It can be challenging to understand the state of digital transformation across the real estate ecosystem today. What can be even more challenging is predicting what may lie ahead. We sat down with Stavvy’s Founder and CEO, Kosta Ligris, and EVP of Corporate Affairs, Angel Hernandez, to capture their insights and forecasts for 2024.
Angel and Kosta are optimistic about the future of digitization in the real estate industry, sharing what they believe to be four critical predictors for digital transformation in 2024 and beyond.
The real estate industry has made significant strides towards RON adoption in recent years. Angel believes that adoption will continue to increase and predicts that based on the current macro market conditions, there will be even more aggressive adoption in 2024 than we saw in 2023.
Despite transaction volume being down for several reasons this year, including home price appreciation and multiple interest rate hikes, the industry saw a steady increase in eNote adoption.
As of August 2023, 2 million eNotes were registered to the MERSⓇ eRegistry, and over 22,000 eNotes were created in August alone. Angel shares that, “Even though the number of eNotes on a year-to-year basis is down, when we look at the percentage of eNote production over the last five years, we’re seeing a positive trend despite challenging market conditions.”
In 2018, the percentage of eNote production was 1.2%-1.3%, and in 2023, the number is closer to 7%.
Angel believes that there is a correlation between eNote production and future RON adoption. “Despite low transaction volume, mortgage lenders are embracing digitization and leveraging eNotes for purchase transactions.” When the housing market shifts and refinance volume picks up again, he predicts that RON adoption will follow.
In addition to increased eNote adoption, Kosta observes that lenders have been focusing on fully digital home equity lines (HELOCs) and second mortgages in the higher rate environment. RON technology has allowed lenders to centralize their operations, reducing mortgage origination and closing costs. Kosta expects this trend to carry through to 2024, understanding that after having experienced efficiencies and savings, loan originators will be hard-pressed to revert to the status quo.
Kosta agrees with Angel’s RON predictions in the mortgage origination space and adds, “This anticipated perspective shift and subsequent progress will likely increase RON adoption in the title industry too.” In particular, he identifies opportunities with title companies and law firms that have been waiting to invest in eClosing solutions until they get a directive from their lending partners.
However, only some organizations in the title industry are waiting for the green light from lenders to go digital. This year, we learned that many title and settlement companies are embracing eClosing in preparation for a volume resurgence and are successfully digitizing sell-side real estate and cash transactions in the process. Kosta expects this trend to increase into 2024 and beyond.
At MBA’s Servicing Solutions Conference & Expo this year, RON for mortgage servicing took the main stage. “The recognition that RON has use cases beyond mortgage origination is there, and that’s exciting news,” shares Angel.
In addition, several regulatory announcements were made this year, demonstrating that industry entities are encouraging broader use of communication technology in the mortgage servicing space—RON included.
“There’s a broad need for remote online notarization across many mortgage transaction types, spanning the entire lifecycle, and the industry is taking notice. I think that's another positive indicator that we can point to as it relates to overall RON adoption and usage in 2024.”
This year, Ginnie Mae announced that issuers can now use RON to execute Power of Attorney documents. The Housing Department of Urban Development (HUD) reported a proposed rule to replace in-person engagement with a defaulting borrower with communication technology. And Freddie Mac published a case study and a blog exploring the benefits of digital servicing, specifically mentioning that a driver of innovation is electronic signatures and RON.
While there’s still much to learn about the California RON law, Angel thinks the state’s law may impact pending federal RON legislation.
“Now that California has a native bill, I think it will spark some conversations at the federal level. Whether the bill removes some objections or clarifies how the federal bill needs to be edited or amended to safeguard the interests California has carved out is yet to be determined. I think it's too early to tell if it will propel federal legislation. At the least, it does clarify what might need to happen for that federal bill to gain the necessary support.”
RON is gaining traction among lenders, real estate agents, mortgage servicers, and title professionals. However, barriers to digital transformation in real estate remain. Some obstacles include RON availability throughout the United States, historically low transaction volume, hesitancy around technology, failure of lenders to adopt eClosing tools, and a lack of understanding by signers.
Despite the challenges, we’re optimistic for additional progress in 2024 and beyond.
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