The Elusive E-Mortgage

Will we see e-closings and e-recordings in our lifetime?

You’ve heard me and other industry media pundits write and speak about the e-mortgage and what I like to refer to as “The Final Four Challenges.” For this discussion, let me address where we realistically stand on the two most critical components in attaining the e-mortgage – e-closings and e-recordings.

Let’s define e-closing as the ability to close a loan without printing docs and signatures. I am not referring to electronic delivery of closing docs, but rather achieving the goal of working with our partners to make SMART docs and signatures “standard operating procedure (SOP).” The benefits are more than apparent to all of us—more efficient loan production, an improved customer experience, reduced origination costs and, ultimately, increased profitability. Sounds great, but as we all know, the legislative process has dragged its feet on pushing the e-signature agenda forward.

As for e-recording, I’ll define it as the electronic recording of documents at the county level. And we have to face reality—there are only a handful of counties doing this at some level. In fact, the Wall Street Journal reports that only 20 of the 26,000 counties and other recording jurisdictions do any e-recording.

You might conclude from this that the e-mortgage may not arrive in our lifetime, right? Not so fast. There’s been a tremendous amount of industry and media e-signature hype in the past couple of years. Couple this with an industry-wide push for establishing data standards, led by the Mortgage Industry Standards Maintenance Organization (MISMO), and the future for electronic closing and signatures actually looks pretty bright. In addition to the efforts by MISMO, the Standards and Procedures for Electronic Records and Signatures (SPeRS) is in the process of establishing industry guidelines for electronic signatures. Finally, recently passed legislation has opened the door wider for the e-signature to have the same validity as that of a “wet-ink” signature.

So, if the technology and the laws are all falling into place, then what’s the holdup? Borrower confidence is one problem. Without borrower faith in the process, the electronic signature won’t happen. It is very easy to forget that for many, if not most borrowers, the mortgage process can be confusing and intimidating. Top this experience off with asking for an intangible signature, and it may be too much for some borrowers to handle. Assuring borrowers that their electronic signature is valid and secure is a far greater challenge than finalizing industry data standards and legislation.

Despite the borrower’s comfort level, it’s important to reassure them and take the time to explain the security measures the industry has taken to build and sustain consumer confidence as electronic signatures become more commonplace. And the demographics and psychographics are in our favor. The next generation of borrowers (the Gen Xers), having grown up in an electronic world, will be much more amenable to electronic signatures.

However, the greatest hurdle on the road to e-mortgage acceptance is, and will continue to be, county recording offices. As noted earlier, less than 20 of the nation’s 26,000 county and other recording jurisdictions are configured to receive and record mortgage documents electronically.

What’s more, the handful of counties that use electronic capabilities in their recording offices are using only basic scanned images. Although the technology exists to provide and facilitate e-recordings, it seems there is no overwhelming or driving impetus for counties to improve efficiencies or speed closing processes. Sophisticated technology is needed to provide the industry with true e-recording capabilities—technology that includes building databases from which information can be transmitted electronically and that can populate the appropriate parts of existing forms, reducing the percentage of re-keying errors and the time required for document review. The efficiencies and savings are there, but can we prove it?

So the bottom line is that for all of the time and money savings that e-recordings promise, the reality of a national working electronic recording system is as far away as universal acceptance and implementation of the technology and processes by county governments.

What part can we play in supporting and encouraging companies to research, develop, and refine the technologies that can answer the remaining electronic problems and challenges to e-closings and e-recordings? I believe the answer is within us as an industry. We have the power to organize at the local, state, and national levels. Discuss it with your employees, business partners, and technology vendors. Elevate the discussion at your association level meetings and conferences. Together, we have the influence and power to move the process closer to reality by sharing issues, successes and milestones. How about this—if we could convince one county in every state to become a “beta” to prove the business case for e-recordings, it would literally open the gates overnight. In a time when local governments are striving to cut costs and provide better service to their constituencies, it might be just what the doctor ordered.

Lining up all the pieces to make e-mortgages a mainstream process is elusive but not unattainable. It’s simply a matter of setting our sights clearly, leveraging existing and emerging technology, and strengthening our industry, national and local government relationships to create a “slam dunk” case for the national acceptance of e-signatures and the local acceptance of e-recordings by county recorders. It is only through this proof and partnership that the e-mortgage will become “Standard Operating Procedure.”

By Sig Anderman