First American

The REconomy Podcast™: The Digital Future of Mortgage Lending and Real Estate Settlement

In this episode of the REconomy Podcast™ from First American, Chief Economist Mark Fleming and Deputy Chief Economist Odeta Kushi discuss the digital future of mortgage lending and real estate settlement, and the innovative technologies that are making an end-to-end digital home-buying experience a reality with Eddie Oddo, vice president of corporate business solutions at First American.

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“The industry is trying to figure out how to scale this over the next two years, but it will take time to get the processes worked out. It may not be obvious, but there's a lot of building going on behind the curtain. Consumer portals, online applications and track your loan on a website. Those have become very apparent, throughout the industry. But there's a lot more activity going on behind the scenes, with investors signing up with MERS to buy eNotes and lenders getting their eVault solutions in place.” – Eddie Oddo, vice president of corporate business solutions at First American


Odeta Kushi - Hello, and welcome back to another episode of the REconomy podcast where we discuss economic issues that impact real estate, housing and affordability. I'm Odeta Kushi, deputy chief economist at First American. And here with me is Mark Fleming, chief economist at First American. And today is a very special day, because we have our very first guest on the show. This is a first for us here at REconomy, and we're so excited to have our guest. Mark, why don't you do the honors of introducing our first guest speaker. Can you tell I'm excited?

Mark Fleming - I can definitely tell. This is going to be fun. Because we got so bored of just doing it by ourselves, we decided we needed help. And I can't think of anybody else, none other than Eddie Oddo, vice president of corporate business solutions here at First American. Most of Eddie's career has focused on designing and implementing business technology solutions internally for First American, as well as externally with our customers in the mortgage lending, real estate, and title and settlement industries. And he's actually also a really cool guy. So I'm very, very excited. He's been totally focused on innovation. You know, that's a big topic and something that we're really interested in. But here, it's specifically pertaining to digitizing real estate lending and settlement. That's a pretty big topic area. Welcome, Eddie.

Eddie Oddo - Thank you. Thank you. Thanks for having me, guys. I am excited to be here. And I have to admit, I'm a longtime listener, even though a first-time guest.

Odeta Kushi - Well, we're so glad to have you here and so happy that you are our first guest speaker because I don't think there's ever been a more important time to bring attention to innovation in real estate. And, as Mark mentioned, you're just the guy to walk us through it. There's been an explosion of digital activity in the consumer real estate lending space, I would say more so in the last three years than in the last 30. Would you agree?

Eddie Oddo - Yeah, I would agree. Odeta, there's been an enormous amount of venture capital targeted at fintech and proptech startups recently. In fact, a CrunchBase report citing data from July of this year, shows that VC-backed real estate companies have raised $10.6 billion in 2021 through July, up from the 8.3 billion that was raised during the same period last year, and really higher than any year in that period in the past decade. And if you go further than that, the total would probably be less than what's in our combined wallets right now. So it's been quite an explosion. In the proptech space, really, what we saw first, just a few years ago, were iBuyers. But now, in addition to these iBuyers, you have fractional ownership platforms, you have rent-to-own models, property investor apps, wholesale marketplaces, cash offer-models, and so many more. And then in the fintech space, the starting point was really that point-of-sale online loan application. We've all heard about that over the past several years, and now many lenders are already there, or getting there very, very soon. But, in addition to the point-of-sale technology, there's automated verification of income and assets, and lead generation technologies, technologies to make underwriting much more efficient, and artificial intelligence for loan quality. There really seems to be a fintech widget for just about everything.

Mark Fleming - I mean, that's definitely a lot of change in the last three years. But we have to ask the question, why is all that money showing up? Why is this big splurge in innovation occurring? There must be some underlying reason or cause, or something that's of such interest to them that they want to bring that innovation to?

Eddie Oddo - Yeah, and Mark, it probably won't surprise you that for lending, the primary focus is reducing cost and reducing time required to close a loan. Now, initially, the fintech or the tech was about the former, about origination costs as a reaction to the increased cost of compliance that came out of the housing bubble and the financial crisis. But now speed is very, very important too. Consumer experience has become even more paramount though. People are empowered by technology. Most generations now expect a technology option, a digital option, but millennials and Gen Z, they're basically going to, or already do demand portal access, text notifications, apps for convenience, no paper, self-serve tasks, things they want to do on their own time. Everything's about my time, I want the convenience. That said, consumers, I think, of all generations, even with digital options, still want to know people are there for them. Even the younger generations want a trusted advisor available since they've never done this before.

Odeta Kushi - So, you touched on millennials. That's kind of my area of expertise. And so I want to dig into that a little bit more. You said, you know, millennials expect no paper, you know, a digital experience. I can tell you, I don't even own a printer. And millennials represent the biggest share of home buyers in the U.S. today. And they do expect a smooth and speedy real estate transaction. I mean, most of our home searches start online, we look at those virtual tours, and we expect that the rest of our home-buying process will be just as tech speedy, and with a great user experience. This is, after all, a generation born in the mobile age. So, if you're looking to win the business of a millennial, or a Gen Z, fintech really is survival. So, obviously, the consumer benefits from increased technology, but who else stands to benefit and how?

Eddie Oddo - Yeah, those are all great points. And you caught me way off guard with you don't own a printer. That is awesome. I own a printer. But that's amazing. That's one way to go paperless, by the way, is not create any paper.

Odeta Kushi - Exactly.

Eddie Oddo - But everyone in the process, Odeta, can really benefit, so it's not just the consumer. So, on the lender side, we talked about how they can reduce costs and increase speed. So automating employment verifications, and income and assets, and all those types of things, eliminating duplicate data entry, which happens a lot in the mortgage process and in our industry. Self-serve borrower portals that reduce phone calls and interactions coming inbound to the lenders. Streamline decisioning, the artificial intelligence I talked about and machine learning, automating quality control. I mean, all these things really do save the lender time and save the lender money. Title agents, though, title agents and settlement providers are also impacted by this fintech. Title agents play an important role in the closing of loans, obviously. But, title agents also transact real estate orders. Think about cash deals and seller-side closings. There's no lender involved there, so this isn't always about mortgage. This is also about the general real estate transaction. So, there's plenty a title agent can do to also lower cost, increase processing speed and cut down on all those interactions coming into their office, so they can focus on answering questions and serving customers more of an outbound play.

Mark Fleming - Hold on guys. I'm trying to find my paper notebook and mechanical pencil. I'll be right back. Yeah, this is great, right? Faster, cheaper, better. I'm an economist. So I'm going to insert a little bit of economics in here. This is about reducing the frictions related to transactions. Reducing the cost, broadly speaking, of a transaction. That could be time, dollars, all the things you mentioned, Eddie, and that sounds good to me. It's probably about time that we do it in this industry. But, we have to get into the details here because I get really lost and, Eddie, you and I've been on the road. We've gone to conventions and meetings together. I've listened to you speak. There's way too many e-things out there - eClosing, eMortgage, digital mortgage, digital settlement, eNote. What does this all mean? I need some help.

Eddie Oddo - And don't forget, we still have email. Can you believe we still call it email? Anyway, electronic mail. So, yeah, there are lots of e's, you've got your eClosings, you've got eNotes. You've got eMortgages. And all this wrapped up in really two big categories of digital settlement and digital mortgage. These are two conceptual areas, but all the 'e's sort of fit into those.

Odeta Kushi - So, yeah, can you walk me through how this all works? Together? I'm kind of thinking of drawing a diagram in my head. Can you explain that to me immediately?

Mark Fleming - Oh, boy.

Eddie Oddo - Oh, boy, is this going to happen to all your guests, Odeta?

Odeta Kushi - Yes, absolutely.

Eddie Oddo - This is okay. Well, yes, of course, I can explain it. I'm so glad you asked. So, the way I think about it, if you can envision in your mind, since we're on a podcast, is two big concepts. One on the mortgage side, one on the settlement side. So, on the mortgage side, really what lenders are going for is a new way of life that they refer to as digital mortgage. So those are a lot of the things that I already talked about, like online loan applications. Collecting documents through a portal. Verifying assets and income. All those automations and fintech components and widgets fit in this journey toward the advent of digital mortgage. Then, on the other side of the equation in a real estate transaction, or refinance, you've got digital settlement. Now, on the digital settlement side, that's the journey of digitizing all the steps in the title agent or settlement agent process, from opening and receiving an order to earnest money deposits, digitizing that process. Scheduling a closing appointment, and notifications on the status. All of those steps can be digitized. You can apply technology and get those cost savings and efficiency gains. So, that whole space is your digital settlement. So you've got on one side digital mortgage, your other side digital settlement. Now, toward or at the end of a transaction, refinance or purchase, you're going to have what most refer to as a closing. A closing is overused in our industry, I'm talking about an event, a signing event where a notary sits down with a buyer or a seller or both, and they execute documents and the keys change hands, if you're in a purchase situation. So that's your closing, you put an 'e' in front of it and, of course, you have your eClosing. So that dance or handshake is an event that both the mortgage company and the settlement company are involved in. And, after your eClosing, if everything is electronically signed, a document pops out of there called an eNote. The eNote is the promissory note. It's just digital. And once that gets sold, the eNote, along with the mortgage itself, that is an eMortgage. And that is what's bought and sold, and bought and sold on the secondary market. So, I hope that makes some sense. You've got some concepts, you have an event, you have a document, and then you have, basically, an asset and a mortgage that gets bought and sold.

Mark Fleming - Alright, I'm following, this is good. Now, we said at the top of the episode that there has been an explosion in that digital activity all the way through to the eNote and the eMortgage at the end of that of that process you just described in the consumer real estate lending space. But that's in the last few years. We love to talk about what's happened in the last year and a half with regard to the pandemic. Absolutely unique. We call it you know, arguably in economics a Black Swan, right? An exogenous shock event. That must have had an impact, hopefully to accelerate, right? I should have said e-celerate, maybe the adoption of these technologies because, you know, in the time of the pandemic, being close to people is not so good. Was it so?

Eddie Oddo - Yeah, you're absolutely correct, Mark. You know, March through June of last year roughly, the industry was just overflowing with this desire for the no-contact closing. Eventually, we settled for the low-contact closing, but everybody wanted this signing event to not have to involve people face to face breathing the same air in the same room. That was a no no. And interestingly enough, as the pandemic kicked off, and it was really affecting the world, and definitely in the U.S. there was a concern in the industry that real estate would just stop because of this challenge. People wouldn't want to see homes and people wouldn't want to interact and sign documents. Everybody would just go away for a while and there'd be no home sold. Well, that's absolutely the opposite of what happened partially due to interest rates. And you guys have talked about all that in the past, so not only was there a need, but there was an explosion of more orders on top of this need for the no-contact closing. So, what we saw, and we were monitoring this almost to the minute, definitely to the hour, and absolutely by the day. State governors were issuing these waves of executive orders, enabling RON, or remote online notarization. And we got a new acronym in the industry called RIN, or remote ink-signed notarization. And, you know, the demand for RON just went through the roof. The vendors, the few that were out there prior to the pandemic, over the past few years have been really trying to push this technology and pass legislation. They could not even accommodate the demand. Their phones were ringing off the hook, or their portals were blowing up, or their chat bots were tired. They could not handle all the in the incoming calls to get set up. They just couldn't set up enough customers quick enough. Even if everybody wanted to do RON, the industry couldn't get enough accounts set up to do it. So, lenders were on the phones with national underwriters, like First American. I fielded dozens of calls with lenders trying to figure out how can we close this loan, how do we get this done without human contact or as little as possible. And so, as it often does, the industry got very, very creative and came up with all sorts of physical signings still, but with very low contact. You had your drive thru, curbside, front porch signings, and our offices turned into, you know, basically parking lots. They looked like the soccer field on the weekends with all these pop-up tents and tables and coolers, and everybody wearing masks and gloves. Soiled pens, clean pens. Like I said, the tailgate tents. Sanitizer. It was it was just crazy, but that was the curbside drive-thru solution that we really had to get to.

Odeta Kushi - Well, where there's a will there's a way. As Benjamin Franklin once said, out of adversity comes opportunity. Now, I imagine there were some challenges or roadblocks along the way over the course of the pandemic.

Eddie Oddo - There were. With going digital and trying to get to that remote online notarization experience, even as the vendors were able to catch up and start to get more lenders on board and create more accounts and get more companies going in that direction, there was still this big challenge. This brick wall, if you will, of the promissory note. So for a lender to set up eNotes and an eVault requires all this wonderful, special technology to convert your paper promissory note to an eNote. It's a special document, you don't just eSign it on any ole platform. So, even with RON moving forward, lenders couldn't move quick enough to handle the volume and deal with the normal employee challenges of the pandemic, just as all large companies or any company was dealing with. They didn't have the capacity to get going on eNotes.

So, as the conversations unfolded with lenders and the title companies, we kept getting to that point of saying, we can do RON on a deal this afternoon. We can get it set up, we can get the documents digitized. But, How do you want to handle that note? Do you want to mail it to your borrower? Do you want to FedEx it? Do you want a courier to bring it? And lenders didn't like that idea, not at scale, of leaving that note outside of a trusted chain of custody.

So, remember, the note does not have to be notarized, but lenders like it to be handled by the settlement company or by a notary. They want it signed by the borrower and right back in the hands of that notary. Since that piece of paper has value, it's worth money, lenders don’t want it floating around unsupervised.

So, mailing it around was not an interesting option for lenders. So, you know, I guess, suffice it to say, eClosing isn't simple to just scale quickly. It wasn't something we could just install, like everybody did with video calls. It was easy to replace a face-to-face meeting with a video call, but it wasn't quite that simple, or quick, with turning paper into signing on a screen.

Mark Fleming - It's sort of somewhat ironic, kind of like the last mile problem in that last mile. Let's just have a human and a piece of paper, the old school way. Right?

Eddie Oddo - Exactly. And Mark, you know, in that discussion with lenders, what they were saying is, well, if we're going to send somebody with a piece of paper, they might as well just bring all the paper. So, the conversation gets up to the last mile. And we started to revert back to, okay, let's go back to the curbside closing.

Mark Fleming - So, there's this this concept in technology adoption, sort of the S-curve, right? Adoption is very low and slow at the beginning. And then, you imagine this big ramp up. By the way, maybe we should post some of these graphics on our Twitter feed, particularly the one that you were talking about earlier, so people can see it. You know, I suspect from what you've just described, we're sort of at the very beginning of that S-curve of technology adoption, because of many of these complexities of that last mile of implementation. So, the real question, I think, is, when do we rise up that curve? And when does all that paper actually go away? As much as I'm going to keep my mechanical pencil and notebook, by the way.

Eddie Oddo - Yes, of course you will. Of course you will. Well, I know the answer and I know the date at which this will happen, but I'm not gonna tell anybody.

Mark Fleming - WARNING WARNING. We always encourage people not to forecast. I was told, forecast the number or the date, but never do both.

Eddie Oddo - Well, you've always said, Mark, at some point rates will go up, right? So, one day, you'll be right on that, right?

Mark Fleming - And one day I'll be right, I'm 10 years into it.

Eddie Oddo - Patience, patience. Yeah, that's really the million, or billion-dollar question. When will all this paper go away. Because, on the surface, adoption, it still feels kind of slow. So you could say adoption of 'e' has quadrupled or gone up by 8x. But, that's 8x of a very, very, very, very small percentage of the starting point. So there is a hockey stick adoption that is happening, it's just you have to zoom in quite a bit to see how steep it is. So, although adoption feels low or slow, what the pandemic did is, it brought more awareness and urgency to the industry than we've ever had before in the space. Odeta, I got real popular with all of my innovation ideas, and 'e' this and 'e' that. It became very important to figure out what the heck we've been talking about with this eClosing thing for a while.

Odeta Kushi - Oh, I bet.

Eddie Oddo - So, the urgency is definitely there. And we know for a fact that many lenders and title companies have something going on in the eClose space. In fact, through First American Docutech, we’re offering a variety of ways to conduct eClosings. And our warehouse lender, First Funding, is helping lenders on their eNote journey with innovative services above and beyond their secure eVault offering.

The industry is trying to figure out how to scale this over the next two years, but it will take time to get the processes worked out. It may not be obvious, but there's a lot of building going on behind the curtain. Consumer portals, online applications and track your loan on a website. Those have become very apparent, throughout the industry. But there's a lot more activity going on behind the scenes, with investors signing up with MERS to buy eNotes and lenders getting their eVault solutions in place. It's difficult to change the transmission on the bus, while you're driving down the highway at full speed, but all off the efforts will pay off … so I'll say soon-ish. We'll see a lot more 'e' transactions, if you will, eNotes, eClosings and the like.

Odeta Kushi - Does soon-ish count as a formal forecast? Can we start doing that?

Mark Fleming - I think we should start doing that, Odeta. It's just going to be soon.

Odeta Kushi - ..ish

Eddie Oddo - I use ish a lot. And that's how you hedge.

Odeta Kushi - I think that's a good call. Well, that sounds like a ton of progress, and signs of much more to come. And I think we'll end on that optimistic note, there's so much more that we can talk about regarding digitizing real estate lending and settlement. But, unfortunately, that is all the time we have for today. I want to thank, Eddie Oddo, so much for joining us on today's episode. We hope you will come back on the show soon. And you can find Eddie talking about all things innovation on the First American Innovation Center at Thank you for joining us on this episode of the REconomy podcast. Be sure to subscribe on your favorite podcast platform. You can also sign up for our blog at And if you can't wait for the next episode, please follow us on Twitter. It's @OdetaKushi for me and @MFlemingEcon for Mark. Until next time.

This transcript has been edited for clarity.