Paul Anselmo of Evolve Mortgage Services: A Primer on SMART Docs

Paul Anselmo is CEO and founder of Evolve Mortgage Services and SigniaDocuments Inc, a provider of outsourced mortgage platforms. 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 paul.anselmo@evolvemortgageservices.com.

MBA NEWSLINK: For the uninitiated, how do SMART® Docs work?

PAUL ANSELMO, EVOLVE MORTGAGE SERVICES: According to MISMO, which provides industry standards for SMART Doc specifications, ‘SMART’ is an acronym for Securable, Manageable, Archivable, Retrievable and Transferable. SMART Docs basically combine data and presentation in a way that enables them to be easily system-validated for integrity by directly reading XML data.

NEWSLINK: How do SMART Docs differ from digital PDFs?

ANSELMO: PDFs are a digital version of a printed document. Because they are digital, PDFs save physical space and can be shared more easily. However, they must still be examined visually by loan processers, underwriters and auditors or read by optical character recognition tools—usually some combination of the two.

SMART Docs, on the other hand, contain an almost unlimited amount of data that can be instantly read by computer systems without requiring OCR or human interaction. In addition, SMART Docs include a secure record of everything that has happened to the document – when it was created, who has modified it and where it has been sent.

NEWSLINK: What are the benefits of using SMART Docs?

ANSELMO: Using SMART Docs has many benefits. First, SMART Docs take less time to digitally sign than PDFs. Before a borrower can sign a PDF, it must be “tagged” by a machine, a loan processor, or a closing agent for signature, which can lead to possible errors. SMART Docs don’t have this problem – who signs it and where they sign is embedded in the document when created.

Second, SMART Docs save enormous amounts of time and effort. Again, PDFs have to be visually reviewed by someone or run through OCR tools to extract the information on them, which adds time to the loan process and is not 100% accurate. Because SMART Docs can be reviewed by a computer, they can be processed in an instant without any human intervention and are unquestionably 100% accurate.  

Another benefit is that SMART Docs are far more accurate and less prone to mistakes than PDFs. Nobody is perfect, so every time you have a human involved with reading loan documents in PDF format or re-keying data into other systems, there’s the potential for an error. And OCR technology, as popular as it has become in our industry, is far from accurate as well. SMART Docs can be read with 100 percent accuracy, and if they are ever modified, there’s a record of it.

NEWSLINK: Which loan documents can use the SMART Doc format?

ANSELMO: All documents in a closing package should be a SMART Doc. MISMO provides a full library of Category 1 SMART Docs that include the most common loan documents that lenders use. By the way, Category 1 SMART Docs are important, because they allow lenders to choose the format of the document based on the needs of their particular investor or trading partner.

Most eClosing vendors approved by Fannie Mae and Freddie Mac only provide the note in SMART Doc format whether that vendor produces it or gets it from a partner. While the GSEs are primarily concerned about the note, however, investors need to verify loan data as well, and SMART Docs make this information easily available. Lenders will also need to implement SMART Docs for their entire files if they want to create a fully digital loan process. To achieve these goals, a full library of SMART Docs is the best way to go.

NEWSLINK: How do SMART Docs impact remote online notarizations?

ANSELMO: SMART Docs are vital for remote online notarizations because they are the fastest and most secure to deliver, sign and store as an electronic document. With a good eClosing provider, deeds can be signed and notarized in an online environment and instantly stored in an eVault and registered on the MERS system. SMART Docs not only enable lenders to deliver a completely digital eClosing process, they also make it possible to create a truly end-to-end digital experience for the consumer. Historically, conventional wisdom was since the deed must be wet signed and notarized, why do an eNote? Now that the deed no longer needs to be “papered out”, the note certainly should not.

NEWSLINK: How has the pandemic impacted SMART Doc adoption?

ANSELMO: You would think that with everything happening remotely, and with the cost pressures lenders are under today, the pandemic would be fueling greater use of SMART Docs. However, adoption has been much slower than anticipated. Despite all the benefits of SMART Docs in the COVID era, the industry is preoccupied with a refinance tsunami and focusing on processing and closing loans as fast as they can.

That being said, we have seen more lenders starting to adopt SMART Docs since the pandemic began, because the benefits are just too good to ignore. These lenders are looking at the big picture; they see very clearly where the industry is heading and they’re looking for ways to set themselves apart by saving time and money and giving borrowers a better mortgage experience. The fact that more states are legalizing RONs for real estate transactions has pushed things along as well. I believe the lenders that are most successful in the post-pandemic era will be those using SMART Docs now while everyone else is trying to catch up in the future.

(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 msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)