PERSON OF THE WEEK: Most mortgage lenders today have the technology in place to deliver an all-digital mortgage experience to their customers, but the reality is most borrowers need at least some “manual” assistance during the process. As a result, most mortgage transactions are not fully digital “end to end” but rather “hybrid” digital/manual. But the capability is there. And certainly a percentage of mortgages are now completed digitally. And most definitely things are moving in the direction of “end-to-end.”
But what, exactly, is an “end-to-end” e-mortgage anyway? How is it defined? To gain a current perspective, MortgageOrb interviewed Tim Anderson, executive vice president of e-mortgage strategy for Evolve Mortgage Services.
Q: Is an e-mortgage the same as a digital mortgage?
Anderson: That is a great question. They sound similar, but there are really some distinct differences between e-mortgages and digital mortgages. A digital mortgage primarily involves the ability to electronically sign documents, which is a technology that has been around for a long time. Digital mortgages often contain PDFs of printed documents and then scanned to get data from them. eMortgages, on the other hand, are comprised of e-documents, which are SMARTDocs – a standard of documents established by the Mortgage Industry Standards Maintenance Organization, or MISMO. They start off as native XML data and because of that data can be more easily shared, verified for compliance and electronically delivered and boarded.
Q: Why are SMARTDocs better?
Anderson: Most lenders are using paperless processes these days, but the vast majority of them are using PDFs. Other than being easier to store, PDFs are really no better than printed documents because they have to be read visually. Even data capture technologies such as optical character recognition (OCR) tools cannot read all the information off PDFs with 100% accuracy. This means PDFs require human intervention and oversight. Also, someone has to manually tag PDFs before the borrower can sign them, which is even more manual work that is prone to error.
SMARTDocs are far better, because they contain the critical data at an individual doc level that can be read entirely and auto-verified by machine. Embedded in SMARTDocs are the shared critical data points and any changes to the data is automatically tracked with a date and time stamp audit trail of who and when those changes occurred as well as when they were created, viewed, delivered and signed.
Why this is critical is both lenders and especially investors want to be able to trust the data within the documents. With the built-in audit trail that travels with the documents and ability to verify data within the documents themselves this accomplishes that.
Lenders can also create SMARTDocs from any document, whether the document is structured or unstructured. With SMARTDocs, lenders can create an entirely electronic loan file. With the right technology, they can also perform fully electronic due diligence and compliance reviews in just seconds.
Q: What is an e-closing?
Anderson: There are different types of e-closings. For example, there are hybrid e-closings where some documents are signed in ink and others are signed digitally. However, a true e-closing involves the ability to e-sign all the loan documents, including the disclosures and the note, as well as the ability to e-notarize the mortgage. With a true e-closing, all documents are SMARTDocs, and everything is electronically executed to create a convenient, seamless experience for the borrower.
I should mention that one of the obstacles lenders encounter when implementing e-closings is that most e-closing vendors only provide the note as a SMARTDoc and use PDFs for other loan documents. Most e-closing providers also do not offer all the components of an e-mortgage in one platform. Instead, they stitch together as many as four different platforms—one for e-signing, one for the e-closing, another for the e-note, and another for the MERS e-registry. This makes e-closings anything but seamless—plus it’s very confusing to the borrower to be shuffled from one system to another.
The best way to implement e-closings is to utilize a single, end-to-end platform that includes a full library of SMART Docs and all the components to create a full digital closing, including RONs. Until recently, such a platform hasn’t been available—but it is now.
Q: Should current production personnel fear being replaced by digital mortgages?
Anderson: No. Of course, digital mortgages require far less manual work, but I believe the industry will always need human expertise. It’s important to remember that real estate finance is primarily a relationship business. The ability to generate new and repeat business through referrals and other relationship-building cannot be replaced by technology. In addition, most lenders that are adopting e-mortgages aren’t letting people go—they are using technology to augment and enhance the productivity of their teams. This enables them to operate more efficiently, so they can focus on sales and improving the borrower experience.
Ultimately, the lenders that choose to embrace e-mortgages and use technology to enhance their relationships will thrive, while those that choose not to will be fighting an uphill battle. As I see it, it’s no longer a hard decision to make.