It’s About Time


JohnLevyA 1975 BusinessWeek article predicted a forthcoming paperless office, forecasting that in the year or two following, paper would become obsolete in business environments. It is clear that the thoughts behind this article were wise, perhaps a bit ahead of their time. But in reality, the amount of paper office workers created and utilized actually increased significantly after 1975, more than doubling year over year until 1999.

Based on the advent of new technology and greater environmental awareness, paper usage peaked in 1999 at 143 percent per U.S. worker and then began declining in 2006 to 127 percent, per U.S. worker, which reflects the downward trend of a traditional bell curve. The amount of paper businesses use continues to trend downward, and it appears we are finally seizing the opportunity to create the paperless office once described in that original insightful article.

The technology that was actually needed for a paperless office was nowhere in sight 40 years ago; however, we now have access to the technology to support that vision. Although many mortgage companies have yet to fully embrace paperless operations, most have adopted electronic processes in some capacity. Recent advances by the IRS, FHA and other industry organizations suggest that the reality of the eMortgage is right at hand. Therefore, it is important for industry leaders to understand the primary factors that have come together over the past 10 years to create a perfect technology storm, allowing the paperless office to finally come to fruition:

Hardware – If you follow Moore’s Law, which was established in the 1970s, it states that processing power for computers will double every 18 months. Based upon this hypothesis, we should now have more than 33 million times more computing power in 2014 than was available in 1975. This dramatic rise, as well as huge increases in processing horsepower and memory are among other factors which give us the computing foundation for the paperless vision of long ago.

Software – The software of today’s era is capable of performing functions that simply could not have been imagined a few decades ago. Current software capabilities that have paved the way for paperless offices include the development of a multitude of industry standard file formats including PDF, electronic business documents, eSignature and workflow technology. For mortgage processes that involve countless documents, a number of signing parties and many operational steps, these software technologies have been revolutionary in helping to complete previously paper-based transactions much faster and with far less personnel or resource requirements. The evolution of software now enables a paperless process to remain electronic from onset through final transaction completion.

Additionally, the cloud processing environment with which we have all become accustomed to, regardless of industry, represents a major advancement that could not have even been imagined in 1975.

The cloud now provides us with a multi-tenant processing environment, hosting the software applications that can automate transactions and processes in an even more secure environment than paper-based transactions.

Bandwidth & Infrastructure – Internet speeds continually improve, as does the way in which network infrastructures within business offices interconnect. High-speed bandwidth has significantly impacted consumers’ lives, giving them Internet access from their homes (and everywhere they go with smartphones and tablets) to read, shop and bank. Today, consumers can shop for rates, view documents and even initiate the mortgage process online, from any location. Increased bandwidth now allows financial institutions to securely collaborate, share and exchange information instantly and totally electronic. The secure infrastructure that is now in place provides audit trails for attribution, secure PDFs, encryption methodology for document integrity and is critical for mortgage companies to handle consumers’ non-public, personal information using paper-free methods.

Regulations & Legislation – The ESIGN Act, signed into law in 2000, and the Uniform Electronic Transactions Act (UETA), passed one year prior, set the stage for the paperless office to become reality in the commercial business space. These laws provided the basis for existing paper-centric processes to become electronically accepted. Both acts state that if a law requires a record or a signature to be in writing, an electronic record and/or signature satisfies the law, and a record or signature may not be denied legal affect or enforceability solely because it is in electronic form.

While ESIGN and UETA are not considered new regulations anymore, their impact and effectiveness are still being felt. Varying interpretations continue to evolve, especially with the formation of the Consumer Financial Protection Bureau (CFPB) and its assessment of how electronic records and signatures may be utilized to allow consumers simplicity, convenience and ease-of-use while adding new levels of compliance requirements. These acts have also become critical to driving other industries, including government agencies, toward paperless practices. For instance, they set the stage for the Internal Revenue Service’s (IRS) acceptance of electronic signatures on forms 4506-T in 2013, and later forms 8878 and 8897.

Of significance to the mortgage industry this year was the Federal Housing Administration’s (FHA) policy change allowing e-signatures on the vast majority of mortgage documents. Announced January 2014, this policy change signifies a milestone and will likely propel the mortgage industry further toward completely paperless processes. In some cases, eMortgages – or fully electronic mortgage transactions – have even been realized, and will likely be much more common after December of this year with additional regulatory changes.

Security – Over the years, many have questioned whether the paperless office can be a secure one. In addition to software becoming more secure in recent years, overall, we now have the means to truly protect the integrity of signed electronic records. There are encrypted documents and tamper evident seals on electronic records, complete audit trails, in addition to various levels of authentication safeguards on both desktops and mobile devices. Without the ability to securely execute documents – regardless of the transaction type – they would simply not be practical for consumers or the financial institution. Who would sign or review an important loan disclosure document that could not be protected? What lender would collateralize or accept a sale, such as a mortgage or even a portfolio of mortgages, which could one day be considered invalid?

ESIGN also dictates requirements for using an authoritative copy documents, which bring additional value to financial institutions that want to securitize or collateralize their electronically completed loans. eVaulting creates a secure original record of the chain of custody for transfer of electronic documents to a secondary market buyer or investor. This has become crucial requirement in the financial industry, enabling institutions to establish ownership and/or control of these transferable e-signed documents.

We have certainly come a long way since 1975. The ideas presented in that original BusinessWeek article are finally beginning to ring true, and it is all benefiting the mortgage industry. It is providing consumers with ease-of-use and convenience throughout a mortgage transaction while allowing institutions to deliver mortgage services in a less resource-intensive manner. It really doesn’t matter what industry you’re in – being fully electronic is easier, less expensive, more expedient, and processes are more secure when they are paper-free. They really had the right vision back in 1975; now 39 years later we can finally seize the opportunity to increase productivity, reduce operating costs, allow for consumer channel choice by adopting the paperless office.

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