Technology that Makes Sense for the Digital Mortgage Closing Community

February 20, 2018

By Andy Crisenbery

Over the past several years, the mortgage industry has diligently worked toward the development and implementation of digital mortgage capabilities. Most lenders have made progress with these solutions are varying levels, and have been helped along by innovative partners and advancements in technology—while others are still looking for the right path. There’s little doubt that a fully digital mortgage process is in our future, delivering a better user experience to consumers, efficiencies across the mortgage continuum and quality improvements to the associated loan data.

Most mortgage lenders have some sort of road map to implement a fully digital mortgage process, but in some cases, they may have critical relationships with a variety of external companies and regulatory entities that are not ready. Getting to a place where a fully digital mortgage is possible ultimately means that all entities who touch a mortgage must be able to seamlessly interact—lenders, customers, settlement providers and the investors, as well as the technologies they rely upon.

A primary opportunity in creating the digital mortgage process is in the closing phase. There are certainly a variety of digital closing solutions on the market today, offering a range of capabilities, such as allowing customers to review documents electronically, and to e-sign documents when appropriate. The question is not whether an e-close can be done, but rather, what questions must be asked and answered for it to be deployed successfully across the industry.

The E-close

Today, e-close solutions electronically deliver loan documents to settlement services agents who then print the loan documents for borrowers to physically sign (wet signature), or when allowable and appropriate, enable the borrower to e-sign their loan on a computer. Of course, there are a fair number of hurdles that must be crossed to determine whether an e-closing is appropriate, and if so the type of e-close that should be used.

First, there are “Yes/No” questions that must be answered. Does the consumer want to do an e-closing transaction? Does the settlement agent want to do it electronically? Does the county allow e-recordation? Does the county support e-notarization? Will the title underwriter agree to this method of closing? Has the Investor approved the lender to sell them e-notes? Will the investor accept it? If the answer is yes to every question, a full e-closing is indeed possible.

The settlement management process must be compliant with all ESIGN (Electronic Signatures in Global Commerce and National Commerce Act) and UETA (Uniform Electronic Transaction Act) rules to make an e-closing valid. In addition, recordable documents that must be notarized may require a wet signature in some jurisdictions, though electronic notarization options do exist. While a full e-closing is possible from a technology perspective, there is only a small segment of the population utilizing these capabilities today. It is encouraging however that we are seeing increased interest in moving more mortgage lending transactions to the e-close approach.

The Hybrid E-close

Until a full digital close transaction is accepted universally, it’s important to leverage a hybrid closing solution A hybrid e-close is one that takes part of the closing package and presents it to borrowers electronically, allowing them to receive, review and possibly e-sign parts of their loan package sooner.  In this way, the lender can make any necessary changes ahead of the closing date to help avoid delays in executing the loan.

From a settlement agent perspective, the big benefit of the hybrid e-close is version control. There is a full audit trail in terms of what the borrowers have viewed and signed, and any changes that are needed must be routed back through the settlement agent for handling. Information remains secure since there is no paper going back and forth between consumers and their settlement agent, and the integrity of the data is protected since the loan package remains fully electronic until the time comes for closing.

In addition, a hybrid e-closing solution monitors and reacts to the activities—or lack of activity—of consumers. For example, if borrowers fail to indicate that they have reviewed their electronic loan package within a specific timeframe, the system automatically prints and sends the loan package to the borrowers via a signature-required delivery service.

When the time comes for closing, if borrowers have either opted out of the electronic closing—or they haven’t registered and picked up their electronic loan documents—the system will revert to a wet sign document environment and print out the entire loan package for the settlement agent. On the other hand, if borrowers have accessed their electronic loan package and reviewed and e-signed the necessary parts, the system will only print out the few documents that may still need a wet signature. The settlement agent doesn’t have to make any decisions about what to do—the system automatically makes the right choices for them.

An Agnostic All-In-One Digital Closing Solution

Perhaps the most significant advancement for the mortgage industry is closing technology that enables lenders to assign a paper, hybrid or fully electronic closing as appropriate for each loan—all through a single system. Even more beneficial to the industry is the fact that advanced closing technology can be completely agnostic to the loan origination system lenders use, as well as to which document vendor or other service providers they work with. These choices, which are made primarily by the lender, have no bearing on the performance or effectiveness of a closing solution. With advanced closing technology, consumers and settlement agents access closing information through a secure, two-factor authentication portal or through integration with their own source systems.

From a settlement agent perspective, there are no new processes to adapt to and there is no new technology to purchase or install. Closings can continue to be done the way they are done today. The only difference for settlement agents is in the size of the loan package that is automatically printed out when it’s time to go to the closing. Settlement agents do not have to make any decisions or change anything in the way they conduct their business.

For example, if it is a traditional paper closing, the settlement agent will simply print the loan documents and take them to the closing. Of course, if a hybrid e-close is being conducted, a much smaller number of loan documents will be printed and taken to the closing. And in the event of a full e-close, no paper at all will be printed. When all is said and done, settlement agents could see anywhere from $25 to $40 in savings per closing, depending upon the closing type.

For lenders, full e-close and hybrid e-close options are clearly the better way of conducting a closing, especially because of the version control and increased efficiency that is inherent to this type of system.  But, right now lenders must have multiple options available to accommodate investor, county recorder, and consumer closing requirements. The technology that enables lenders to easily choose the appropriate closing type will also enable them shift to digital as quickly as other factors allow with minimal change to their internal and operational processes. In the meantime, regardless of which closing method is chosen, lenders, settlement agents, and investors need to have complete confidence in the integrity of the loan package and the closing process.

Normalizing the Settlement Services Environment

What’s needed now is a progressive solution that focuses on operationalizing the settlement services environment. This means that settlement providers can interact with lenders and borrowers to complete closings, regardless of the technology lenders use. Instead of trying to integrate with every loan origination solution on the market, settlement providers can instead focus on the job they know best—without having to learn new technology, change their processes, or in any way disrupt how they do business.

These are the kinds of essential benefits the industry needs, especially with few-to-no changes required for settlement agents. By seamlessly enabling e-closings, hybrid e-closings and traditional paper closings based on borrower preferences (and the requirements of other closing participants such as local notaries), settlement agents can have everything they need to remain efficient, responsive and in touch with changing consumer preferences. This is the approach that makes the most sense, and it not only works – but helps everyone in the mortgage closing process.

Andy Crisenbery is senior vice president and managing director of eLending Solutions at Black Knight. He can be reached at exec.author@bkfs.com.


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