A new report indicates loans included in residential mortgage-backed securities will benefit from digital mortgages as long as legal issues are addressed.
Increasingly, loan originators are adopting e-mortgages — where critical loan documentation is created, executed, transferred and stored electronically.
By utilizing the digital loan process, RMBS transactions will likely benefit
from improving data quality as well as improving loan documentation.
Those findings were discussed in E-Mortgage Growth Will Benefit Loan Quality if Implementation Addresses Legal Requirements from Moody’s Investors Service.
Fully electronic mortgage transactions help to better inform borrowers by providing pre-closing access to documents. At the same time, improved loan data quality results from a reduction in transcription errors and missing documents associated with the manual origination process.
Another benefit is the easy access to the note for servicers — enabling faster foreclosure processing.
While some lenders and servicers
that fail to comply with the established legal framework run the risk of an unenforceable e-note, the few court cases involving challenges to e-mortgage foreclosures have provided clarity about the servicer’s ability to show that it has the necessary control over the note to permit it to foreclose.
“The few decided cases involving challenges to e-mortgages suggest that as long as the servicer can establish a transfer history that shows the servicer as the holder of the e-note, the servicer has standing to commence a foreclosure,” the report stated.
But Moody’s cautioned that
the lack of nationwide legislation on e-notarization, as well as the hurdle of market-wide acceptance, has limited broad adoption.
