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Wells-eOriginal Deal Could Mean Wider E-Note Adoption

Wells Fargo Home Lending will now be using e-Original’s e-vault platform to accept e-notes as collateral. The decision to deploy the platform could tip the balance in favor of widespread industry adoption of the technology. One of the factors driving the the lack of adoption—Fannie Mae and Freddie Mac accepted e-mortgages, but few investors did–was the concern over the legality and enforceability of e-notes as security in the investor community. But with Wells Fargo committing to the technology, the possibility for far more widespread adoption among lenders has increased.

“The acceptance of e-notes fits our digital strategy,” said Brian Webster, SVP and strategic planning manager for Wells Fargo Home Lending. “Earlier this year we introduced an online mortgage application for our retail division, now we are introducing e-notes for our secondary market. This is a natural evolution of our end to end strategy and shows where our focus is and the direction in which Wells is going.”

Wells Fargo originated $42 billion in mortgages in the first quarter, for a market share of 12%, based on total mortgage industry origination volume of $356 billion. During a digital mortgage session at the conference, Webster said 28% of Well’s September originations came through the digital channel and he expects that to increase.

“The e-vault system, which time stamps and tracks access,allows for a better borrower experience, ensures compliance, reduces the operational cost around QC, reduces operational risk, increases capital efficiency and improve secondary market execution,” said Simon Moir, SVP and general manager of digital mortgages at eOriginal. Increasing the efficiency of the end-to-end process will also allow lenders a more efficient use of warehouse lines and reductions in their float and hedging costs.

One of the largest aggregators of mortgages, Wells acceptance of e-notes provides a significant liquidity channel for correspondents originating electronically and could set the tone for an industry-wide digitization of the secondary market similar to what is developing on the originations side. With other big banks expecting large e-origination volumes in the coming years, it might be natural for them to develop secondary channels for e-notes as well.

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