E-notes popularity in the modern digital arena continues to hit new highs, but should you be using them? Going digital-way is critical, but caution shouldn’t be thrown out of the window.
Today, consumers rave about completing transactions regardless of their physical location. As the IoT continues to revolutionize how we manage our daily activities, the digital arena makes this a reality in many ways. You can, for instance, shop around, find property and mortgage products, and complete the process virtually. This is a considerable milestone, especially as online remote notarization (RON) continues to be the go-to.
While consumers and mortgage lenders continue to marvel at the convenience of the developments, the complexities and uncertainties surrounding the digital solution can be overwhelming. As a lender, for instance, you could be wondering if eNote for mortgage is ideal for your business. Would the approach come back to haunt your business, especially if cases arise and you aren’t sure if you will be on the right or wrong side of the law? Let’s look at eNote and what it means for lenders.
What are eNotes?
eNotes or electronic promissory notes are legal documents showcasing a borrower’s commitment to pay an agreed amount per the terms and conditions of a loan. Promissory basically means a promise the borrower makes to the lender, legally binding them to the obligation to pay within the agreed time. eNotes also indicate that the borrower understands the terms and conditions of the loan agreement and can’t come back to claim they didn’t. This includes the consequences of a mortgage, for example, foreclosure and/or repossession.
eNotes include details such as the borrower and lender names, loan amount, initiation date, payment options, frequency and dates, and when it is expected to be settled. The notes could also include special clauses per the agreement. The notes are signed and sealed in real-time, including creating a tamper-proof to keep the file secure. Extra security measures are put in place, ensuring the documents can’t easily be edited and remain as legally binding as the paper documents.
The growing popularity
ENotes, like other digital solutions such as RON, gained significant traction following the restricting Covid-19 measures. The allure of continuity, even when you can’t manage physical meetings, continues to propel the solution’s hold on its users. The notable benefits associated with eNotes further propelling users’ favor include:
- Speed: eNotes helps speed up the process, especially since face-to-face meetings aren’t a requirement. As lenders strive to offer a seamless experience, speed continues to hit new highs, attracting more users.
- Lower cost: Expenses such as cabinets for storage, papers, and ink, among others, are considerably cut since the focus is on digital solutions. The lower costs are transferred to consumers as well, making it a win for them, further propelling the popularity.
- Transparency: Digital solutions offer greater access and transparency and leave a better audit trail to lenders, borrowers and settlement agents. The robust cyber security measures in place, including encrypted communication and ID verification, offer better solutions than in-person processes.
Adopting the eNotes solution isn’t straightforward, considering the legal implications. The legal framework, including Electronic Signatures in Global and National Commerce Act, governs how the processes are handled. The rules and laws clearly define the following:
- What constitutes a legally acceptable eNote
- The issuer and who it’s issued/transferred to
- The integrity of the documents, including whether it is the original or a copy of the eNote
- Safeguards during the eNotes custody
- Consent for any changes
As a lender, the major concern is how well you can establish the legality of the eNotes in a court of law. The field is relatively young, leaving a lot unexplored, hence the complexities of navigating the processes in cases of disputes. Nonetheless, digital platforms offer a lot that can help ensure the processes align with the laws and regulations in place.
Lenders must only use credible and reliable solutions to ensure eNotes don’t jeopardize their operations. If done right, eNotes offer a win-win for every party involved. It is a sustainable model that will continue to shape the future of online transactions in real estate and beyond. This is more so as tech advancements continue to offer access to affordable and reliable solutions facilitating smooth digital processes.
