What is an eNote?
A paper note (or promissory note), is a physical piece of paper that the borrower signs at the closing table that obligates them to the loan that they've applied for. However, it may be surprising to some that an eNote is not a document in the traditional sense. While there is a PDF representation of the eNote that borrower(s) sign, and in many respects, it looks like the paper version of a note, the important part of the eNote is not the PDF, but the data underneath. In addition, an eNote cannot be ink-signed because there is language that specifies that it is meant for electronic execution. Once an eNote is electronically signed, it is tamper-evident sealed and stored in an eVault.
A common misconception is that eNotes have to be notarized. That is incorrect for both paper notes and eNotes. Neither need to be notarized, and they never have been. Some lenders may in the future want the note to be electronically signed in the presence of a notary in a RON ceremony, but an eNote doesn’t require notarization to be considered valid and legally binding.
What are the benefits of adopting eNotes?
Due to the fact that eNotes cannot be misplaced, destroyed, or "lost in the mail" when a loan is sold (and physical documents need to change hands), an eNote is a more secure alternative than the traditional paper note. There is also a tamper seal on the eNote that secures it and is proof that it hasn't been altered. Beyond the additional security, lenders can also reduce costs with eNotes by streamlining the post-closing and certification process, as well as eliminating the need to physically transport a note. Loans secured with an eNote can also be more valuable to investors than the equivalent loans using paper notes because their history is easily retrieved via the MERS® eRegistry.
What should you consider on your eNote journey?
Because eNotes are a natural accompaniment to eClose, we have found that lenders who start with a hybrid eClose solution, and then add in eNotes, have much more success in adoption. If a lender has already adopted an eClose process for their ancillary documents, it’s a natural transition to move over to eNotes. When preparing to transition to eNotes, lenders need to consider questions such as:
- Who am I selling to on the secondary market?
- Are there any approvals that I need to do prior to using eNotes?
- Will I continue to retain servicing?
What steps should you take to get started with eNotes?
- Understand how the process works today:
Start by taking a long look at your workflow to understand opportunities to offer eNotes as opposed to paper based notes. Check out what’s available:
Get to know what’s out there and familiarize yourself with different vendors. For Encompass® customers, we encourage you to look at the eClose page of the Resource Center and also in The Marketplace™ by ICE Mortgage Technology®.Crawl before you walk:
We’ve found that lenders have the most success when they adopt a hybrid approach first (start by simply adopting electronic signatures for your ancillary documents). Once that is rolled out within your organization, then add eNotes into the equation.The key to success is your loan officers:
Your loan officers can act as advocates among your internal teams, they are also well positioned to set expectations for the closings with your borrowers early on in the transaction.
How can ICE Mortgage Technology help?
Our goal at ICE Mortgage Technology is to simplify and streamline the closing process to make your team’s jobs easier. That is why we’re bringing the various eClose-focused features you need into a single workflow within Encompass. This one workflow doesn’t just include the origination aspects of the process (generating the note, presenting it to the consumer for signature, then bringing it back into Encompass, where it automatically gets registered with the MERS® eRegistry). It also includes the steps needed after the loan is closed (performing an eDelivery and a transfer of that note) conveniently located right within the Encompass eFolder.
Click below to learn more about Encompass eClose and how you can start streamlining your closing process.