Chris McEntee of ICE Mortgage Services on COVID-19 and Impetus for the Digital Mortgage Process
Chris McEntee is President of ICE Mortgage Services, Atlanta, the business unit responsible the Mortgage Electronic Registration System (MERS), which is now part of Intercontinental Exchange Inc. He serves as a Director of ICE Mortgage Services, the governing board of MERSCORP Holdings Inc. and chairs the Company’s Compliance, Governance and Risk Management Committee. He previously served as Senior Director of Corporate Development of Intercontinental Exchange. He continues his responsibilities of M&A, partnerships and alliances in various business segments, including mortgage finance and emerging technologies.
Prior to joining ICE in March 2011, McEntee worked for the Federal Home Loan Bank of Atlanta as a Director and managed marketing of lending programs, supported product development, and served on multiple executive committees. He began his career as an Editor and Bureau Chief for Bond Buyer, serving was National Editor until 1999.
MBA NEWSLINK: Do you think the coronavirus pandemic–tragic and economically devastating as it is–might be the catalyst for the last lenders to get on the digital bus?
CHRIS McENTEE, ICE MORTGAGE SERVICES: Before the COVID-19 outbreak, the mortgage industry understood that every nearly every other vertical in financial services had gone fully digital. The digital mortgage infrastructure has been here for some time with the government-sponsored enterprises, leading vendors and MERSCORP Holdings establishing the foundation.
The fintech innovators emerged more recently as venture capital saw the opportunity to bypass some legacy dependencies, and consumers were looking for ways to use digital whenever possible. However, the industry as a whole was still struggling to reach critical mass. Unfortunately, without being prompted by something as painful as a global pandemic, many companies appeared to be comfortable sticking with what they knew – in paper or even hybrid formats – and following a much longer route to going digital.
In light of circumstances, a big lesson for lenders and other key stakeholders is they need to be resilient, responsive and adaptive in order to survive and eventually thrive in a new environment. It’s what author Nassim Taleb refers to as being “antifragile” in design, delivery and capabilities. It remains unclear how long social distancing will be with us and how that uncertainty will impact home buying and lending. What is clear is that companies that have not expanded their tool kits to attract customers, assess risk and close loans in a range of environments and contexts will find it hard to survive. That said, we are seeing that digital investments that used to be viewed as “nice to have” are now “need to have.”
NEWSLINK: As states begin to open up and face-to-face interaction becomes more of a possibility, will the push for widespread adoption of an end-to-end digital mortgage lose ground?
McENTEE: Not at all – we are still seeing interest in rapid acceleration of adoption of digital mortgage tools as the industry attempts to quickly shift from analog to digital, but this interest did not appear out of thin air. For the past two decades, there has been a coordinated effort among the GSEs, Ginnie Mae, Federal Home Loan Banks and MERS to meet the needs for digital adoption. This momentum was blunted significantly by the last financial crisis but began to be re-invigorated in the last three years. At this point, we’re poised to establish sustainable, relatively low-cost adoption of digital infrastructure for a range of lender and investor business models. Our view is that lenders and other key liquidity sources are simply accelerating their ETAs to the destination toward which they were already moving.
A challenge to maintaining this momentum and broader adoption once the emergency situation has ended is the legislation and protocols being passed and enacted. We need to ensure that the emergency policies that were implemented during the pandemic won’t be disruptive and difficult to reconcile once when we move towards the “new normal.” After the 2008 financial crisis, the industry spent nearly a decade managing borrower disputes, litigation and an incredibly complex regulatory environment. We need to be smart in our assessments. Are emergency policies sustainable? Do they create potentially unforeseen risk or moral hazard? Which of these actions should become permanent, and if so, how can we standardize protocols that underpin them? For its part, MERS is working closely with the MBA and MISMO to ensure we can support this future state and add transparency to the lending process while affording the right investor protections and liquidity.
NEWSLINK: What type of demand have MERS and Simplifile been experiencing from their customers during the COVID-19 crisis, and how are the companies responding to their customers?
McENTEE: While demand for eNotes and eRecording has been steadily increasing over the past year, we’ve certainly seen a sharp uptick during the crisis. MERS has seen a 55% year-over-year increase in companies transacting on the MERS® eRegistry. MERS has responded to the demand with an accelerated onboarding program, developed in partnership with the GSEs and leveraging the experience of the established eVault providers. This program enables companies who are properly prepared to become active on the MERS® eRegistry in just two weeks.
Simplifile, the leader in eRecording, has also experienced a more than four-fold increase in new submitters, with more than 2,400 new submitters in March joining its eRecording network, which covers more than 84% of the U.S. population. Most notably, Simplifile eRecorded its 100 millionth document on April 2 so, as two leaders of the industry, we are experiencing growth thanks to early investments in infrastructure and integrations.
NEWSLINK: What are the first steps organizations need to take if they are interested in implementing eMortgages?
McENTEE: It’s simple: educate yourself! There is an abundance of resources to draw from, including vendor presentations and those hosted by media outlets and trade associations. MERS continues to offer webinars covering the foundational and legal concepts of eNotes. The subject matter experts of the industry have never been so present or available through webinars, live streams, white papers, best practices and how-to videos. For example, Simplifile Vice President of Strategic Initiatives Nancy Alley has authored a three-part NewsLink series (Part I, Part II and Part III) that outlines best practices for lenders in rolling out their digital mortgage strategies.
We also encourage lenders to talk to their counterparties to better understand what their policies and capabilities are with regard to accepting different documents that compose an eMortgage to avoid unexpected obstacles. As the carpenters’ saying goes, measure twice and cut once. To prepare for integration with the MERS® eRegistry, we encourage companies to examine their internal processes to determine how to best transition from paper to “e”, select their technology vendors, form an internal project team to manage the transition from start to finish and prepare a strategy for educating not just the project team, but the company as a whole to better prepare everyone for this transition.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at email@example.com; or Michael Tucker, editorial manager, at firstname.lastname@example.org.)