MISMO, a subsidiary of the Mortgage Bankers Association, is the development standards body for the mortgage industry, which works to promote the efficient exchange of data across the industry. It created the standard after receiving requests for natively created home equity line of credit electronic documents. HELOCs, because of high home prices and stubbornly high mortgage rates, like other home equity products, have and are expected to continue to see growth.

"The new Doc V3 eHELOC Specification will help lenders and investors that are interested in gaining efficiencies and trust while originating, buying, and servicing HELOCs," said MISMO Acting President Richard Hill in a press release. "The specification applies SMART Doc V3 Verifiable Profile functionality to the HELOC agreement, further enabling the seamless exchange of HELOC data and documents between trading partners."

Why HELOC electronic doc standards are needed

The next 12-to-24 months in particular should be a very strong environment for all sorts of second lien and/or home equity products, a panel at the recent Mortgage Bankers Association Secondary and Capital Markets Conference in New York predicted.

A TransUnion study noted the number of HELOC accounts grew 8% year-over-year in the fourth quarter, with closed-end seconds increasing by 13%; including first mortgage refinancings, the category grew by 23% to 720,000 total accounts produced during the period.

Why this matters to settlement and technology providers

The MISMO document is a welcome development for someone who has experience both as a provider of title and settlement services and as a borrower. 

"The paper HELOC closing process, even today, remains incredibly cumbersome and even archaic," said Aaron Davis, CEO of the Florida Agency Network.

"Not long ago, while finalizing my own transaction, I was actually required to fly from Texas to Florida simply to sign my documents at a particular bank branch," he continued. "The availability of remote online notarization and the use of digital SMART documents would have saved us all a lot of time and money."

DocMagic, which among its services is closing document preparation, has been ready to support eHELOCs for some time, said Brian Pannell, chief eServices executive.

"This announcement serves as another indicator of how MISMO and its members are working in conjunction with MERS to provide solution-based products to the eMortgage industry," Pannell said. "The ability to utilize the value add of a SMART Doc technology for HELOCs within the daily transactions between MERS eRegistry business and trading partners provides a tremendous avenue for lenders and investors to further their efforts to eliminate bifurcation of business processes."

In a recent interview with National Mortgage News, Pannell noted MERS now permits registry  of home equity lines of credit, as its competitor DART already does.

On June 6, a DocMagic client registered the first eHELOC with MERS using a direct integration between the two providers.