eNotes: What They are, Benefits, Getting Started

The adoption of digitization continues to accelerate, and the mortgage industry is no exception. Implementing a digital strategy results in numerous benefits, as evident in the digital lending scenarios necessitated during the pandemic. Today, the modern consumer appreciates speed and convenience – two essential variables that determine the success of any business.

One way in which the mortgage industry ensures this is by fully digitizing mortgage processes. For instance, lenders now use digital mortgage closings – a faster, more accessible, transparent experience for customers. Lenders who want to adopt digital mortgage closings need to understand what eNote for a mortgage is and how it works.

What is an eNote?

An eNote is the equivalent of a promissory note – a piece of paper that a borrower signs, obligating them to the loan they have applied for. However, an eNote is not a document in the traditional sense; they are generated in a specific file format that can be secured to ensure the security of the electronic note. If not created as an XML file in the MISMO SMARTDoc, they can’t be registered or sold to investors.

All the information in a paper note is also present in an eNote; it includes property address, loan amount, and interest rate. An eNote can be transferred between investors, a lender, warehouse lenders, sub-servicers and document custodians. The primary difference between an eNote and the traditional promissory note is that electronic notes are digitally created, signed, transferred, and managed.

The benefits of using eNotes

They can’t be misplaced

Usually, when a loan is sold, physical documents are passed on from one person to the other. Therefore it is easy for the papers to get misplaced, lost, or damaged during this process. An eNote offers a more secure alternative than the traditional promissory note.

Improved customer experience

More and more younger home buyers are getting into the mortgage marketplace, making digitized experiences table stakes. Young people are accustomed to fast, convenient, and instant-response experiences. They are therefore more likely to gravitate to lenders that meet their high expectations.

eNotes are integral to an entirely digitized mortgage experience, allowing customers to complete mortgage closing from the comfort of their homes. Usually, traditional closings require the involved participants to meet physically; this can be inconvenient, especially if individuals live in different states. Besides the travel costs, one may need to take half or the whole day away from work for the closing.

But eNotes allow customers and settlement agents to avoid in-person contact for mortgage closings. Additionally, they benefit from a faster, simple, accurate, and reliable mortgage process.

Transparency and security

eNotes allow you to securely store and manage documents digitally, making it easier to service the mortgage and move the asset to the secondary market with excellent transparency. The electronic closing process is also effective, providing borrowers, lenders, and settlement agents with a more cyber-secure process, including encrypted communication, ID verification, and a complete audit trail.

An eNote is also tamper-sealed to protect the integrity of the document. The tamper seal is more secure than an ink signature on paper notes. No one is likely to alter an electronic signature; this makes eNotes a safer alternative to traditional promissory notes.

Things to consider on your eNote journey

eNotes are a natural accompaniment to digital closings or eClose. That means that as a lender, you want to start with a hybrid eClose solution and then add in eNotes for more success in adoption. It is more seamless to move over to eNotes if a lender has already adopted an eClose process for their ancillary documents. As a lender, you want to ask yourself the following questions when you prepare to transition to eNotes.

  • What approvals do I need before using eNotes?
  • Will I continue to retain servicing?
  • Who are my buyers on the secondary market?

Steps to get started with eNotes

  1. Understand how eNotes work. Analyze your workflow to understand and establish the opportunities to offer eNotes instead of paper notes.
  2. Look out for what is available by getting out there and familiarizing yourself with different vendors.
  3. Start by adopting simple digitization like using electronic signatures for your ancillary documents. You can then add eNotes into the equation once that is rolled out within your organization.
  4. Loan officers can be advocates among your internal teams; they are the key to success. They are also positioned to set the closing expectations with our borrowers early in the transaction.

Now is the time to adopt eNotes; failing to implement digital technologies puts your organization at risk of falling behind competitively as they fail to meet the customers’ demand for an entirely digitized mortgage process.

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