Another milestone in the adoption of paper came this year as a North Carolina credit union became the first to transfer a mortgage to the Federal Home Loan Bank of Atlanta as an electronic document.
Truliant Federal Credit Union of Winston-Salem, NC ($ 3.3 billion in assets, 270,834 members) transferred FHL bank’s first electronic promissory note (eNote) to the Atlanta area on March 26. and the Electronic Mortgage Registration Systems (MERS) electronic delivery system.
Lenders, buyers, sellers and real estate agents have long wanted to avoid the paper feast of traditional mortgage fences, but COVID-19 has made the move towards electronic fencing more urgent. States have made special exemptions to limit face-to-face meetings.
Supporters said electronic fencing helps lenders streamline workflows and increase efficiency by removing manual steps and allowing loans to close faster.
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Rob Kovach, chief credit officer for FHL Bank Atlanta, said banks and credit unions are increasingly interested in using eNotes as collateral. âThis first transfer demonstrates that we now have the capacity to meet this growing demand,â he said.
Beth Eller, vice president of mortgage services at Truliant, said credit unions have been able to send electronic mortgages they sell to Fannie Mae and Freddie Mac for about a year, and that Wells Fargo has started buying eNotes.
However, credit unions tend to keep a large portion of their mortgages in their portfolios. To use them as collateral to receive funding from Federal Home Loan Banks, they had to send in paper documents.
Eller said the eNote transfer is important because it means that the mortgages that credit unions plan to hold in their portfolios can now be closed without pen or paper thanks to electronic subscription, signatures and electronic storage in a safe. strong.
When a fence is complete, the electronic note is sealed and recorded in the MERS eRegistry system, which also indicates the location of the authoritative copy. ENotes cannot be edited without the change being recorded on a digital audit trail, and the note cannot be lost.
âYou are starting to be adopted across the industry by the big players,â Eller said. âThe Federal Home Loan Bank that comes in is huge. When you get their seal of approval, you know there is a safe way to pass it on. “
FHL Banks have been working since 2017 to develop the many components needed to enable their individual members to pledge eNotes. Atlanta is one of the first 11 institutions in the system to reach the pilot phase, which aims to test the infrastructure necessary to allow a limited number of FHL Bank Atlanta member institutions to claim eNotes as collateral.
Eller led the process development team for Truliant and worked closely with FHL Bank Atlanta’s eNote program.
In order for the transfer to be effective, Truliant followed a series of standards for electronic signatures, eNote documentation, electronic closings, electronic ledger requirements, eNote vault requirements, and maintenance system requirements.
Eller said the obstacles to setting up a full system require some technological wizardry, especially when it comes to security. But much of the work over the past 20 years has also been about gaining acceptance from state regulators and developing protocols that are both effective and acceptable to lawmakers and government agencies.
For example, some states, including North Carolina, require an electronic notary system that involves a notary visiting the signer so that they can actually see the person signing a special electronic tablet called an iPen. Some states allow a remote electronic notary system where the notary and signatory meet online, with the signer’s identity verified through a series of questions and a scanned photo ID, such as than a driver’s license.
Truliant President / CEO Todd Hall said the successful transfer of the Truliant eNote was the culmination of years of work by the State of North Carolina, FHL Bank Atlanta and ” of a dedicated team at Truliant â.
âTruliant completed its first end-to-end electronic fence on March 27 of last year,â Hall said. âSo literally a year later we are the first member to deliver an electronic note to FHL Bank Atlanta. This final digital step makes the whole home buying experience faster, more accurate and safer.