Electronic real estate loan goes to secondary market

August 24, 2005

Paperless transaction opens doors for e-mortgages

Inman News

A secondary mortgage market investor has purchased in a cash sale an electronic mortgage loan in a pioneering move toward the paperless real estate transaction, Document Processing Systems said today.

The company today reported that its DPS eMortgage Studio online lending platform has been used by 1st Advantage Mortgage to execute the industry's first cash sale of an electronic mortgage loan to a secondary market investor through the MERS eRegistry. The mortgage was electronically closed, registered and immediately sold, using the eMortgage Studio as the interface between DPS partner 1st Advantage Mortgage LLC of Chicago and the eRegistry.

The transaction opens the door for lenders to transition to electronic mortgage closings by ensuring that eNotes can be easily, efficiently and securely sold in the secondary market. Any lender can use the DPS eMortgage Studio to close and sell a loan, and any secondary market investor can connect to the MERS eRegistry through the DPS eMortgage Studio and purchase eNotes from the registry by executing an electronic transfer of control.

Last year, the DPS eMortgage Studio completed fully paperless, all-electronic mortgage closings and registered the eNotes with the MERS eRegistry, the electronic system of record for ownership of electronic notes. Electronic mortgages promise less paperwork, fewer errors, faster closings and reduced costs, and the ability to sell closed loans immediately to the secondary market.

The loan sale announced today was closed in conjunction with Chicago Title and sold to Fannie Mae by 1st Advantage Mortgage.

"Much of the cost savings of eNotes comes from streamlined delivery to the secondary market," said Dan McLaughlin, executive vice president, product division, MERS.

After the borrower, notary and settlement agent electronically signed the documents through the DPS eMortgage Studio in a simple point-and-click procedure, 1st Advantage registered the loan on the MERS eRegistry and sent a transfer of control request through the DPS interface. Fannie Mae used its delivery systems to accept the transfer of control electronically, and the MERS eRegistry was instantly updated to reflect the change in ownership to Fannie Mae.

"This transaction advances the eMortgage movement exponentially by bringing secondary market investors seamlessly into the loop. It used a commercial platform that can be accessed by any authorized party with a Web browser, and it can be replicated at any time," said Paul Rakowicz, president of DPS.

The DPS eMortgage Studio is an eLending platform that can be used by all parties — including lender, document provider, title company, settlement agent, notary, borrower, servicer and custodian — to facilitate paperless loan origination, closing and servicing.

The MERS eRegistry is a system of record that identifies the owner and custodian for registered eNotes, providing liquidity, transferability and security for lenders.

Source: MBA

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