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The argument for electronic warehouse mortgage lending


Loan originators may be able to fund six to seven times as many loans with the same amount of available credit simply by adopting an eMortgage platform, according to a panel at the Mortgage Bankers Association's technology conference in Fort Lauderdale, Fla., Tuesday.

Stanley Street, founder and president Street Resource Group Inc. in Atlanta, said shifting to a fully electronic system for mortgage warehouse lending cuts the time of a traditional transaction from roughly 20 days to one or two days. Loan originators also lower the cost per transaction by eliminating the costs of shipping the paper documents between lenders and investors, while expediting the processing and approval of funding requests.

Street said an all-electronic system provides benefits to the warehouse lender by reducing costs and operating risks, increasing fraud protections and improving data integrity. Warehouse lenders also stand to make six to seven times as much per file fee income from migrating away from paper.

Paul Anselmo, chief executive of SigniaDocs Inc., said transitioning to a fully electronic system could help lenders leverage capital to increase production. He said the shift is necessary to move the industry forward, adding that the increased transparency and velocity of the system will be embraced by the secondary mortgage investor.

"eNote is the change the industry has been clamoring for," according to Christopher George, president and chief executive of CMG Mortgage Inc. "And we are starting to see a lot of new technology coming now that the landscape has been wiped clean."

George added the move to a system that uses electronic signatures in lieu of ink on paper "must make me money or save me money" to eventually gain a foot hold within the industry and ultimately allow consumers to save money. In addition to eliminating lost notes, the shift to an electronic platform improves cash flow speeds, lowers financing costs and provides for better execution by selling faster and with better quality documents.

George said eWarehouse lending enables companies to settle loans every day, which is something the traditional business model doesn't allow for. Using the electronic system also provides for savings of up to 20 basis points, or about 0 per loan, excluding potential interest savings. George said his firm currently sells all of its eNotes to Fannie Mae because other investors don't have the ability to accept the mortgage notes electronically.

Peter Crouchley, principal at Vantage Capital, said eWarehouse lending is beneficial for all parties involved, providing the loan originator more efficient use of capital, mitigating risk for the warehouse lender, improving data quality for the investor and giving the borrower a faster, easier way to close the loan.

"This is some very exciting, cutting-edge stuff and we can't wait to see what the future holds" for this type of loan origination and securitization, Crouchley said. "It maximizes originations per capital, which allows originators to use the free capital to invest in (mortgage servicing rights) or additional business aspects."

Christos Bettios, senior product manager for paperless initiatives at Fannie Mae, said today's loan origination process already includes the electronic generation of loan documents. But those documents are then shipped, rekeyed and rechecked, producing unnecessary duplicative functions.

Moving to an all-electronic system mitigates risk and chances for fraud while increasing transparency and loan quality and supporting faster selling to the secondary market. This enables all parties involved to "make more money with less risk," he said.

"This is not rocket science, but a way for everyone to be strategically thinking about the future," Bettios said. "I'd advise (lenders) work with C-level executives on this shift and get ready by having operations, IT and capital markets involved and educating everyone in the chain."

Write to Jason Philyaw.


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