS number and maintain a license in good standing, loan officers must complete and maintain various steps, such as passing a written qualified test; providing a credit report and fingerprints for a background check; completing pre-licensure education courses; taking annual education classes; not having a felony conviction in the last seven years; and never having a felony conviction for a financial crime.

Lenders and mortgage loan originators have to publish their NMLS numbers on advertising such as business cards and websites, as well as on specific loan documents.

Related Content:

• CFPB's 5-year TRID assessment produces mixed results (10/15/2020)
• The redesigned URLA will be required in a few months; are you ready? (9/24/2020)
• Why lenders still need print fulfillment—even if they're going digital (8/25/2020)

Brian D. Pannell, DocMagic’s Chief eServices Executive, was named one of HousingWire’s 2020 Tech Trendsetters.

“This year has been one of the most challenging in my career, given the influx of requests to implement many of our solutions throughout the pandemic and refi boom that is setting volume records,” Pannell said. “But seeing all the hard work pay off for DocMagic’s clients and partners has been very gratifying, and receiving the Tech Trendsetters award at the end of this long year makes it all worthwhile.”

The award, now in its second year, was given to 50 of the housing industry’s most innovative technology leaders, across sectors such as residential mortgage lending, servicing, investing, construction, and real estate.

“Our Tech Trendsetters award recognizes a group of leaders who were critical to the outstanding performance of housing and real estate during this pandemic, finding innovative solutions when everything changed on a dime,” said HousingWire Editor in Chief Sarah Wheeler. “We’re very proud to celebrate their achievements and honor the impact they’ve had at such a crucial time.”

Throughout 2020, Pannell has racked up several key accomplishments, including:

• Helping clients implement multiple DocMagic solutions, including Total eClose, a 100% paperless eClosing platform that leverages our dynamic document generation capabilities, and DocMagic’s eVault and eNote process—not just for lenders but also for other members of the supply chain.
• Working on Secured Party and Master Servicer/Subservicer for the support of MERS, the Federal Home Loan Banks, Ginnie Mae, and the gap in servicing support for servicers that don’t have their own eVaults.
• Helping launch AutoPrep, a new technology that can convert documents from any lender into compliant e-enabled documents that can be used with Total eClose.
• Serving as an invaluable resource to the mortgage industry as a subject matter expert on end-to-end eMortgage automation, eSigning, eNotarization, eNotes, eVaults, eClosing, eWarehouse lending, and more.

Pannell has helped countless lending entities go “e” this year, enabling them to serve their customers during the pandemic. As an industry thought leader, he plays a key role in where digital mortgages are headed.

“In its second year, the 2020 Tech Trendsetters once again surpassed all expectations as the housing industry rose up to meet unprecedented challenges,” HousingWire Magazine Editor Kelsey Ramírez said. “This year’s Tech Trendsetters represent shapers whose innovative solutions continue to inspire the industry.”

Related Content:

• Survey: Homebuyers adapt to eSignings, remote closings during pandemic (10/29/2020)
• DocMagic's CEO honored with Lending Luminary Award (10/27/2020)
• DocMagic's Brian Pannell named winner of Thought Leader Award (6/18/2020)

DocMagic’s Chief eServices Executive Brian D. Pannell will be leading a webinar for the Electronic Signature and Records Association (ESRA) this Thursday, Dec. 3, at 10 a.m. PT/1 p.m. ET.

ESRA is an industry trade association that works to advance the adoption of digital transactions. Pannell serves on its Board of Directors.

This year mortgage technology—especially eNotarization—evolved in order to meet the challenge of closing safely in a pandemic. “eNotarization morphed into limited-touch notarization,” Pannell notes. This led to a rush by states to pass temporary emergency orders to allow remote online notarization (RON) closings, but also alternatives such a remote ink-signed notarization (RIN) and socially distanced in-person notarizations.

After seeing up close how lenders and borrowers have adapted to pandemic-driven changes in 2020, Pannell will share his insights and stories from the field about the mortgage industry's new tech normal.

Related Content:

• RON update: Lots of forward momentum—but also a setback (6/26/2020)
• DocMagic's Brian Pannell named winner of Thought Leader Award (6/18/2020)
• Webinar: How mortgage industry should adapt to COVID landscape (6/3/2020)

Community State Bank, which has seven locations across southeast Wisconsin, has implemented DocMagic’s full suite of eClosing solutions and is now offering their customers a 100% digital mortgage process—something that’s key in the middle of a pandemic.

“During these times of uncertainty, it is extremely important that our team be able to adjust quickly in order to continue serving our customers safely,” said Scott Huedepohl, Community State Bank President and CEO. “We’re very honored to be able to provide both a high-tech experience, while still offering personalized service to guide our customers along the way.”

Community State Bank, founded in 1898, partnered with DocMagic to implement technology and help ensure the highest levels of customer safety during the pandemic. But in addition to safety, the bank also sought to offer borrowers a faster and more efficient loan process.

“By utilizing DocMagic, our mortgage team can now offer customers the option of signing mortgage documents electronically, from the moment they apply through closing,” said Community State Bank Vice President of Mortgage Operations Shakil Haider. 

Using the Total eClose platform, Community State Bank is also now offering remote online notarizations (RON), eNote generation, secure eVault storing capabilities, and direct connectivity to the MERS® eRegistry. Recently, MERS featured Community State Bank in its monthly newsletter, congratulating the lender for completing its integration. Community State Bank is, as of late November, one of just 74 originators integrated with the MERS eRegistry—nationwide.

“Community State Bank has put their customers’ needs at the forefront by implementing our automated, end-to-end lending platform,” said Dominic Iannitti, President and CEO at DocMagic. “We provide our clients with an agile and technology-forward mortgage process that ensures they can sustain and scale critical business processes.”

Customers have praised the new digital process. Gary Strand, who recently closed a mortgage with Community State Bank, noted, “Our experience was very simple from start to finish. Having the option to close our loan online shows they are willing to accommodate their customers’ needs and busy schedules while also keeping safety in mind during the pandemic.”

Related Content:

• DocMagic, VirPack integrate platforms (10/1/2020)
• DocMagic teams up with Simplifile to facilitate eClosing adoption (7/27/2020)
• MortgageCountry closing loans in 13 days using DocMagic solutions (7/21/2020)

The Internal Revenue Service (IRS) recently released a new version of Form 4506, as Form 4506-C, IVES Request for Transcript of Tax Return (version September 2020). 

Previously, the IRS posted an updated Form 4506-T (version June 2019) which removed Line 5a, which covers mailing tax transcripts to third parties, and replaced the “Caution” statement after Line 5 with the following “Note: Effective July 2019, the IRS will mail tax transcript requests only to your address of record. See What’s New under Future Developments on Page 2 for additional information.” This updated version of Form 4506-T could no longer be utilized for third party tax transcript requests, but the IRS continued to accept the prior March 2019 version which does allow for third party requests.

How a new lender found success amid the pandemic: Download the MortgageCountry case study

With the release of the new Form 4506-C, the IRS announced it will only continue to accept Form 4506-T (version March 2019) for all tax transcript order requests through Feb. 28, 2021.

Starting March 1, 2021, only Form 4506-C will be accepted for use by authorized Income Verification Express Service (IVES) Participants to order tax transcripts records electronically. Line 5a of the new form allows for participating IVES Participants information to be entered.

DocMagic postponed changing to Form 4506-T (version June 2019) and has continued to provide the March 2019 version of the form so that it could continue to be used by all customers and our IVES partners.

DocMagic will make the new Form 4506-C (DocMagic Form ID: 4506C.MSC) available upon request starting Nov. 19, 2020. Currently, DocMagic is working on implementation with IVES partners and awaiting guideline updates to be made by agencies and the secondary market to allow use of the new form. DocMagic will announce the default addition of Form 4506-C to initial and closing packages in the coming weeks.

Should you have any questions, please contact DocMagic’s Compliance Department at compliance@docmagic.com.

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• California enacts consumer financial protection law (10/7/2020)
• The redesigned URLA will be required in 5 months; are you ready? (9/24/2020)

(Update: On Nov. 5, Michigan enacted HB6297, which confirms the validity of remote notarizations performed between April 30, 2020 and Jan. 1, 2021, and HB6296, which requires registers of deeds and financial institutions to accept electronic documents notarized during that same period. The state later extended the deadline for both laws to July 1, 2021.)

When the pandemic hit in March, Michigan already had a law on the books that allowed remote online notarization (RON) closings. But the state took it a step further when Gov. Gretchen Whitmer (D) declared a state of emergency and issued a series of executive orders, including one allowing the use of remote ink-signed notarization (RIN), a lower-tech alternative to RON.

"We conclude that the Governor lacked the authority to declare a 'state of emergency' or a 'state of disaster' … after April 30, 2020, on the basis of the COVID-19 pandemic," Justice Stephen J. Markman wrote.

The Oct. 2 ruling, plus a related ruling on Oct. 12, nullifies hundreds of Whitmer’s emergency orders, including the one that authorized RIN, which allows notaries and borrowers to use audiovisual technology to remotely notarize and ink-sign paper documents. 

“Hundreds, if not thousands, of mortgages have been recorded in Michigan since the start of the pandemic, many employing notarization processes approved by the nullified Executive Orders, and have been thereafter accepted for filing by county recorders,” noted an analysis by law firm Manatt, Phelps & Phillips, LLP. “Many [mortgages] may have been recorded using RIN or other procedures that were approved by order but not part of the statute itself.”

While the analysis found that RIN was likely legal up until Oct. 12, “borrowers and their lawyers will doubtless argue that mortgages submitted for recording in reliance on the emergency orders are somehow void, and lenders will doubtless be considering various potential fixes to avoid this otherwise likely line of collateral attack.”

To clear up any confusion, the authors urged the Michigan legislature “to move quickly to ensure the validity of mortgages recorded under the expanded procedures.”

While RIN closings have become more popular in recent months due to COVID-inspired social distancing guidelines, the mortgage industry's response has been mixed. Fannie Mae’s RIN guidance encouraged lenders to consider RIN only if RON wasn’t available, due to the RIN emergency orders being temporary.

“I see RIN as essentially using new technology to hold onto an old way of conducting notarizations. That seems oxymoronic,” said Gavin Ales, DocMagic’s Chief Compliance Officer. “It’s adding in extra steps when you don’t need to because you can conduct actual remote online notarizations using available software.”

Nonetheless, some states are still supporting RIN use during the pandemic. Minnesota, which also has a permanent RON law, recently passed legislation to temporarily allow RIN, while last week the governor of Tennessee—another state with a RON law—extended his executive order allowing RIN through the end of the year.

Permanent RON laws, meanwhile, are now on the books in 28 states. The latest state, Hawaii, passed its law on Sept 15, making it the sixth state to take action this year.

Related Content:

• Survey: Homebuyers adapt to eSignings, remote closings during pandemic (10/29/2020)
• Benefits of remote online notarization (RON) can't be overstated (10/22/2020)  
• RON vs. RIN (remote ink-signed notarization): What's the difference? (6/10/2020)