(Editor's note: Phil Hall, whose Blog View column runs every Monday, is on vacation this week. Today's column is being guest authored by Jason Nadeau, senior vice president of e-mortgage solutions at Stewart Title Guaranty Co. in Houston. Hall's column will be back next week.)
Having the ability to offer an electronic mortgage isn't just for technology savants. Instead, it is an emerging technology that is on the verge of transforming our industry. Experts may differ on when exactly the industry will stop the backward slide and begin to grow again. What is certain, however, is that our industry will emerge immensely changed from where it was just two years ago.
In previous years, when the market was thriving, many lenders managed by throwing staff at inefficient processes instead of reengineering and retooling lending processes. However, the lenders who emerge from this downturn will most definitely be leaner, meaner and more efficient than the lenders of the past. It has become clear that having an ‘e’ strategy is one of the critical tasks at hand for lenders who emerge from the chaos.
Of course, one cannot assume that elimination of paper alone means elimination of inefficient processes. Many lenders who have adopted imaging systems, for example, have eliminated some of their paper-related costs, but in most cases have failed to introduce document collaboration or efficient processing models into the equation.
While lenders may begin moving to paperless lending, the simple truth is that our industry is solidly grounded in documents. As a lender, a critical step to a paperless process must incorporate a solution that allows the numerous parties to collaborate, view, post and comment on the various documents. Only with this will a lender actually realize significant benefit from a paperless process.
In addition to document collaboration, the e-mortgage process introduces the electronic closing (e-closing). A common misconception is that the e-closing requires an electronic note (e-note). Unfortunately, acceptance of the e-note by investors has been slow in coming.
Many documents today are ready to be included in the electronic closing process, and lenders can begin by electronically signing and sharing their disclosures and non-critical documents. Critical documents such as the note and security instrument can remain on paper in the initial phases.
The industry defines this as a hybrid e-closing. There are a great many benefits of an e-closing that can be experienced with hybrid e-closing.
A hybrid e-closing, in which the borrower is engaged prior to the scheduled closing date, can make what has been considered a very stressful time in one's life a much more pleasant experience.
In many cases, the closing package has over 75 pages of documents to be read and signed. The average closing lasts approximately 60 minutes, leaving the borrower roughly 48 seconds per page for the closing agent to review the document with them, for them to read the page and then execute that page.
As a result of this, and other factors, recent reform has been proposed to better educate borrowers as to the content of the documents they are executing. It provides the ability for the borrowers to preview their closing documents days before closing, allowing the borrower ample time to ask questions and become further educated on their closing documents.
An e-closing solution provides one of the clearest and greatest benefits to the lender of any emerging technology on the market. E-closing solutions provide lenders with the following benefits:
- Improved Customer Service. The ability for the borrower to preview documents from home greatly improves the closing experience and reduces the stress and confusion of a traditional closing process. Borrowers are able to review documents via their computer and electronically sign their closing documents at the title company with the click of a mouse.
- Reduced Document Errors. Through the ability to preview documents before closing, many simple document errors such as misspellings and incorrect fees are caught days before closing, allowing for easy redraws without delaying and irritating the borrower or the real estate agents at the closing table.
- Elimination of Document Quality Control. Since the documents are signed electronically and tamper-sealed at closing, the need to review each document in post-closing is virtually eliminated. E-closing solutions assure the lender that the borrower has signed correctly, in all the correct places and has no means of altering any documents in their closing package.
For many lenders who are fully pursuing the e-mortgage, the e-note is the final leg of the race. Through adopting the e-note, lenders are able to reap a number of benefits including reducing post-closing costs and increasing liquidity.
Through the e-note SMART Doc format, lenders are able to receive the e-signed note as data and perform various auditing functions against the note in a fully automated manner.
Additionally, since the majority of the shipping and post-closing quality control functions are fully automated, lenders are able to sell e-notes to their investors the same day they fund those loans.Â
No one can say for certain what will happen to the mortgage industry as a whole. However, it is reasonably safe to say that tomorrow's successful lender will not be buried under mounds of paper.
