Aaron King of Snapdocs: Obstacles to Digitization
Aaron King is founder CEO of Snapdocs, a leading digital closing platform that powers millions of closings each year. Snapdocs combines an open platform, patented AI technology, an extensive settlement network, and a team of industry experts to ensure digital closing success. A passionate advocate for digital closings, King began his career in the mortgage industry working at an IMB while still in high school. At 21, he founded NotaryLink, a nationwide notary signing service. King is a frequently sought speaker at industry events and has been featured in publications such as The Wall Street Journal and Forbes. He can be reached at www.snapdocs.com.
MBA NewsLink: Why hasn’t full digitization of the closing process taken place already?
Aaron King: That’s a great question. Fragmentation is the biggest blocker to digitization and advancement as a whole in the mortgage industry. This can be explained by the complexity of real estate transactions, the lack of visibility between participants, and the dynamic nature of the market. More than a dozen parties (e.g., lender, settlement, notary, borrower) are involved in any given transaction with no consistent way to coordinate. Multiplied by various workflows, technologies, loan types, and regulations, this results in an exponentially large number of permutations that create the complexity in the closing process.
To get to 100% digitization of loans, solutions must solve this fragmentation of people, processes, and technology. Only then can the benefits of increased efficiency and improved borrower experience that digital closings provide be maximized.
In addition, change management can feel cumbersome to lenders of any size. It requires lots of coordination both inside the organization and with outside partners. To be successful at scaling digital closings, a lender must have clear goals, a phased roll out plan with executive alignment, and a technology partner invested in supporting this process. To address this challenge, Snapdocs has heavily invested in our implementation and support processes, informed by industry experts, to guide and support lenders to scale.
NewsLink: What share of lenders haven’t yet gone fully digital in their closing processes?
King: There isn’t a single lender that has a fully digital process across all of their closings, yet. However, digital adoption is increasing. The industry reports I’ve seen suggest that just three years ago, fewer than 24% of lenders had adopted some form of digital closing technology. This has grown over the years, and now roughly half of lenders have implemented some element of technology into their closing process. So, while it may be some time before full digitalization of the closing process is widely achieved, the industry is clearly moving in that direction.
NewsLink: How does technology in the mortgage industry compare to technology in all other sectors?
King: Historically, the mortgage industry has adapted to digital technology rather slowly compared to other industries, for some of the reasons I mentioned earlier. But after the mortgage meltdown in 2007, the industry fell a little further behind. Many mortgage technology companies lost funding or shut down entirely. Those that remained had to grapple with new regulations aimed at preventing another housing market crash, so compliance became a priority and digital investments took a back seat.
These events put our industry about a decade behind others in terms of technology adoption. Look what’s happened in other industries over the past 10 years, like retail and banking, where technology has been at the forefront. Amazon is now the world’s second largest retailer, and hardly anyone writes paper checks anymore. But this tells me that the mortgage industry has the greatest potential for digital transformation. We saw an acceleration in 2020 when COVID resulted in shelter-in-place, requiring an urgent switch to digitization. Now, adoption continues to increase as lenders focus on optimizing technology use to reduce costs and improve the mortgage experience for their borrowers and employees.
NewsLink: Can the obstacles to digitization be overcome?
King: Absolutely. Many technology service providers in the industry are dedicated to scaling digital closings, and we’re witnessing progress every day. Our own research shows that lenders that adopt hybrid closings and eNotes can save lenders an average of $290 per loan. This represents a substantial reduction in operational costs across a lender’s full loan portfolio. So from a business case standpoint, digitization—even on a modest level—is an economically sound decision.
However, the advantages go beyond mere cost savings. Digitization also shortens the time it takes to close loans and enhances the borrower’s experience by making a complex transaction faster, more convenient, and less stressful. In the long run, digitization can lead to greater customer satisfaction, stronger referral business and greater market share—which is why a growing number of organizations are adopting digital closing processes today.
NewsLink: How do you manage all of the different regulations and standards that states and municipalities place on digital closings?
King: Managing the differing regulations and standards for digital closings can be complex for any lender. To help with this necessity, it’s important for lenders to partner with a digital closing provider that is one step ahead at all times, can make changes quickly as laws progress, and offers technology that automatically complies with all regulations. A digital closing platform should include eligibility or logic engines that let the lender control which transactions are processed with eNotes or remote online notarizations to maximize digital adoption.
Managing requirements can be even more challenging for lenders who then sell loans on the secondary market, as buyers have different acceptance criteria. For these lenders, it’s also important to question which digital closing platform has a robust ecosystem of partners offering guidance to accelerate investor and trade-partner approvals.
At the end of the day, lenders should look to providers that are taking it one step further by partnering with industry organizations to evolve the proper standards for digital closings and influence change that helps lenders drive profitability.
(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 NewsLink Editor Michael Tucker at mtucker@mba.org or Editorial Manager Anneliese Mahoney at amahoney@mba.org.)
