Paul Anselmo: The Moment Has Arrived for Remote Closings
(Published on Apr. 24)
Paul Anselmo is CEO and founder of Evolve Mortgage Services and SigniaDocuments Inc, a provider of outsourced mortgage plaforms. He has more than 30 years of experience in the banking and mortgage industries. Previously he served as president, CEO and founder of Mortgage Resource Network, a business process outsourcer and technology provider to the mortgage industry. In 2019, he was honored as a “Lending Luminary” by the PROGRESS in Lending Association. He can be reached at email@example.com.
As the real estate industry eyes its way forward through a new era of social isolation, one of the most pressing challenges has become how to close loans safely. To be sure, the traditional loan closing has gone from a celebratory event that takes place in person between title agents, notaries and borrowers to a legitimate health hazard.
If our industry has been slow to adopt an online remote closing process, we certainly have good reason to speed things up now. But remote closings are not a simple endeavor. While remote online notarizations, or RONs, are now legal in about three-quarters all U.S. states, many disparate parties and processes must work together in order to make adoption a reality. Many loan aggregators and investors aren’t fully prepared to buy RON deeds either, or even eNotes, for that matter.
With the speed that RON adoption has seen, the aggregators are the last domino to fall. Most originators cannot sell directly to the agencies and sell to aggregators instead. Sadly, even Ginnie Mae has responded quicker than most of them. That leaves many lenders to their own devices to get loans closed in a patchwork process for eSigning, eNote, RON and eRecording.
Fortunately, there are technologies and providers available that can help lenders fast-track paperless, remote closings and reduce the risk of person-to-person contact. But identifying which solutions work best—and who to trust to provide them—is not easy.
Watch Out for Wild Claims
There’s no doubt that anxiety is running high in our industry. Mortgage production had been soaring until the early weeks of March, when everything turned upside down and mass uncertainty entered the picture. And as social distancing and sheltering in place became a part of daily life, lenders and settlement services providers have been scrambling to create new ground rules and guidelines for closing loans, while keeping all parties safe.
Amid all this uncertainty, a number of companies have emerged offering full paperless and remote notary eClosing solutions. Some advertise the notion that their remote closing solutions represent some type of technology breakthrough or industry “first,” when in fact the technologies behind RONs and eClosings have been around for some time.
Having spent the past decade developing and implementing eClosing technologies, I’m concerned that many companies offering remote closing solutions are making promises that they won’t be able to keep or aren’t scalable. Some have untested products that haven’t been properly vetted, while others seem to have great technology but not an effective means of controlling the signing process. Most providers simply lack alliances with other key technology providers or states that require pre-approval to make remote closings scalable and trustworthy. Others have created a consortium of several vendors to achieve the whole process, introducing multiple points of possible failure.
Choosing the Right Partner
All of this is piling more confusion on top of lenders that want to pursue a complete digital closing experience and process but are understandably baffled about how to go about it. At the end of the day, what lenders need is a partner with solid experience in eClosings and eNotes, the technologies to assure paperless closings are safe and secure, and the proper relationships in place to deliver.
The most important thing a remote closing partner must have is expertise in eNotes, as well as a rich understanding of how eNotes impact a lender’s partners and investors. Ideally, such a provider should have a decade or more of experience in eClosings. But they also must have a document engine that runs on SMARTDocs®, which enables them to deliver documents in standard data formats and a team that has real experience in this segment of the industry.
Unfortunately, many eClosing providers are still using PDFs, which are less efficient and more time-consuming and inaccurate compared to native XML SMARTDocs®. For instance, PDFs must be tagged for signatures before they can be electronically signed. PDFs must also be inspected for errors by human staff instead of automatically scanned and verified for accuracy. Like all manual processes, this opens up the door for mistakes and omissions.
Before choosing a closing partner, it’s important to ask whether they have a full library of MISMO Category One SMARTDocs that cover the wide range of loan documents most lenders use. When it comes to SMARTDocs, unfortunately, many newer closing providers focus only on the note being a SMARTDoc. A provider with a library of Category One SMARTDocs, on the other hand, gives lenders the option of using XML or PDF for any loan document in their library, as well as the option to change document formats based on the requirements of a particular investor as things evolve. Being able to offer an entire library of SMARTDocs also enables lenders to create digital versions of any document in the loan file. This allows loan files to be electronically reviewed and auto-verified for due diligence and compliance once they are signed.
It can be extra helpful to choose a closing partner that not only provides eClosing services and a full library of SMARTDocs, but other mortgage services as well. Such a partner is likely to have digital capabilities baked into their other services, whether those services involve processing loan applications or providing underwriting and due diligence support. A partner that has a holistic view of the industry and understands originations and the secondary market will be able to support you in many ways.
As far as identifying capable eClosing partners, the eMortgage vendor lists kept by the GSEs are an excellent place to start. Vendors on these lists allow lenders to create and submit electronic mortgages to Fannie Mae and Freddie Mac, and every vendor listed has conducted eNote delivery tests with MERS and the GSEs. Some vendors’ services are all encompassing, while other vendors’ services depend on a partner. That being said, not all eClosing providers are capable of taking the final step toward offering a full paperless, remote closing process.
The Key to Social Distancing – Going Remote
To go the final mile and achieve fully remote closings, lenders will need an eClosing platform that is capable of supporting RONs. When combined with a full library of electronic documents built off Category One SMARTDocs, a platform that is RON-enabled allows lenders to create a truly end-to-end digital mortgage experience for borrowers that includes the ability for borrowers to electronically sign closing documents, no matter where they are. It also provides the intelligence to create a package that has RON-specific notary language where applicable as well as the specific language for eNotes, yet still supports the traditional paper-based, ink-signed packages.
RON-enabled platforms leverage audio and video and identity verification tools to create a totally virtual notarization process, which can be used in accordance with state and emergency social distancing mandates. With RONs, no face-to-face contact is required, as a certified notary is able to witness the signing process over the Internet. To be truly effective, however, a platform needs to be simple to use and give borrowers the opportunity to review each loan document electronically and ask questions before signing closing papers in the web presence of a notary.
The good news is that these platforms exist today. One of the partners that we have integrated to provide this solution is Pavaso, which supports both versions of eNotary—In-person Electronic Notarization (IPEN) and RON—and brings a title perspective rather than just a tech perspective to the approach, which helps increase adoption.
While RON adoption is relatively new, mortgage lenders and title agents are starting to utilize these platforms to deliver a paperless, remote closing experience to borrowers in the growing number of states that have legalized RONs. By enabling borrowers to electronically execute all of their closing documents from the comfort of their homes, these platforms can keep borrowers and notaries safe from possibly spreading COVID-19 and prolonging our nation’s health crisis. Almost as importantly, they are keeping mortgage closings on track and helping to sustain our economy during a very challenging time.
While uncertainty has become our industry’s new normal, remote closings give lenders the best chance to limit or eliminate physical interactions between borrowers, title agents and notaries. The key to adopting a remote closing strategy ultimately depends upon choosing the right provider, one with the expertise, technologies and partnerships to make remote closings not just possible, but secure and scalable. And for lenders that choose correctly, the benefits will last long after the pandemic is over.
(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 firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)