From the desk of Rose Oswald Poels, President and CEO, Wisconsin Bankers Association
Banks across the nation are still working their way out of a backlog of mortgage refinance applications received in a massive wave in the first half of this year. When rates plummeted to historic lows, consumers jumped at the chance to refinance and lower their monthly payments, resulting in a 105% year-over-year increase in refi volume.
This spike in volume coupled with a concern over future economic uncertainty may be why the Federal Housing Financial Agency (FHFA) announced a new 0.5% fee on refinance loans as a means to provide a capital buffer for Fannie Mae and Freddie Mac.
Despite that, banks continue to serve their customers. WBA has heard from many members regarding this issue, and thus far all are planning to “eat” the fee rather than pass it on to their customers. I will continue to keep you updated as to WBA’s efforts, along with other trade groups, to roll back the new fee.
Fortunately, FHFA has now pushed back the implementation date for this fee from Sept. 1 to Dec. 1, 2020.
While the new “adverse market fee” may dampen demand moving forward, the surge in applications occurred in the midst of the Paycheck Protection Program (PPP) launch. With banks’ lending staff already swamped processing PPP loans, wait times for refinance loans to close extended dramatically. As your staff work through the backlog, one way to increase efficiency in the process, especially with lingering concerns about COVID-19, is to adopt electronic signatures (if you haven’t already).
There are two aspects of incorporating electronic signatures into bank processes: compliance requirements and risk tolerance.
The main regulatory concern is complying with the Electronic Signatures in Global and National Commerce Act (ESIGN Act), which has governed electronic records and signatures since 2000. In the context of mortgage lending, it applies primarily to the disclosures banks are required to distribute to borrowers.
Loan documentation not required by regulation, but still necessary to complete the loan transaction, falls into the risk tolerance category. Banks must determine what their level of comfort is in utilizing electronic documents for the note, account agreements, mortgage, identity authentication, etc.
Especially in the midst of this pandemic, many member banks have already found that streamlining their lending procedures with electronic documentation and signatures was a key component to delivering a smooth, positive banking experience to their customers.
- Loan Processing Central (LPC): This FIPCO service will assist your bank in meeting your customers’ needs with fast and accurate loan documentation. Click here to learn more.
- Upcoming Legal Live: Join us TODAY (Aug. 27) at 10 a.m. for a discussion of electronic signature. Click here to register.
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