Warehouse Banks Scale For eNote Adoption As Technology Improves

As the mortgage industry undergoes a digital transformation, warehouse lenders are adjusting their processes and using technology to manage eNote transactions.

eNotes are electronic promissory notes and the digital equivalent of a paper promissory note, the asset being bought and sold during real estate transactions. Like a paper note, they include the terms of the repayment of the loan. They also include language identifying the document as an eNote that is electronically presented and signed by the buyer.

eNotes are stored in an eVault and registered on the MERS eRegistry. Their tamper-evident seals are recorded.

Camelia Martin, vice president of eMortgage strategy and industry affairs at Snapdocs, recently spoke with The Mortgage Note about the challenges and successes warehouse lenders are having as more mortgage lenders adopt eNotes. Snapdocs is the industry’s leading digital closing provider.

Martin said that for a warehouse bank, an eVault may not be part of their technology stack today. And while workarounds have sufficed so far, when industry experts look at projections, they see eNote adoption sitting at about 30% within the next few years.

Currently, eNote adoption is at about 10%, Martin said.

“As eNotes start to scale in the industry, warehouse lenders’ ability to scale their processes and their technology alongside lenders and correspondent lenders also has to sort of keep pace,” Martin said.

“Warehouse banks will say, and I completely agree with this, you want to build this process out and you want to build it for scale now while it’s at 10%. You don’t want to be trying to do that when the market’s already at 15%, 20%, or 30%.”

In May, Snapdocs announced a partnership with SitusAMC to integrate the Snapdocs eVault into SitusAMC’s ProMerit platform.

According to a press release, warehouse banks can now accept eNote transfers, initiate outgoing eNote transfers, reconcile eNote data, and view eNote statuses within ProMerit’s system.

Anthony Beshara, managing director and head of warehouse financing and custodial solutions at SitusAMC, told The Mortgage Note that while consumers have seen significant improvement on the origination and production side during the mortgage process, there is still a technological lag when it comes to how promissory notes are typically handled.

“Once you get to that point where that loan has been reviewed by a credit risk officer, and has been approved, and it kind of makes its way through underwriting, it’s interesting, it reverts back to a very sort of antiquated, manual, paper-intensive process,” Beshara said.

Beshara said part of this is generational and the way business has been handled in the mortgage space for a long period of time, but companies are now seeing the value in digitization because it reduces costs, increases production, and improves efficiency.

“Paper notes and things like that will eventually fall by the wayside. It’s not the sort of thing that is going to happen overnight, but if you look at our kids’ generation, most of those kids have grown up with a cell phone in their hands. It’s all real-time. It’s all quick. It’s all using various applications to communicate and things like that, and I think that’s going to translate into the mortgage market,” Beshara said.

Martin said when she speaks with company leaders about digitalization, she likes to start from a place of education because there is typically a hesitancy about the potential risks involved in digitizing such important documentation.

“What I like to do is just sort of say, ‘I know you’re worried about all these risks by introducing technology, but why don’t we look at all the risks that you have today in your paper processes and let me show you each and every point where that goes away.’ Usually, that’s when the light bulb moments happen,” Martin said.

Adapted from an interview in The Mortgage Note, published July 11, 2024