Joe Tyrrell knows mortgage technology. As president of ICE Mortgage Technology, he knows the ongoing need for the industry to digitally evolve, and he’s been part of several projects and products that have helped move the sector forward.
As a longtime executive at the intersection of lending and technology, he also knows that movement isn’t always as speedy as some might like.
“In our industry, because it’s so heavily regulated and so driven by the secondary market, everything that we do can’t be some instant revolution where we’re going to charge the hill and everybody’s going to go this way,” he said. “It’s always got to be a process that everybody’s got to get comfortable with, because they’re thinking about it purely from a risk and liability perspective.”
The COVID-19 pandemic changed that calculus somewhat, with the workflow and lifestyle shifts that the health crisis imposed on lenders and borrowers alike necessitating some agility from both parties. But even then, the mortgage lending space has remained as steadfast as it can when it comes to the adoption of new tech.
That’s certainly been the case for remote online notarization (RON), which allows a licensed notary public to remotely notarize a document via webcam, e-sign and keep digital records. RON had seen a fairly lukewarm reaction among lenders through early 2020. But the pandemic pushed many mortgage companies to make remote closings more accessible, leading to a substantial increase in RON demand industrywide — although not without significant trepidation.
“A lot of people were originally thinking, ‘Well, how do we embrace a full e-close?’” Tyrrell said.
“Hybrid [closing] is one thing,” he added. “[Lenders are] having the consumer in the convenience of their home or office digitally initial most of the document package. But when it comes to the instruments that get recorded or need to be witnessed, there was still a lot of comfort in having a notary sitting down with you and verifying your identity. From a litigation perspective, there’s really no worry that an investor would have.
“But now that we’re moving to the e-notarization — and the technology has been there for the last several years — how do those lenders get comfortable that that e-note is going to stand up in court? And one of the big issues was, how are they going to be able to pull that video three or four or seven years from now if needed?”
That’s where ICE came in. At the Mortgage Bankers Association’s Annual Convention in October 2021, Tyrrell and ICE announced that Mortgage Electronic Registration Systems (MERS), a widely used electronic mortgage registry owned and operated by ICE, is upgrading its capabilities to include secure storage for RON video storage.
Adding an RON video depository to MERS wasn’t only a perfect fit, Tyrrell said, it simply made sense. Before, RON vendors often served as video depositories for their clients, leaving videos scattered across multiple companies nationwide without centralized access for all stakeholders involved. If the original vendor isn’t evident, searching for a loan’s RON video could be a painstaking process — and even if the vendor is known, Tyrrell said that many companies routinely purged their video storage due to data limitations. Some states only require RON videos to be stored for five years after the fact, a period that significantly falls short of the average life of a mortgage.
The longstanding and widespread use of MERS across the mortgage realm assuages such concerns, according to Tyrrell.
“MERS, for a long time, has been the industry’s standard for tracking residential mortgages,” Tyrrell said. “This is an extension of capabilities that perfectly complements and extends the value that MERS is already delivering.”
The use of extant MERS technology as a foundation for the storage system solved complex issues relating to tracking, accessibility and retention, Tyrrell said. But ICE’s product team went an extra mile to ensure that the solution instilled confidence in a naturally restrained customer base.
“We’ve reshaped the technology a little bit, but it’s less about making it cool and slick,” he said. “You’ve got to be thinking about compliance. You’ve got to be thinking about lender risk. And you’ve got to be thinking about the secondary market. We took an incredibly thoughtful approach … to ensure that the lender, and the investor down the line in the secondary market, could have confidence in fully adopting it knowing that [notarization] would stand up just like a paper note would.”
Launched at the end of last year, the MERS RON video storage system has seen strong adoption thus far, according to ICE. More enhancements to the base system are planned in 2022, including the option to customize video storage duration.
The program’s debut and opening months have been met with praise. Michael Lyon, a retired executive vice president at Nexsys Technologies, said that “having a single, independent place to house and provide access to the industry’s RON videos will answer a big issue in the industry today.” Meanwhile, Chris King, senior vice president of business development at Mr. Cooper, called it “a tipping point for RON adoption.”
And that’s important, Tyrrell said, because while the mortgage business traditionally may be slower than other industries to adopt new technologies, once something sticks, it stays.
“Just because something was — I don’t want to say forced upon us by the pandemic, but certainly, we had to adjust because of it — it doesn’t mean that it’s going to go away once people get used to it,” he said. “Especially something that adds convenience and ease to the e-close process, which is a direction the industry is moving.
“Taking the capabilities we have at MERS, which acts as the industry’s system of record … adding this capability was a natural step.”