“E” to the Rescue

Carmen Bramante, CDB Consultancy

February 18, 2009

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“E” Opportunity in Servicing and Loss
Mitigation
Carmelo D. Bramante
Founder and Managing Director
CDB Consultancy LLC
www.cdbconsultancy.com

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The Tower Group

“The mortgage industry is

one of the last bastions of
highly manual processes
left in the consumer credit
world.”

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Topics for Industry Change

• The “E” Laws

• Industry Standards & “E” Processes
• Servicing Value Chain
• Opportunity in Servicing: An Example
• “P” World vs. “E” World
• Benefits and Value of “E”
• Change Management

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“E” to the Rescue

E2 = Electronic X Efficiency
eSignatures
eRecords x Business Process Redesign
eDocuments

Technology x Servicing

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The “E” Laws

• Uniform Electronic Transactions Act (UETA), approved by

NCCUSL in 1999; currently enacted in all states except
GA, IL, NY and WA (however, these 4 states have their
own e-signature law).
• Electronic Signatures in Global and National Commerce
Act, enacted by Congress in 2000 (ESIGN) and applies to
the entire country.
• Uniform Real Property Electronic Recording Act, approved
by NCCUSL in 2004 (URPERA); currently enacted in 19
states and the District of Columbia.

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The “E” Laws

An Attempt toward a Uniform Legal Landscape . . .

• E-SIGN / UETA / URPERA are “overlay” laws / “opt in” / parties agree
to transact electronically.

• E-Signatures, records and contracts “may not be denied legal effect

and enforceability solely because it (they) is (are) in electronic form.”

• E-Mortgage Notes / Transferable Records

• E-Notices and E-Disclosures (and consumer consent requirements.)

• E-Signature - defined broadly.

• E-Notarization - allows use of electronic signature.

• E-Record Retention

• E-Recording – URPERA and UETA

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E-Mortgage

* A mortgage where the critical loan

documentation – specifically the promissory
note, assignments and security instruments
are created electronically, executed
electronically, transferred electronically, and
ultimately stored electronically, aka a
paperless mortgage.

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* MISMO’s eMortgage Guide Version 2.0
E-Mortgage Processes

Industry Standards
(MISMO & PRIA & LegalXML)
PRIA
Key:
MISMO

Legal eDocs
(Land records,
eRecording Servicing
External tax liens, other
Docs docs/affidavits)

eOrigination Secondary
eDoc
& eClosing Investor,
Prep
Underwriting Aggregator

MISMO XML eDocuments

Data Transactions eSignatures
and/or SMART Docs Service
Ordering: eNotarization
eVault eVault

Credit
Flood Buyer Seller
Hazard eNote Data, Messaging & Control
Title
MI National eNote Registry
(MERS eRegistry)

SOURCE: MISMO 9
E-Mortgage Processes

Industry Standards
(E-Mortgage Flow with Security)

eRecording Servicing
Tamper-evident seal
SMART Docs
and ePackages
Service Tamper-evident seal
Ordering:

MI
Credit eOrigination Secondary
eDoc
Valuation & eClosing 1 Investor,
Prep
Flood Underwriting Aggregator
Hazard
Title
eSignatures * *eNotes *

Buyer *
MISMO XML eVault eVault
Data Transactions
(and/or SMART Docs) Seller

1. Access control, Access Control and Tamper-evident seal

Tamper-evident seal, and
eSignature
National eNote Registry

SOURCE: MISMO 10
Servicing Value Chain

The critical functional areas of mortgage loan servicing . . .

Customer
Loan / Service &
Remittance Investor Payoff Escrow Default
Processing Processing Admin Mgmt Support
Acctng Functions

z Billing/coupons z Investor Loan Set- z Payment z Tax bills & z Collections & z Customer
z Payment Deposit up Posting/ payments Notices Inquiries
& Clearing z Investor Reporting z Escrow Acctg & z Loss Mitigation z Customer
z Payment Remittance/ z Payoff Quotes Analysis z Foreclosures Research
Exceptions & Custodial z Counterparty z Hazard z Bankruptcy z Document
Returns Accounting notification coverage & z Property Mgmt Storage
z Clearing account z Whole Loan Rptng z Lien Release claims z REO Mgmt & z Assumptions
reconciliation & Recon z Document z MI coverage & Sales z Special Loans
z Pool Rptng & Release claims z Default Reporting z New Loan Set-up
Recon z Sales &
z ARM Changes Acquisitions

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Opportunity

Default Management . . .

Loan / Customer
Remittance Investor Payoff Escrow Default Service &
Processing Acctng Processing Admin Mgmt Support
Functions

“Original” Docs Trading Partners Functions Recordable Documents

z Note z Appraisers z Forbearance and • Loan Modifications
z Recorded Mortgage or • Assignments
z Credit Agencies and Repayment Schedule
Deed of Trust • Satisfactions / Reconveyances
Service Providers z Loss Mitigation • Notice of Default / Fcl Referral
z Mortgage Insurers and Workouts • Foreclosure Recission
z Investors z Foreclosures or Reinstatement
Servicers • Notice of Foreclosure Sale
z Foreclosure and z REO Sales
Borrowers Closing Attorneys Closing the REO Sale:
z Title and Settlement • Deed
z Property Managers and • Mortgage or Deed of Trust,
• Riders / Addenda
REO Sales • Satisfactions / Reconveyances
z Recorders • Substitution of Trustee
Disclosures • Assignments

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 E-Recording: An Example of Opportunity

Buyers and Sellers

Realtors and Real Estate Agents
Mortgage Brokers and Correspondents
Lenders and Servicers
Title Agents and Insurers
Closing and Escrow Agents and Attorneys
Hazard and Flood Insurers
Credit Agencies and Property Appraisers
Mortgage Insurers
County Courthouse Tax Assessors and Collectors County Courthouse
Mortgage Lien Mortgage Lien
Deed Deed
Rider / Addendum Rider / Addendum
Assignment E-Closings Assignment
Lien Release E-Escrows Lien Release
Notice of Default E-Servicing Transfers Notice of Default
Modification E-Workouts Modification
Reinstatement E-Loan Liquidations Reinstatement
Foreclosure E-Foreclosure Sales Foreclosure
Substitution of Trustee E-Lien Releases Substitution of Trustee
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E-Recording: An Example of Opportunity

• 29 states: AR, AZ, CA, CO, FL, IA, ID, IL, IN, KS, MA, ME, MI, MN,
MO, NC, NH, NJ, NM, NV, OH, OK, PA, TN, TX, UT, VA, WA, WI, and
the District of Columbia

• Statewide ER Web Portal Initiatives Led by Recorders:

– NJ (in operation; 13 counties)
– IA (in operation; 94 out of 99 counties)
– MO (in operation with about 6 counties)
– CO (underway; planning to incorporate with State portal)
– CA (planning stages)
– PA (considering)
– NC (considering)
– FL (considering)
– MN (considering)
• Over 370 counties e-connected with e-recording
SOURCE: Property Records Industry Association (PRIA); PRIA periodically updates and
validates this information. 14
eRecording Benefits

Task Paper World Electronic World

Prepare Documents 5-10 Minutes 15 Seconds

Execute/Calculate Fees 5 Minutes 10 Seconds

Delivery ½ Day – 5 Days 15 Seconds

Recorder Processing ½ Day to 30+ Days 30 Seconds

Return Delivery ½ Day to 5 Days 30 Seconds

Enter Recorded Information ½ Day to 21+ Days 15 Seconds

TOTAL 2 days, 10 min to >2 minutes

62+ days 15
Value of “E”

• Reduces Recording Time / Quicker Turnaround

• More Efficient Processing

• Reduces or prevents document fraud (encrypted eRecords)

• Reduces Errors due to Re-keying of Data

• Reduces Transactional Costs

• Standardizes processes and formats

• “SMART” / Intelligent eDocuments feed processes and systems
• Reduces Probability of State-Imposed Penalties

• Resolves Title Issues Sooner / Reduces the “Gap”

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 Change Management

De
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Executive Sponsorship

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Senior Management Leadership

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Ma
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Cross-Functional / Interdepartmental Team

me
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Business Planning / Process Mapping / Process Redesign
lop
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Technology: “Build or Buy” Decision / Request For Information or Proposal

Legal and Regulatory Compliance / “Get the Lawyers Involved in the Planning Process”

CDB Consultancy © Develop a “Roadmap” and “Rollout” Strategy

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Thank You

Carmelo D. Bramante
Founder and Managing Director, CDB Consultancy LLC
202.441.1396; carmen@cdbconsultancy.com
www.cdbconsultancy.com

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