This year, practical technology methods have finally reached the tipping point for mortgage professionals to move away from paper-based signatures, and into the digital present. In fact, we have already seen the overall industry conversation shifting away from the general acceptance and adoption of electronic records and signatures, since it is now the general societal expectation that this technology will be a part of any consumer engagement process. Instead, there is greater emphasis being placed upon the end-user experience and consolidation of disparate, consumer-facing interactions by business applications. Greater attention is now being paid to the benefits of e-signed records and digital assets resulting from these processes, which are able to ensure the integrity of information and provide proof of compliance needed to satisfy various regulatory guidelines throughout the mortgage lifecycle.
Lenders continue to encounter an evolving regulatory climate that includes oversight considerations from several agencies. At the same time, they seek ways to combat the challenges to completing transactions with the incorporation of informed, risk-based decisioning practices. What was once a choice for credit-granters when determining loan applicant eligibility is now a requirement involving prescriptive instructions on providing disclosures, managing delivery timelines and protecting records to ensure they can be used to demonstrate regulatory compliance. Not only is this an enormous, and growing, undertaking for lenders, but consumers are also frustrated with the amount of time the expanded process requires, the lack of transparency throughout and the piles of confusing paperwork that are required to be signed.
Consumers, businesses and government agencies are all realizing the widespread benefits of adopting electronic record and e-signature technology. Although it may appear to some that electronic processes are just coming to fruition, this is not the case. In fact, they have been in place since 2000, when the federal Electronic Signatures in Global and National Commerce (ESIGN) Act was enacted into law. Then, state adoptions of the Uniform Electronic Transactions Act (UETA) began in 1999. E-signed records and electronic workflows have taken off and will soon become an industry standard, not just for the efficiency gains and cost savings they create, but because they can be further leveraged long-term to improve risk management, security and fraud prevention initiatives.
For mortgage companies, discussions with consumers are becoming less about the adoption of a process, and instead, becoming more about the consolidation and consistency of experience across various applications and access channels. They are not explaining how to use e-sign technology, consumers get it. They expect it. Tablets and smartphones certainly change how lenders can communicate with consumers and share documents; however, today they are forever changing how borrowers research information, seek funding sources, and obtain credit in today’s market. For 42 percent of home buyers, the first step in the home-buying process was looking online for properties and 14 percent of home buyers first looked online for information about the home buying process according to the National Association of Realtors 2013 Profile of Home Buyers and Sellers.
New models for interpersonal and business interactions have evolved significantly over the past few years and are now beginning to affect financial services organizations. Key audiences have influenced, and will continue to shape, the digital consumer phenomena. Millennials, who comprise 31 percent— the largest share — of U.S. homebuyers, are digital natives. This generation conducts all aspects of their discovery, consideration and decision-making processes with the support of technology. More than half of buyers from this generational segment used a mobile device during their home search; among those who did, 26 percent found the home they ultimately purchased. To a millennial, the experience when using a mobile device or smartphone requires no more effort than opening a refrigerator door.
How does this evolution impact the lender community? Lenders are used to the posture of setting the rules for business. Instead of consumers conducting business as defined by the lender, lenders have to redefine their business models to meet expectations of consumers and become more reactive. However, they should be careful not to allow time spent on reacting to consumer demands to diminish their ability to move forward in a proactive way. Instead of focusing solely on consumer adoption, financial institutions need to revisit and modernize their business processes. Digital business models enable new, more efficient ways to manage processes and workflows all while saving companies money. To accomplish this, organizations are continuing to incorporate electronic records and signatures as a way to improve customer experience, ensure that the appropriate fields on the application are entered, and increase the speed of the transaction.
One readily available resource that can assist lenders in complying with regulations is the Standards and Procedures for Electronic Records and Signatures (SPeRS). This manual contains a technology-neutral set of guidelines and strategies for industry use in designing and implementing systems for electronic transactions under both federal and state law. These defined procedures can effectively help mortgage companies and lenders navigate the current legal and regulatory landscape related to the use and acceptance of electronic signatures and records.
The mortgage industry should take note of the rapidly emerging, non-traditional financial lending model often referred to as peer-to-peer (P2P) funding or simply Internet finance. Lenders can gather modern-day consumer adoption insights and engagement preferences from this disruptively innovative business concept. The initial focus of P2P lending was to connect an individual borrower with pooled funds from a collective of individual investors for small dollar loans; however, now institutional investors and high-dollar loans are being funding using this method. The Internet finance industry leverages secure technology methods, engages networked consumers and maximizes the value of electronic commerce legal principles. Electronically signed records are at the core of this paradigm, offering an alternative to traditional lending options. It’s not too late—traditional lenders still have an opportunity to adapt their legacy approaches to better address borrower challenges and compete with these future potential marketplace competitors. Adapting or re-inventing legacy mortgage application rituals with the incorporation of advanced functionality will empower a streamlined consumer process, facilitate the detection and correction of errors in documents, improve process transparency, and enable affordable access to credit.
Ultimately, it is time for mortgage professionals to re-think the role of borrowers as consumers in their relationship with their lender. Regardless, if acting as a borrower applying for a mortgage or as a consumer in the outside world, loan applicants embrace the same concerns regarding protecting sensitive data. As high as consumers’ demands are today for trusted digital customer service, your borrowers’ expectations are even greater when it comes to managing their own personal information or the finances of their family. The same technology used for consumers can also be leveraged when interacting with your borrowers – social media, mobile devices, ‘always-on’ self-service engagement. By viewing the lender-borrower relationship as one that involves information consumerism, financial institutions can better increase process transparency and transform the confidence for all involved parties of a trusted, mortgage experience.
About The Author
Jeff Knott, winner of the 2014 Steve Fraser Visionary Award, is 2015 chairman for the Electronic Signature & Record Association (ESRA) and assistant vice president at Equifax. He is a recognized leader in driving business strategies, product innovation and industry adoption of e-signed records. Knott has vast experience guiding cross-functional teams and introducing creative business solutions as well as managing mergers and acquisition transitions. He is known throughout the industry for his contributions in reforming IRS policy to allow the acceptance of electronic signatures on Forms 4506-T. He is an “out-of-the-box” thinker who champions emerging technologies, promotes consumer engagement, advocates change and encourages the partnership between the private sector and government.