eClosing Best Practices, Part I: Going for the Quick ‘e’ Wins to Drive Internal Adoption
Nancy Alley is vice president of strategic planning for Provo, Utah-based Simplifile, an online service that connects lenders, settlement agents and counties. She can be reached at firstname.lastname@example.org.
No one is disputing the operational benefits or the cost savings lenders can achieve with digital closings. What seems to be still up for debate is how feasible it is for lenders to go digital today, with discussion focused on the “all or nothing” proposition.
In reality, every lender can be digital to some degree right now using a hybrid e-closing strategy. Rather than sitting on the sidelines until the total e-mortgage is a common reality or assuming a complete business process re-engineering is the only road to success, lenders must instead focus on achieving quick “e” wins to build the familiarity and momentum with digital mortgages that will ultimately drive positive change and savings for their organizations.
From a big-picture standpoint, implementing hybrid e-closings is the first major milestone in the digital mortgage continuum, as investor acceptance is much higher for hybrids than fully digital closings at this time. Smaller milestones that lenders need to achieve in order to get there include:
–Automatically flagging loans that are hybrid-eligible based on pre-set defaults within the document preparation system/process;
–Allowing borrowers to e-sign eligible documents prior to closing;
–Condensing the length of the closing ceremony;
–Establishing a consistent method for securely delivering every closing package, including ink and hybrid;
–Creating transparency through clear email notifications and access for the agent to view borrowers’ e-sign status prior to closing and to download e-signed documents after; and
–Reducing post-closing review time for e-signed packages.
Once lenders have hybrids under their belt, the next steps to going “e” include identifying which investors will accept eNotes and which counties will accept electronically signed security instruments. Once these permutations are understood, a lender can selectively increase which documents go digital based on product and location. Quick wins for this next hybrid step include all of the “wins” listed above for ink-signed and hybrid e-closings, as well as:
–Utilizing e-signatures, e-notarization and e-recording wherever and whenever possible;
–One additional paperless document that reduces paper tracking;
–Automating the return of the recorded security instrument and fees.
Ultimately, the point at which every lender hopes to arrive at with their digital strategy is eNote execution. Investor acceptance rates for eNotes are less than the acceptance rate of hybrid e-closings, but the list of eNote warehouse lenders and investors is growing as aggregators, Ginnie Mae and the Federal Home Loan banks all adopt digital pilots. Therefore, it is important for lenders to routinely check with their investors and update their settings with their document provider to maximize the pool of loans that are eNote-eligible.
Furthermore, the lender must be integrated with the MERS eRegistry and approved by their investors before executing eNotes. In addition to all of the previously outlined items, some of the quick gains that are measurable when performing eNotes are:
–Optimizing delivery times to investors;
–Improving collateral control by reducing the risk of lost promissory notes;
–Enhancing the auditability of the controller of the document and investor; and
–Automatically delivering notes to an eVault for eRegistry and eDelivery.
The key to achieving all of these “wins” is to champion the cause of digital closings across the organization. As much as the industry focuses on external stakeholder adoption, like settlement agents, digital success starts at home. Without internal buy-in, adoption efforts are futile, and executive sponsorship, operation leaders, sales leaders, department managers, operation team members and compliance all must work off the same vision for this effort to succeed.
Furthermore, corporate commitment must be unwavering and reinforced throughout the implementation process to minimize the natural and instinctive reactions to change that can occur. Champion the cause by taking these first steps to kick off the project:
–Designate an executive sponsor to champion the project, provide financial backing, gain internal stakeholder buy-in and communicate why e-closing is an important investment for the organization;
–Designate a primary point person to liaise with external vendors and to track, report and communicate successes and gaps to the executive team;
–Create an internal e-closing project team comprised of subject matter experts from Operations, Sales, Compliance and IT;
–Identify settlement agent partners to participate in a pilot before ramping up to full production;
–Create an internal “Be ‘e’ as You Can Be” strategy, including the timeline for achieving each of the broader “e” milestones previously outlined; and
–Monitor and measure progress and communicate results internally, making going digital a company key expectation.
Ideally, every lender would be able to go all-in on eMortgages today, but unfortunately, that isn’t a reality quite yet. However, lenders can begin reaping the benefits of a digital mortgage strategy– and building valuable experience in the process–by aiming for quick ‘e’ wins based on what’s feasible today from an investor and regulatory standpoint. Of course, there are external factors to consider in making the switch to digital, which this series will cover in its next installment.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at email@example.com; or Michael Tucker, editorial manager, at firstname.lastname@example.org.)