Mass adoption of e-signing has been the white whale for innovators in the mortgage industry for years, decades even. Now, with the Truth in Lending/Real Estate Settlement Procedures Act (TILA/RESPA) integrated disclosure requirements going into effect in August, electronic documents, signatures and transactions are going to have a significant advantage for the borrower and the lender alike.
Why will this specific compliance requirement finally push eSignatures forward? By embracing digital documents, the opportunity exists to streamline and refine the disclosure process leveraging electronic document technology to improve compliance reporting, reduce paper expenses and better meet the needs of borrowers who embrace digital documents.
Reducing Defects, Cutting Time with Electronic Disclosures
The most important benefit of electronic transactions from a compliance standpoint is data integrity. Since an e-disclosure is accessible to all service providers in the mortgage chain, changes made in the system of record are automatically applied to the documents. It is impossible with an electronic transaction to have the data from the loan file be different from the data on the documents. This eliminates the number one source for loan defects.
From a legal perspective, the electronic documents offer more protection than paper documents. As the borrower reviews every page of the document, the system can keep a record of how long each page is viewed, verify signatures, and ensure files are opened and returned.
From a time and cost-savings perspective, electronic documents also enable lenders to eliminate a large percentage of the manual effort of handling, processing and checking paper documents.
The new closing disclosure will be one of the most time-intensive parts of the mortgage workflow after August 1st of this year. Due to the timing requirements of the RESPA/TILA law, lenders must allow between six to eight days if using paper documents in advance of the closing.
If the documents are sent electronically and the borrower consents to receive them electronically, lenders can save up to three days off of that lead-time. There’s also value to the borrower due to having access to documents instantaneously and having more time to review.
Last but not least, e-disclosures cost lenders less money. Integrating all the documents into one digital platform will reduce the need for the expensive transportation, filing and storage services needed by paper disclosures. Decreased time in the process means less money spent on each loan.
Despite rumors to the contrary, lenders should not expect a delay or extension on the deadline. The new laws provide a natural incentive to look at adopting more electronic documents and signatures into the workflow. Now is the time for lenders to begin upgrading systems and offering electronic solutions to accommodate borrowers before the reform that goes into effect on August 1.
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