Clint Salisbury of IDS: Don’t Sacrifice Borrower Experience for Sake of Digital Mortgage Innovation
Clint Salisbury is Regional Manager with IDS, Salt Lake City, Utah. Since joining IDS in 2008, he has served as In-house Counsel and Director of Implementation Services.
When Netflix was founded in 1997, the original concept was renting movies to customers through the mail. Ten years later, Netflix introduced streaming services for movies, beginning a digital revolution that has not only resulted in a plethora of streaming options, but also changed the entertainment industry. It’s understandable to think that very few people, if anyone, knew what the future would hold for Netflix 25 years ago.
Conversely, the mortgage industry has always been crystal clear in its vision of enabling a fully digital mortgage process and introduced eSign as the first step in that journey. As technology evolved and investors and insurers gained confidence in the legality of eSigned documents, adoption soared, and today, the vast majority of mortgage documents can be signed electronically. This also opened the door to additional technological advancements aimed at digitizing other aspects of the mortgage transaction, ultimately resulting in a hybrid eClosing process.
The benefits of hybrid eClosings are obvious when viewed from the lenders and/or investor perspective – streamlined processes, greater operation efficiency, reduced errors, etc. – and borrowers certainly feel the impact of those to a certain degree. However, the “digital revolution” many lenders may assume they are delivering to consumers might not be as revolutionary when examined from the borrower’s side of the transaction.
For example, the document preview and signing process most lenders use today achieves its intended outcome, which is to provide borrowers the opportunity to review the closing package and ask questions prior to the closing ceremony. However, separating these functions introduces both inefficiencies and possible points of friction for the borrower. Requiring borrowers to log in multiple times to complete the entire process means borrowers not only have to memorize a new login and password to preview their closing documents, but they also have to remember to log back in on the closing date to complete the signing process. Combining these steps into a single transaction executed prior to the closing ceremony would greatly streamline and simplify the process.
What has historically prevented lenders from doing so is investors’ reluctance to purchase transactions in which ancillary documents (meaning those that do not require a witness and/or notarization) were signed in advance of closing. That tide has begun to shift as Fannie Mae and Freddie Mac have both signaled their willingness to allow ancillary docs to be signed before the note date as long as the dates on the top of the document matches the note date, and where the GSEs go, other investors eventually follow, thus providing an opportunity for lenders to vastly improve the borrower experience while also streamlining their own processes.
Rather than layering technology onto the existing mortgage process for the sake of “innovation,” lenders need to thoughtfully examine the true impact of that innovation on the borrower experience. Unfortunately, when looking at the bigger eMortgage picture, it’s easy to lose sight of the fact that borrowers are at the center of every mortgage transaction. When it came to video rentals, this is what happened to Blockbuster.
Despite being one of, if not the, premier video rental chains in the country, Blockbuster failed to recognize emerging trends and adapt its business model accordingly to improve the customer experience. While Blockbuster was an early adopter of DVD rentals, customers were still required to rent their videos in a physical location, whereas Netflix offered consumers the convenience of renting DVDs through the mail.
Simply put, Blockbuster forgot to center its practices and processes around the customer experience at a time when Netflix was shining a spotlight on the very same thing, and ultimately, it took Blockbuster too long to realize the detrimental impact of its antiquated process on its business.
For many lenders, the focus of the eMortgage evolution has been on the application and origination processes, not the closing process. In Q4 2021, more than 60% of lenders did not participate in a single hybrid eClosing transaction[1]. For borrowers who completed a majority of the mortgage transaction digitally, an abrupt switch to a traditional closing ceremony not only feels antiquated, but it can also leave the borrower with a sense of unpreparedness.
When a borrower sits down at the closing table and is handed a stack of 100 pages and simply shown where to sign, the borrower can feel rushed and unprepared as they aren’t able to review the documents at their own pace. With eClosings, borrowers can have access to all closing documents before the closing ceremony, allowing them the opportunity to review on their own timeline. In addition to the benefits of a hybrid or fully eClose ceremony, remaining consistent provides a better borrower experience.
Throughout 2020, lenders had to rely on eClosings, either hybrid of full, and by the end of the year, more that 70% of lenders had eSigning capabilities live[2]. Yet only 43% of lenders implemented hybrid eClose capabilities and only 12% had achieved greater than 75% adoption. While these adoption statistics are more than a year old, it’s worth noting that hybrid eClosings decreased from Q4 2020 to Q4 20211.
As the mortgage industry continues implementing and refining technology to achieve a fully digital mortgage process, it cannot do so at the expense of the borrower experience. By considering the eMortgage process from the borrower’s point of view, lenders can ensure they are keeping the borrower and the borrower experience at the center of the transaction as they continue to innovate.
The mortgage industry may not know exactly what the future holds for eMortgages in 25 years, but lenders who fail to make borrower-centric changes, such as allowing ancillary documents to be eSigned prior to the note date, won’t be here to see it – just ask Blockbuster.
[1] https://www.stratmorgroup.com/insights_article/as-the-mortgage-market-turns-lender-perspectives-on-the-2022-market/
[2] https://www.stratmorgroup.com/insights_article/digital-rising-the-mortgage-world-according-to-garth/
(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.)
