E-Mortgages: Saves Time and Cuts Cost

By James Woodard

June 16, 2014 5 min read

The two most frequent complaints about home mortgages are that they take too long to process and are too expensive. The new electronic mortgage (e-mortgage) can solve both problems.

An e-mortgage process could cut 30 days off the average 52 days it takes to close a loan, according to a team developed by Fannie Mae to study e-mortgages. Also, going paperless could save the mortgage industry an average of about $1,100 per mortgage — or about $1 billion a year, it was reported by the National Association of Realtors.

The industry has been slow to adopt electronic mortgage processes, facing several hurdles in transitioning to an all-electronic system. However, the process is expected to get a boost from the Consumer Financial Protection Bureau's new mortgage disclosure forms that will be disseminated electronically, NAR reported.

"This will allow stakeholders much earlier in the origination chain to derive value from going electronic," says Nancy Alley, vice president of strategic planning at Simplifile, a company that helps electronically record mortgages.

"That should help adoption. Plus, an electronic process should drive a better consumer experience."

The industry has been gradually progressing toward digital mortgage processes. About 25,000 mortgages had electronic promissory notes in 2013, but that only represents about 1 percent of all U.S. mortgages originated last year, according to Michael Cafferky, product development manager at Fannie Mae.

Fannie Mae created a team called "Advancing e-Mortgage." It's charged with improving the electronic mortgage process.

Q: When will mortgage loans become more available?

A: Mortgages are now becoming more available, according to the Mortgage Credit Availability Index, a report from the Mortgage Bankers Association.

The MCAI increased 1.14 percent from 113.8 in April to 115.1 in May. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit. The index was benchmarked to 100 in March 2012.

Mortgage credit loosened somewhat in May, partially as a result of a slight increase in the availability of jumbo loans. Another component was the action by some investors to lower credit score requirements on FHA loans.

Q: Now that mortgages are more available, is this resulting in more applications?

A: More applications are indeed being processed. Mortgage applications increased 10.3 percent last week from one week earlier, according to data from the Mortgage Bankers Association's Mortgage Applications Survey.

The Market Composite Index, a measure of mortgage loan application volume, increased 10.3 percent on a seasonally adjusted basis.

Q: What's the biggest problem for people who want to buy a home?

A: Lack of money for a down payment and not being able to qualify for a mortgage are the two key obstacles for buyers in today's price-rising market.

According to a consumer survey conducted by Trulia, 60 percent of American adults ages 18 to 34 say a lack of savings, poor credit and severe debt stand between them and homeownership. As a result, 50 percent would have to ask for help from their parents or grandparents to put together enough money to clear the initial hurdle of making a down payment.

Q: Do young adults who recently left foster care have special problems in buying or renting a home?

A: Those young folks do indeed have problems. As the housing market continues to improve, bringing hope to many formerly underwater homeowners or others who simply hoped for a good return on their investments, at least one group of young Americans has seen no relief in the improving market.

HUD recently released a report chronicling the challenges young adults aging out of foster care face in finding safe, affordable housing, it was reported by DS News.

Q: Why do so many homebuyers need mortgage insurance?

A: The number of buyers using mortgage insurance is growing. According to research results, 37 percent of homeowners who purchased within the last decade required mortgage insurance.

Looking at just the last two years, that number is up to 43 percent, reflecting the troubles buyers are having meeting normal down payment minimums as home prices continue to increase.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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