While President Trump's executive order promoting increased access to mortgage credit makes prominent mention of digital loans and remote online notarization, the practical effect might be limited.
RON is already allowed in 48 states and the District of Columbia; though some of those still only have temporary authorization in place.
However, even with the large number of participating states, many nationwide lenders are reluctant to make use of RON capabilities because of the cost of running parallel processes for loans. Some third parties, like aggregators or recorders, do not accept remote notarization, noted Aaron Davis, CEO of Network Transition Solutions.
"It's a fact that it is cheaper, the cost of doing a digital closing averages $400 to $500 less than traditional, simply because of the workflow involved," Davis said. The process is also less susceptible to mortgage fraud.
Still, the inclusion of digital mortgages, eNotes and RON in the executive order is significant, said Dark Matter's Chief Product Officer Stephanie Durflinger.
"It does make a material difference, because it changes the way that the agencies look at things, and regulators look at things," Durflinger said. "It changes it from a position that says, 'use it with caution, you know you can use it,' to more of a digital is acceptable with guardrails."
The mentality shifts to one where automation is expected, digital signatures are expected.
"Now that opens the door where previously that really hasn't been the case, and so lenders haven't been as willing, for good reason, to take advantage," Durflinger said.
The way to think about this is the federal government is removing the obstacles for acceptance, she added.
Over 3 million eNotes are now on the MERS registry, Intercontinental Exchange announced on March 11.
"Surpassing 3 million eNotes reflects the steady progress the industry has made in modernizing how loans are produced, transferred and managed," said Bob Hart, president of ICE Mortgage Technology, in a press release. "As adoption expands, the ability to connect digital infrastructure across the mortgage lifecycle becomes increasingly important."
Nothing in the order is likely to override existing state law. Specifically, the four government agencies mentioned, including the Federal Housing Finance Agency are to consider these in a manner "consistent with applicable law."
The order calls for:
- Eliminating unnecessary wet‑signature requirements for disclosures, applications, closing documents, and similar documents;
- Standardizing acceptance of electronic signatures, e-notes, and remote online notarization; and
- Promoting digital mortgage standards.
While the EO will not change things tomorrow, the measures do set some expectations for digital processes being important to the mortgage lifecycle, said Jay Arneja, expert relationship manager at nCino.
It "exposes it to everybody to say it's not just verifications, it's not just your credit, but your closing areas also need automation, because it's a part of fraud prevention," Arneja continued. "It's money savings, it's better experiences for everybody, and its better delivery to the GSEs and to your secondary market."
This doesn't move the needle immediately, but the first step towards change is bringing these to the forefront, Arneja said.
The 3 million eNotes on MERS signal that digital mortgages have reached meaningful scale, Arneja, a former executive at the registry, pointed out.
"But the usage has been amongst the people that understand technology, understand the guardrails, and understand that this can save you money," Arneja said.
"We are probably at the tipping point" for growth in digital mortgages and RON, added Brian Webster, president and CEO of NotaryCam.
The executive order does not cover new ground for settlement services providers, Elizabeth Blosser, chief strategy, communications and innovation officer for the American Land Title Association said.
"From the outset, ALTA has prioritized building strong safeguards into digital closing frameworks," Blosser continued. In particular, we have championed RON legislation that incorporates rigorous identity proofing, secure credential analysis and robust anti-fraud measures."
ALTA's primary focus is protecting consumers and combating the growing threat of real estate fraud, although convenience is an important benefit of digital mortgages and RON.
Even as legislation enabling digital closings is now in place in nearly every state, adoption has been slower for mortgage transactions.
"The President's executive order is an important step in encouraging broader adoption, particularly for mortgage-related transactions," Blosser said.
ALTA is looking forward to working with FHFA Director Bill Pulte, HUD Secretary Scott Turner and other policymakers "to responsibly expand access to digital closings and mortgages nationwide."
But those variations in state laws regarding RON is likely not something the federal government can just clear out of the way, Webster said.
Even calling out the specific agencies might not necessarily move the needle except in certain circumstances, he continued. For example, Fannie Mae and Freddie Mac accept RON and even use it for modifications.
The FHFA could make a difference with the Federal Home Loan Banks, which have risk mitigation requirements and protocols around the types of assets which can be pledged as collateral, Webster said.
The broader home equity market is another area where inroads can be made.
But consistency among recording jurisdictions can also be a problem, Webster noted. Even in the same office, one clerk might not accept an electronic package, but on a different day, a different person will.
"If you're a title company or a lender, and there's a chance that I can't sell it or I can't record it, they're going to take that safe route," and use a paper package, Webster said.
Another factor is whether all title companies are able to accept digital transactions and some are not, Davis, who is also CEO of Florida Agency Network, said.
From the customer's perspective, "I got this great digital experience up until the signing of the note in the mortgage, and I have to paper out, have that wet signing," Davis said. "It just kind of loses the whole luster of the cool factor of a digital closing," and this is what the order could change.
The order is recognition that electronic adoption by lenders is an important component, Arneja said.
"Don't just look at automating the 'up the funnel' piece," Arneja said. "This experience for the borrower goes all the way to closing, and this is where some of the newer solutions are headed."
For lenders this also will give them data they can use in their business for every day purposes like tracking and where to next focus their plans.
