Earlier this year, an unprecedented research effort was conducted in the mortgage industry. A government agency, the CFPB, worked with lenders and vendors to gather real world data from actual loan closings in order to determine how technology could be used to improve eClosings for the benefit of consumers. Today, August 5, 2015, the CFPB issues its findings from this pilot. As one of only five vendors selected to participate in the CFPB’s eClosing Pilot, eLynx had a unique opportunity to demonstrate how our Expedite Inbox solution would be applied to the delivery and signature of closing documents to borrowers.
Our lender partners in the pilot were Universal American Mortgage Company (a division of Lennar Homes) and Flagstar Bank. The eClosing pilot provided us all with a good view into how eClosings could be conducted in the future and what is required to conduct eClosings at scale. We also gained early experience with the advance delivery of closing documents to consumers under the TILA-RESPA Integrated Disclosures (TRID) rule.
The following are some of the takeaways and things we learned from our participation in the pilot project:
>> eClosings at scale can be successfully performed and lead to a positive experience for consumers and closing agents, one that is smooth and pleasant. For purposes of the pilot, we worked with our lenders to ensure that certain criteria were met for pilot loans. When the process was properly aligned with the technology capabilities, closings were executed quite easily. This showed that…
>> Process, not technology, is the critical driver for a smooth eClosing. The technology behind eSignatures is neither new nor difficult, and the legal standing is well established. However, the application of the technology to the closing process is complex because of the multiple parties involved, the need for checks and re-checks, and the variety of forms that require signature. In fact, stakeholder involvement was challenging because…
>> Many participants and stakeholders still aren’t fully prepared to accept eSignatures. Investor acceptance of eSignatures and the need for notarization remain two of the toughest hurdles. To achieve wider adoption, more must be done to figure out how eNotarization will work and to encourage private investors and GSEs alike to fully accept eSignatures in loan documents. Notes and deeds, two of the most critical loan documents, were wet signed because of these issues, leading to a hybrid approach.
>> A hybrid approach may seem like a viable means to make incremental progress toward eClosing, but it has drawbacks as well as benefits. While effective for this project, there remain several challenges in using the dual approach on a large scale. Close configuration of technology to accommodate the twin processes is required to make this efficient at scale.
>> The closing agent plays a critical role in eClosings, and that role will only increase in importance as eClosings develop. Even if consumers review and “sign” some documents in advance, the closing ceremony is still a critical part of the mortgage process. It may be shorter, which most parties will appreciate, but it is no less important. As such, the design of eClosings should incorporate input from agents who bring valuable perspective on what processes will and will not work. Close collaboration in design and execution is critical to making eClosings successful for the consumer in the long run.
Have you experienced an eClose as a lender or consumer? Tell us what you think about the process via email to ACheung@eLynx.com.
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