How Lenders and Title Agents Can Simplify eNote Adoption

Marvin Stone (00:00)
Well hey everyone. welcome back to another great episode of Steward in the Studio. We just had an excellent conversation with Brian Webster, who heads our signer's choice team, talking about how e notes are really no longer difficult to execute on. So let's get to it.

This is Stuart in the studio from Stewart's Thought Leaders. Okay, so we're here to talk about E notes in detail. Now we did a an episode recently with you, Brian, talking more about Ron, IPen, mobile notary, kind of the whole signing experience. But now we're gonna deep dive and kind of geek out for the e note piece, which to those who are not really in this space, that's a whole different technology-bound way of delivering the note. So we'll go there. Brian, you've been an expert in this field for a long, long time. dating back to all the way back to CFP, your your days at the bureau and things, and then through basically on the lending side, in a couple of different operations, seen it firsthand, and now you're over here at Stewart in Signer's Choice. So just a brief kind of high level on where your intersection comes with the whole e note story.

Brian Webster (01:08)
Thanks, Marvin. I don't know if I'm an expert, but I did stay at a holiday and express left. So hopefully I can I can opine on that. as you mentioned, it all kind of started, gosh, almost fifteen years ago, I guess. you know, we were studying kind of the benefits of of e closings and a like a digital experience for the consumer at the closing table, at the C F P B. You know, I did do some good things.

that just kind of progressed and snowballed into, you know, various stops along the way and then landed me here, you know, at Stewart running notary cam. And, you know, one of the advantages of kind of coming over to Notary Cam and the tools and resources that Stewart kind of provides to that is really being able to focus in on, you know, how can we as not only just the technology but the service provider kind of bring tools and resources to our users to Stewart's customers to our lender partners that can really help facilitate, you know, that digital mortgage adoption, specifically around kind of that electronic note piece, because that's the most important that everyone focuses on because that's that's what follows the money. Yeah. Right. Is that's the collateral piece that was gets sold and bought in the secondary market. And so that's that's the that's the one piece that everybody really kind of focuses on and makes sure sure they want to get it right.

Marvin Stone (02:36)
Yeah, good. So and we've got a number of things things kind of coming up in the works. You know, MBA annual is coming up. They've got the MBA Tech Exchange twenty six that you'll be at, and we'll we'll have a big crew at. So one of the things that really has been striking about e notes and that whole space is it's just out of reach for a lot of executives who are in the mortgage space. That's for the tech guys. And they don't necessarily see the strategy behind it. So we're gonna kinda go into a plain English foundation just to set the table real quick on smart docs, MERS e registry, what's a MERS and e vaults, you know, those types of things. Just a quick fly over in a in a few minutes on what that looks like.

Brian Webster (03:16)
So it all starts with the e note, right? An electronic note, promissory note. And, you know, the introduction of this around kind of eSign and UEDA around two nineteen ninety-nine and two thousand, you know, the GSCs really kind of push forward, like how can we bring this electronic document as a transferable asset into kind of a digital format, right? And so working very closely with MISMO and a couple other kind of forward thinkers in this space.

You know, develop the standards around kind of a smart doc. And a smart doc

Marvin Stone (03:49)
I can't remember the acronym.

Brian Webster (03:51)
I know it's it's secure, marketable, accountable, readable, transferable. Yeah, something like that. Charlie will yell at me. Yeah, right. Others, yes. And so what that really kind of does is define the combination of the document and the data. That's what makes smart doc so so powerful.

Is that really it is a data set that contains a readable version of what is represented within the document or what's represented within the data.

Marvin Stone (04:28)
Real quick, what's novel about that is the data goes with the document. Absolutely. I mean they're they go together. And so today we have so many in across all the mortgage title, every every aspect of the industry, we've got things that are out of band. It's like, well, this goes the data channel, this goes the document channel, this goes in the system, that goes in email. So to your point.

Brian Webster (04:47)
You know, there's always been a push by you know certain groups within the industry to try to get every document as a smart doc. Right. Like, you know, organizations, lenders, title, you know, QC have these processes in place to take the document, extract the data

from it to validate the data on the document. Whereas if it was in a smart doc format, you have all of the data and the document together, right? You know that it is immutable. because it's it's what's represented on what you see on the document. And it just goes back to the advantages of keeping everything digital because once you print something out on a piece of paper, you have lost that ability, that audit trail, that accountability, that control, that quality of the data that you've got within your systems. And so a smart doc can kind of give you that that benefit. but a smart doc is is a requirement for a a GSC eligible e note.

Right. So it has to be in a MISMO smart doc format that's generated from approved vendors that allows it to be transferred, registered with MERS and and and sold to the GSCs.

Marvin Stone (05:56)
Someone explained it to me as light socket, light plug. You know, I mean just like these two go together, you don't even think about it, and that's the way smart docs are supposed to be, is you just you can bank on that standard.

Brian Webster (06:07)
Then the bulb comes on.

Marvin Stone (06:08)
There you go. That's right.

Rich Kuegler (06:10)
Yeah, but I think the enormity of of going from kind of that paper based let's image it into a smart doc environment is also enough to have you know, it really impact the adoption because it becomes such a huge job when in fact, and I think you pr I don't want to leave the witness, but I think you're gonna probably talk a little bit about what we're doing in the e node space that allow you to make that a simpler process than thinking about this whole thing you have to bite off.

Brian Webster (06:36)
Right. And that and that's really kind of, you know, setting that foundation of what is it that you really need to do and then defining the stakeholders within the process that Could be or should be doing those acts, right? Doing those tasks, right. You know, lenders always feeling like that it was on their shoulders, that it was their burden to have to do this and that they were had to do it on their own. Well, they're not. They're not alone. And if you think about it, right, every real estate transaction doesn't necessarily have a lender involved. Right. Right.

Marvin Stone (07:14)
A third of them don't.

Brian Webster (07:16)
A third of them don't, right? So there's there's opportunity there for really kind of spreading the responsibilities across all the state.

Marvin Stone (07:23)
Putting it in the right place, really. I mean, if a third why have two processes, and I think that's where we saw a good cast was okay, the Ron providers initially went to the to the lenders and say, You make your title agents do this, but then there are so many different systems, right? This is where that comes into play, where a title agent can have one system to serve any number of lenders.

Rich Kuegler (07:43)
Yeah, well I was gonna say Barbara, that that that's probably the issue too, is if you view it as a separate process entirely and something you have to do in parallel, it really doesn't work well because why would I have two pro

Brian Webster (07:54)
And going back to kind of the groundwork, right? you know, we talked about the smart doc and and then you know the other terms that you that you hear about quite a bit related to e-notes is MERS and MERS e-registry, right? So MERGE is a mortgage electronic registration system. really began with tracking kind of where physical notes were. They developed the e-registry to track e-notes. so any any electronic note that gets generated.

In order for it to be sold to the GSEs, it has to be registered with MERS. And so if you think about the location finder, right, the MERSE registry dictates who is the rightful owner of that collateral and where does it actually exist. In coordination with E Vault and the MERS E registry, you identify, you know, the people that are involved, the the owner of the note, the the holder of the note, and then the servicer of the note, any type of interested party guarantors associated with net that note all can be tracked within the e-registry. And that's what really kind of creates the fungibility that creates security that creates the marketability of that digital asset because you're able to track it from start to finish and whoever needs to touch that asset can be tracked within the registry.

Marvin Stone (09:12)
So so that's kind of the mechanics of it a lar largely. Now talk about the done for you approach that you guys bring to the table. and and really from the standpoint of what does a title agent need to do to serve multiple lenders and how can a lender take advantage of that?

Brian Webster (09:28)
When I had the opportunity to go into a lender to try to implement this, right? The traditional model was the lender owned it, I defined it, I defined the platform. You know, originally e closing and Ron vendors went to the lender because typically the lender controls the entire transaction, right? You know, as I was thinking through this, it's like, well, the title company, the settlement agent, the closing attorneys are the ones that are actually executing the documents. Why not focus on the person that's actually executing the documents?

Marvin Stone (09:57)
And by the way, you were the only one who ever said that. I mean everyone else was like full on talking to the lender.

Brian Webster (10:03)
I sat with you and Scott Gillen in 2015, you know, having this very conversation, right? The challenge that a lot of lenders were having early on was well, I've got to go to this title company, I gotta go to that title company, I gotta go to this title company. Too many touch points. Right. Way too many touch points. But then flip it, look at the other side of the table, right? As a title agent, I've got five lenders. They all have their own closing platform. So I now need to know five different platforms.

I gotta manage logins. I gotta manage users across five different platforms. Let's go back to Betty Sue. Betty Sue's sitting at the table. She's doing a Wells Fargo transaction at nine on platform A. She's doing a Bank of America trend transaction at 10 on platform B. She's doing a Citibank at 11 o'clock on platform C. And the ability for her to be effective and efficient at her job, delivering the type of experience that.

All of these lenders want for their customers, right? And Betty Sue wants to be delivered to her customers, it makes it a challenge. Why not go to the person and give them a better PIN? Right? Upgrade their BIC to something much better, right? Give the title agent, give them the technology to execute the documents and control the transaction. Then they can go to the lender and say, look, what I can do for you. So going back to the whole Eno digital transformation, right? It was always a challenge that the lender

In order to manage all the touch points, to figure out what I needed to do, who was going to do it internally, right? And so what we've done in that done for you model is built a solution that we can give to a title agent that says, look, we figured out mostly what lenders need to do in order to adopt digital mortgage. And we can give you tools that can help you facilitate majority of those tasks, right? So

We can take the dumb PDF documents. The lender doesn't need to change doc providers. They don't need to do anything different with their with their doc systems. We can take the dumb PDFs. We can get the agent documents directly sent to us. So the dumb PDFs from the title company. We then transform those. We can flag and tag and index all the documents and understand which each of the documents are. We add the appropriate annotations. We then extract the data that we receive, generate a GSC approved e note. get everything executed within the same session between the notary and the signer. We have a notary cam e vault so that the e-note gets deposited into the e-vault. And then dependent upon and the lender, the title agent's requirements at a transaction level, because this could be different for every single transaction. We then dictate where we then deliver that that e note to.

So thanks to some changes MERS made a few years ago with the e-registry, it allows me to do that. So I can deliver an unregistered e note back to the lender, to the custodian, to the warehouse lender wherever I need to, without having to kind of step into that chain of custody. Right. So I don't necessarily want to do that. But they've also added ability for me as notary cam to register on behalf of the lender under the DFT model, delegate T for transfer. So it gives me the ability to kind of act as an agent for the lender for a registration purpose.

What all of that does is it gives the title agent basically an unmanaged tool because they're not really doing anything much different. We're managing all between our processes and technology to really create that digital transaction, that digital mortgage for the lender through the title agent, the title agent's relationship that really only leads what the lender needs to do is fund it and sell it. Right.

Marvin Stone (13:51)
Which is all they want to do.

TJ Harrington (13:54)
You just don't want extra work, right? So some of the early platforms you were manually flagging and tagging. Right. And what we found was the the vaunt the savings and not having to post close your packages were basically eaten up with click times, having to click all the fields manually to add the tags.

Brian Webster (14:09)
And part of that too was the title agent wasn't seeing the benefits. Yeah. Right?

TJ Harrington (14:13)
That's right.

Brian Webster (14:13)
That's right. Because right. The lender was getting the benefits of the digital mortgage and the e note and the better execution and and and shorter delivery times. The title agent is seeing an increase in time per file, the cost to be able to flag and get the documents ready. You know, as an agent, I'm like, why do I want to do extra work? Why am I going to put fifty percent more kind of operational time on a single transaction?

for you to see a ten basis point better execution on your delivery.

TJ Harrington (14:42)
To your point, I remember my my first ENUB closing transaction was on Amtrust gemstone. So got spicy back in the day. And again, that was a very manual process having to click click through that. But to your point about about delivery, even if it wasn't someone using gemstone, it was only gemstone, well now it's Amtrust gemstone. It's it's FSP, it's different banks gemstone. I'm now logging into the same platform for four or five different lenders and balconizing my process by lender.

and my lender partners are feeding into me as the distribution partner.

Brian Webster (15:14)
Right. Exactly. So what we've what we tried to do is give the title agents additional tools, additional resources to be able to go to sell their services to the lender. You can now deliver a better product to your lender customers without really doing much more. Right.

Marvin Stone (15:29)
Right, right.

Rich Kuegler (15:30)
Well allow the allow the technology to really be that efficiency tool that it was intended to be. Right. You've removed a lot of those obstacles and hurdles and that's gotta really be a great business case for for sure. Right. Now you can adopt this as a as a part of your project.

Marvin Stone (15:42)
And now both the lender and the title agent have a business case for this. It's a matter of explaining that business case. The cost of origination is what sitting still at twelve thousand dollars and what how much money can this take out of the process in in addition to time and efficiency and error? How much hard dollar savings do we know? Is it like

Brian Webster (15:59)
There's been a few studies. you know, the latest one that I can recall from a few years ago said about an average of three hundred dollars a transaction fr from in the lender's perspective by doing kind of raw and digital mortgage. I've had originators tell me, you know, they equated to like ten basis points just in in execution delivery. And that that really isn't taken into account the actual benefits from a capital market execution delivery.

Rich Kuegler (16:28)
It probably hasn't been priced in yet.

Brian Webster (16:29)
It's really just kind of an operational advantage. They're like as soon as I know I'm doing e-notes, I I I know I'm getting a 10 basis point lift. Because conversations have always been it's like, okay, if I have an e-note and I know that it's gonna close on on on Thursday, you know, I know that there's not gonna be any issues, I know that you know it's gonna be rock solid, I can get it certified, I can get it verified by my investor for the GSCs, they do all the certifications, right? So I know that I can then deliver that note almost immediately.

And so you may have some very bold secondary marketing managers out there that, you know, are starting to do more mandatory delivery or shorter best efforts on their on their secondary market execution, which can really result in some pretty significant gains. Right.

Rich Kuegler (17:13)
Right.

TJ Harrington (17:16)
your hedging strategy, your rate box strategy which changes the cost of capital, which I I think when you bake that twelve thousand dollar number, that's a big chunk of that, right? Particularly in a volatile market environment rate environment where you lock in today and rates go higher tomorrow, that cost of that capital's gonna be very different.

Brian Webster (17:33)
Yeah, because especially if if you can ensure that that I mean the some of the advantages around kind of an electronic note or electronic asset, digital mortgages, RON, those type of benefits is that, you know, the the the systems, the technology help mitigate errors. Yeah. And is and and if you think about I'm taking my QC process from post-closing to pre-closing and closing, so that I'm actually performing post-closing checks.

while I'm actually executing the documents and delivering documents. So if I can eliminate that risk of p pushbacks or even buybacks, unfortunately, you know, downstream, again, it creates efficiencies, it creates cost savings where I can start, you know, re redeploying resources elsewhere where I may need them within the organization.

Marvin Stone (18:22)
Yeah, and one of the things we wanted to talk about a little more is is the business case. and and you guys too, you know, when you're talking to lenders out there, are they aware of the business case, like, hey, I should do this or where does that start

TJ Harrington (18:34)
Hard to quantify a numbers perspective. Everyone's always chasing that that cost reduction to f in fulfillment. But it's a no-brainer from a customer experience perspective. So if they're really focused on the customer experience pieces, it's such a better experience to go through E notes and Ron where possible than not. And so I I do think that we we see that. you know, we just had a conversation with a major, major lender on it, and it's on the roadmap. They found it kind of insurmountable because of all the ecosystem pieces they perceived they had to build and so they had a big Brock budget to try and do that. You know, when we shared kind of the vision that Brian brought with the the you know s solve for you turnkey execution, they're like, why aren't we talking about the survey? Right.

Brian Webster (19:19)
That's a great point to start thinking about because you know, traditionally, from a lender's perspective, it's always been, you know, what is my ROI? Like, what is my gonna how am I gonna get better execution? How am I gonna either reduce cost by moving to e notes? And that honestly, you know, if that is the only metric that you're looking at, when you start running all the numbers, you're gonna have institutions that are gonna be like, it's gonna cost me too much money.

And too much time and resources and technology changes to be able to do it for the just the dollars and cents on the back end. You gotta look at it as a much bigger picture. You know, you're about the customer experience. What does the customer want? What are my operational efficiencies and gains that I'm gonna get within my organizations, right? It goes far beyond just cost savings or better execution in the secondary market and meeting the customers where they're wanting to be met today.

And tomorrow, right? We're seeing this in the in the home equity space, resistance percent and other lending products outside of just real estate. Customers are are demanding, they're wanting

Rich Kuegler (20:27)
Well well really, you know, they they and someone said this to me in in a meeting not too long ago, is that they're really looking to see how can we make this experience to be like an Amazon experience. Right. So

Brian Webster (20:37)
So

Rich Kuegler (20:38)
every other part of the consumer experience is I'm on my phone, I'm on my PC, I'm ordering something electronically, I'm inner interfacing that way as well. So why can't the mortgage process do the same? And I think as we looked at, you know, the traditional causes that that or the traditional adoption obstacles.

where it's too much of a scope, it's too much cost to do all this all this stuff. And now it's not necessarily that way. So that I think is gonna change the complexity of that. And and and to be more competitive in the market, it's something you that someone's almost going to have to

TJ Harrington (21:11)
Do

when we see the winners in the home equity space, especially the fintechs playing, they they focus almost wholly on experience and they've been winning the consumer that way. Is that

Rich Kuegler (21:20)
Despite a higher higher rates, it is it is a very

TJ Harrington (21:22)
That's right. Then experience is one of the day. Right. And you even have, you know, your your average average HELOC today is under six figures. You see the car buying experience where maybe you're buying a wagoneer for a hundred and ten thousand dollars and that will take you, you know, super duper duper fast execution, primarily 'cause it's electronic in nature. And so it's at least parity from and from a serious dollars perspective. But the execution on a mortgage is that much harder.

When you don't have a digital process.

Marvin Stone (21:53)
Yeah, even to the point of a lot of people who come up to home buying or renting today and the rental experience in many cases is now fully electronic. So that we didn't see that ten years ago. Now it's pretty prevalent. So they're expecting that just as you said, right?

TJ Harrington (22:10)
Beginning to become market stake. Yeah.

Brian Webster (22:12)
Yeah. And you just start looking at all the different components in order to get that full experience to being able to deliver that across the board. Enote is a big part of it. And Enote has always been the the kind of daunting piece because it is the collateral. Right. Right. But it's it's not as much of a challenge, really, because you know. The technologies are there, the doc providers are there, the warehouse lenders are there, the investors are there, right? So all the ecosystem surrounding it, the stakeholders involved are coming to the table to make it easier for lenders to be able to adopt.

Marvin Stone (22:47)
But sure I know as a lender on a transactional basis. I think you mentioned e eligibility in the past. And I'm just kind of looking down, you just checked off a bunch of items here on my checklist of things that lender would have to take into account. So th those things are taken care of. But on a transactional basis, in a certain state, certain type of transaction, how do I know I can do this one electronically all the way to an email?

Brian Webster (23:10)
a couple of different ways, right? I mean, if depending upon your technology, your LOS, what you're able to do, you know, it at my last lender that I worked at in order to implement a fully digital offering, we added two data points to our systems. we had one up front that basically set the eligibility requirement. Like what what could we do? And that was based on loan program and it was based on property location.

And then we had an indicator kind of on the back end to indicate, well, was there actually an e note on this transaction that flit flowed into our postclosing and secondary market that says, can I can I fund this with this warehouse lender or that warehouse lender? Can I sell it to this investor or that investor? Right. And so sometimes the technology is easy to update and move forward and add that in there. You can also look to your partners, you know, going at this.

alone is that's where it really becomes, you know, extremely daunting and makes it seem to be unattainable. So finding the right part. So you could have your partners could have the technology to be able to tell you, right? And you know, when submitting an order to your title company or submitting an order to kind of a notary camp from a signing service, you know, we have the tools to be able to flag it and says, hey, you can do Ron.

Rich Kuegler (24:28)
What might this qualify for?

Brian Webster (24:29)
Right. Exactly. Luckily from a Ron perspective, it's driven by the state.

So 45 states have RON legislation, roughly. Recording can be a challenge that we've talked about before, right? So really it's it's property location. I can do Ron or not. and then typically it's based on the loan programs, right? So your conventional conforming GSCs, like they buy Ron e notes all day long. some of your niche products that you may be selling off to some private investors that are non-GSC programs or maybe not on board yet.

But all of those can be easily programmed in. usually it's just kind of a lookup table. Yeah. Right. Like that's what we've created internally. It's a lookup table based on property location and based on the title underwriter, because several underwriters might have additional overlays. So we manage to that internally to be able to let our clients know if they can do it.

Rich Kuegler (25:23)
Again, that allows allows the lender to have a better customer experience, right? So you don't have to stop and start. You can allow it to flow through that waterfall.

Brian Webster (25:29)
Price being legendary.

TJ Harrington (25:30)
Ryan's being a little humble because you know, a lot of the adoption for warehouse banks from that those aggregators, he's been had those conversations to be an evangelist on e-sign across his his career, so that that part of it's gotten easier. That wasn't always the case. True. True. to toot your horn a little bit. He's been kind of carrying water for that part of the industry to remove that as part of the execution risk. Because it used to be, yeah, I programmed it, but now I I go, I go eSign.

And now half my investor list or my aggregators are out and now my best ex from a from a profitability perspective is off the table. Well now it's only one or two not taking it versus one or two that would take it. So that's a it's a flipping of the economics there. And you don't always know. And you don't always know on a given day if you're if you're not pledging ahead of time or have some forward delivery who your best execution is. And now that's that math problem has gone away where you can count on that from a profitability standpoint.

Marvin Stone (26:28)
So great conversation. Obviously, there's a lot more we can talk about when it comes to e notes and I love the done for you approach. It it kind of reminds me of home improvement projects. You start going to the store, figuring out what you have to do, it's like, man, it's gonna be a lot, and then you realize that somebody who really does this as their day job and really knows this space well can make short work of it. And that's kind of what you guys are doing. So if anybody wants to talk at MBA with you guys about anything e related, you're both gonna be there. I think you're gonna be maybe at Alta, but you will have people at MBA, so plenty of opportunity there. So that's it for this episode. Thanks for thanks for getting together to talk e notes.

Brian Webster (27:06)
Great, thanks a lot. Thanks guys. Thank

Rich Kuegler (27:07)
It's

Brian Webster (27:08)
you guys.

Marvin Stone (27:08)
That's it for Stuart in the studio. Find more episodes and insights at Stuart.com/slash lender. We'll see you next time.

Brian Webster (27:15)
This podcast is for information purposes only and reflects the view, and listeners should consult their own advisors before making decisions.