Requirements will enable borrowers to preview documents before closing
By MortgageDaily.com staff
7/3/2002

Fannie Mae announced this week formal requirements to help lenders create, sell, and deliver paperless mortgages through the secondary market to the government sponsored housing enterprise. The company said electronic mortgages will help lenders reduce time, costs, and errors by providing information ahead of time so borrowers can review the information before getting to the closing table.

"For several years, Fannie Mae has worked with industry partners to facilitate the adoption of eMortgages, which have tremendous potential to lower the cost of homeownership by eliminating paper, and reducing time and errors in the mortgage origination process," said Harvey Trimble, managing director of eBusiness for the real estate finance behemoth . "The company's requirements allow lenders to use the technology provider of their choice to create eMortgages that can then be sold to Fannie Mae."

The new electronic mortgage requirements follow the Mortgage Bankers Association of America's (MBA's) SMART DOC data format adopted by the industry, according to the announcement. "As the MBA continues to work with Fannie Mae and our other industry partners in MISMO, we look forward to continuing to establish and maintain standards on e-mortgages, data structures and electronic transaction security," said Gabe Minton, MBA's Senior Director of Industry Technology. "Benefits are beginning to emerge for lenders, their customers and investors and more benefits will emerge as developments advance."

Fannie said electronic mortgages will enable lenders to gain greater visibility into the closing process and access their electronic documents immediately after closing.

IDC, which says it is a provider of technology intelligence, industry analysis and market data, noted in a recent forecast and analysis that the outlook for the growth of online mortgages over the next five years is conservative but positive. The company said by 2006, consumers will use the Internet in some way to apply for 26% of new mortgages and 33% of mortgage refinancings.

IDC said the main drivers of adoption will be the introduction of new electronic document and signature technologies and greater integration of the Web with traditional channels such as call centers and branches. Major inhibitors of growth will include a continuing reluctance on the part of consumers to use the Internet for such an emotionally stressful and complex transaction, ongoing security and privacy concerns, reluctance by many lenders to make the necessary investment absent clear customer demand, and the need to coordinate among many different service providers.

Internet quality measurement firm Gomez recently reported that while the majority of online mortgage shoppers are only using the Internet to search for rates and mortgage information, online conversions (i.e., application starts, finishes and mortgage closings) appear to be on the rise. Gomez speculated that the refinance boom in the 4th quarter and lender website enhancements have driven a recent increase in conversions.

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