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The CFPB Favors eClosing

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TME-DGreenThe Consumer Financial Protection Bureau (CFPB) released “Leveraging Technology to Empower Consumers at Closing” on August 5, 2015. This is an eagerly anticipated report covering the eClosing Pilot project the CFPB conducted with a group of lenders and mortgage technologists during the first four months of this year. (Full disclosure: we participated in the pilot with BECU, our long-time partner and one of the most experienced users of our lending technologies.)

A little background: The CFPB issued a Request for Quotation last April from teams of lenders and technology partners to help them test several hypotheses concerning the paper-based mortgage closing process as it exists today versus the newer, still under-utilized eClosing processes successfully used by some lenders. The CFPB’s hypotheses — that consumers would favor eClosing over paper closing because it would give them a better understanding of the process and a feeling of empowerment, leading to greater satisfaction — all turned out to be true.

We – Accenture Mortgage Cadence and BECU – thought we would make ideal pilot project participants because of our longstanding interest in improving the borrower experience, as well as our more than seven years of history in eClosing mortgage loans. For BECU, eClosing has, since October 2008, been one part of a bigger, overall eMortgage process to make the origination cycle completely paperless, from origination through closing and delivery.

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Improving the borrower experience was one big reason for this initiative; increasing lending efficiency was the other. An efficient mortgage program, after all, is both a profitable and competitive program. Being a pioneer eCloser also provides competitive differentiation. Thousands of BECU members have closed electronically in the last seven years, enjoying the benefits of receiving their closing package days before the closing itself, giving them the opportunity to review the documents before their closing meeting. It also leads to time savings at the closing table. Receiving a copy of their completed closing package on a memory stick is an added welcome bonus, too — more secure than a large file folder, much more accessible, and tremendously space-saving.

It obviously helped that we believed in the CFPB study and the hypotheses it tested, which made us eager to participate. The results, we believed, would also provide hard data to support the benefits of moving beyond traditional processes, pushing consumers and the industry forward.

One important note on eClosing: It does not have to be entirely paperless. The CFPB’s report discusses a hybrid eClosing model that involves both electronic and wet signatures depending on lender capabilities, comfort and recording entity preference and readiness for new technologies.

Why Don’t More Lenders eClose?

We have been closing loans electronically for more than seven years, yet eClosing is still relatively uncommon. One likely reason for this is the hard work required to transition from paper closings. It takes a fair amount of time and a true commitment from the entire organization. Timing is often challenging, too. For example, 2008 marked the beginning of the recession and its aftermath, and nearly every year since has seen new regulations to which lenders must adapt. Lenders have been far too busy to even think about major process changes.

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In addition, refinancing recently captured everyone’s attention, as borrowers scrambled to take advantage of rates not seen since the 1940s. While seven years may seem like a long time for eClose to remain in development, it was far from an easy seven years for the mortgage industry. Another issue holding back eClosing is the persistent belief that mortgages closed electronically aren’t legal, valid, enforceable loans. This is despite the Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transaction Act (UETA), which establish clear legal authority and procedures for electronic signatures. UETA came first in 1999, followed by the ESIGN Act in 2000. Both provide for creating an electronic record with the equivalent enforceability of a mortgage note.

Legal traditions in the mortgage industry are ancient. Yet electronic consent first appeared in mortgage transactions at the dawn of online lending. Electronic signatures for all sorts of financial transactions are so commonplace as to be expected; in fact, being presented with a pen and document is almost a surprise in some situations. It is time, we believe, to make this true at the closing table, too.

Times have changed, yet again, for mortgage lenders. Mortgage workouts are almost a thing of the past. Most refinancing is probably activity seen in the rearview mirror, as well. Big regulatory changes such as ATM/QR and the Mortgage Disclosure Regulation (also known as TRID and KBYO) will be behind us in October. With the market settling into a steady, long-term purchase run estimated to produce consistent annual volume in the $1.1 to $1.4 trillion range, and these big projects checked off the to-do list, will eClosing finally become a top priority for lenders?

We think the answer should be “yes” for all the reasons cited in the CFPB’s report:

>> During the pilot program, consumers who received their closing documents three days before closing perceived greater empowerment through the closing process. They also said they had a better understanding of the closing process. Receiving documents early gave them a chance to read through their closing packages, check for accuracy and ask questions.

It is important to mention that, during the pilot, borrowers received their entire closing package three days prior to closing. This is different from the Mortgage Disclosure Rule (TRID/KBYO) requirement that they receive only their closing disclosure three days ahead of time. There is nothing in the regulation that prohibits providing the entire closing package early. In fact, learnings from this project show borrowers prefer this approach.

>> Pilot program consumers who received their closing documents three days before closing reported shorter closing meetings than those who experienced paper closings, which indicates greater efficiency in the process as well as higher borrower satisfaction.

>> Consumers who were provided access to the CFPB’s educational materials along with their closing packages reported using them and also reported they found them helpful. Mortgage documents can be confusing, especially since most borrowers see them once every five to seven years. When you only see something a few times in your lifetime, every time you see it again is an entirely new experience. Providing reference material along with the closing package is a good idea, and one that borrowers like.

Greater consumer satisfaction, understanding, empowerment and increased efficiency are good reasons to consider eClose, but there’s another reason. A new generation of borrowers is emerging. The Millennial generation, the largest in history, is poised to begin forming households and, thereafter, to become homeowners. The U.S. economy and the mortgage industry have been expecting them to engage for the past several years, and, while it has not happened yet, the Joint Center for Housing Studies of Harvard University predicts that it will, driving annual household formation to above 1.2 million per year between now and 2020. Even with homeownership rates in the low- to mid-60 percent range, that equates to more than 750,000 new homeowners each year.

Millennials have different expectations than their predecessors when it comes to transactions. They grew up online and do not remember a time when there were no smart devices. Paper-based processes, such as those traditionally used in the mortgage industry, are not going to fly with this important group. Millennials have also lived through the housing crisis, watching parents and relatives deal with the aftermath. Consequently, they are going to have a lot of questions about their mortgages. They will research online, they will want to watch their mortgage ‘mature’ throughout its lifecycle, and they will want time to review their closing package before arriving at the closing table. These factors will all push toward eClose adaptation.

Yet eClose is not just for Millennials. Boomers and Gen-Xers fostered the technologies that make electronic mortgages possible. These, too, are the generations that learned to work in paperless formats. Most of these individual do not want to read large stacks of papers, nor do they want to be presented with a closing package, e- or otherwise, moments before they are expected to review and sign them. While Boomers and Gen-Xers will not buy as many houses over their lifetimes as the Millennials, they will remain important borrowers for several more decades, especially the youngest of these cohorts.

What Does It Take to eClose?

The CFPB report provides invaluable information on what it takes to eClose. The lenders and technologists in the pilot program were a mix of seasoned eClose veterans as well as those new to the process.

The report shares their experience preparing for the pilot and highlights three key success factors:

>> Commitment. Transforming an entire operation is a big endeavor. Big projects cost money, take time, and require focus. Those who have made the transition agree it takes the entire organization to make it happen. And it will not happen overnight; it is a months-long or year-long project to design, test and implement for all borrowers who opt in. Some will not, and, for those, paper closing processes must remain in place.

>> Collaboration. There are plenty of moving parts in every manufacturing operation. As with all manufacturing, it takes suppliers and partnerships to produce a finished product. The same is true in mortgage lending – especially with eClosing, since most lenders rely on a partner to close their loans. When working toward eClosing, close collaboration with settlement agents is crucial.

>> Communication. A natural extension of collaboration, regular and ongoing communication with the eClosing team is essential to a program that works. Expanding the definition of “team” is critical. The mortgage team should be joined by settlement agents, Realtors, and other staff members who interact with borrowers as well as others who influence the mortgage process.

The full report can be found at consumerfinance.gov. It makes excellent reading and provides valuable insight into what it takes to make the eClose transition.

When I read the final version, I came away thinking that an eClosing in which borrowers receive their closing package early, report a quicker closing, and feel more empowered, more knowledgeable and generally more satisfied has to be a good thing for the industry. When we’re closing the biggest, most complex transaction most people will ever engage in, and we’re doing it faster and making consumers happier, we’re doing the right thing. There’s no doubt in my mind that eClose is an idea whose time has come. Now lenders have to start thinking about how to make it happen.

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5 Things eLynx Learned From CFPB’s eClosing Pilot

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.

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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…

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>> 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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Can Traditional Mortgage Technology Provider Address “E”?

You Can Download This Entire Article As A PDF HERE

Alan-HarrisThe residential real estate finance industry has struggled with ‘e’ for years. Efforts to move from paper introduced microfilm, microfiche, imaging, Optical Character Recognition, (OCR) and scanning. All come with their own cost, infrastructure, deployment, storage, retrieval and indexing headaches. This was further complicated with the introduction of an ‘e’ or digital signature component. Everyone understood the benefits of ‘e’, but this type of process change was going to require resource and time investments allocated at a cost to more immediate wants and needs. For the interim,‘e’ would wait.

When the E-Sign Act was signed by President Clinton in 2000, the real estate industry didn’t take much notice. There really wasn’t any reason to modify existing processes and frankly mainstream technology wasn’t available to institute ‘e’ save for the memorialization of a signature in an e-mail. The industry has danced with some ‘e’ success, e-disclosures (boiled down pdf documents sent through e-mail, i.e. ‘paperless’), evolving to attestation of those documents through a signing room where the recipient stumbles through an authentication process, to ‘sign’ the documents, which are then delivered back to a ‘eVault’ for storage, which can be retrieved as .pdf documents.

There has been success in delivering eNotes electronically, with little enthusiasm. To date 321,559 e-Notes have been registered and delivered electronically to the investor. The adoption of ‘e’ has been lethargic at best, but in reality pathetic. ‘e’ will shortly become the required standard and best practice, because drivers are in place to force the process change. They may look like the same old drivers the mortgage industry has been marching to over the years. But the reasons and structure are changed.

There are three drivers, which will force the industry to move to a fully enabled ‘e’ transactions, from the purchase of a home to the delivery of the collateral to the secondary market. Yes, I said Home Purchase to Delivery. What does purchasing a home have to do with collateral delivery? Financing. It is the contention of the author that ‘e’ starts at the beginning and the beginning is different for purchase and refinance transactions.

>> Fraud – Fraud breeds regulation. Each iteration of regulation begets more data to combat fraud. These two components ultimately force the industry to adapt rigor which guarantees transactions, ‘are what they are’. The industry needs to provide sustainable, accurate and verifiable data elements, end to end, from the inception of the transaction; regardless where that is, purchase or refinance to delivery.

>> Audience – As we move from the Greatest Generation through the Baby Boomers. The X and Y Gens occupy the market place, they are tech centric and their culture is to obsolete ideas over and over.

>> Technology – Those partners who deliver the most user friendly, least obtrusive, e-solution will gain the most acceptance, faster.

Looking at each of these in more detail.

Fraud

Data is the driver behind each real estate finance transaction. Looking at a purchase transaction. Nearly 70% of the data elements populated on the Universial Residential Loan Application (Form 1003) are collected either when the property is listed for sale or when the purchase and sales agreement is executed. In a purchase transaction the data between those data sources need to be combined and transferred to the lenders origination system electronically. Obviously a refinance tranasaction is working with a more abbreviated data set, but the utility and process are the same.

The real estate finance industry has compiled a comprehensive data dictionary with the development and revision of the MISMO data set. This standard is the vehicle to share and transfer common data elements through out the loan process. Unfortunately the standardization of data elements and attributes is not currently available from the multitude of listing services used by the real estate industry. In a perfect world the data elements in a purchase transaction would be directed from the Realtor® to the lender, eliminating rekeying of the data into a website or the loan origination system. The present process of delivering a paper copy, minus the listing data to the lender, generates friction in the transaction and potentially opens a window for fraud. Everyone acknowledges best practice moving data electronically is faster, more efficent and elements errors.

Traditional data delivery does not look beyond their own vertical silo. The real estate finance and real estate industries understand the benefits of communication and collaboration to close a transaction. However, they are reading from two different books. Both of these industries continue down the same process happy path that has worked the last forty plus years. This is expensive, inefficent, inaccurate and easy to fraud. The fork in the road of traditional data aggregation and management is coming, and while the players may not surprise you, they likely won’t be your traditional technology solution providers.

Touch points need to be reduced to improve data integrity, speed up delivery and drive down the cost of the process. In essence much of the groundwork is done, the data set needs to be more robust and delivered in a standard format (MISMO), providing accurate, verifiable and auditable data file.

This data set follows the life cycle of the loan rendering, (view) when needed, in the appropriate document. Once the data is compiled it can be parsed to render the appropriate data fields for the particular document in a browser. Indeed the basic premise of the SMART doc® is data that appears in a browser as it would if you were completing a paper document. Changes to the data are date & time stamped, tracked and logged in a history file. As the transaction moves through the process certain fields become locked, and once the loan is eSigned and closed the transaction is then securely locked down and wrapped with a tamper evident seal to prevent further changes.

Funding generates the data file necessary to deliver the collateral to the investor, at a minimum the e-Note. Since nothing is printed to paper it can’t be altered or lost. Based on the users credentials anyone who is authorized to view any part of the transaction renders the document in a secure browser.

Audience

X + Y = ‘e’

The above equation can be confusing; I struggled with math. I attribute part of the problem to the guy who sat next to me in math class during high school. Had he applied himself more I would have done better. However this isn’t about math.

The audience is all ready engaged and will require the shortest learning curve, while being the quickest to adapt. The X and Y generation are the people that will to force the ‘e’ solution. They are tech savay, multitask endlessly, pay their bills electronically, have documents stored in the cloud and don’t do paper. The current generation is of age and wants stuff pushed to their Smartphone or tablet. They will execute their loan documents at 11:30 pm on Sunday. ‘e’ – Really.

Audience and Fraud are the two largest drivers that will compel the industry to move to ‘e’ quickly. The provider who implements smoothest ride to ‘e’ will win. Technology is the vehicle which enables lenders to remain competitive and differeniate from their peers. Lenders will naturally gravitate to the providers making it easiest to do business for them and their borrowers. Those providers who deliver the best solution; stable, secure and easy will be in a strong position when it comes to market share.

Technology

The mortgage and mortgage technology industry has never been willing to truly address the process and technology investment to fully move to ‘e’. There have been gallant attempts by various players to provide a solution, but when the rubber meets the road; roadblocks allowed for a minimalist solution. Counties won’t accept electronic documents, lack of an e-notary, non-acceptance by investors, HUD or the IRS, security; cost to implement, the list goes on. The roadblocks are down, all the reasons the industry has had about investing in ‘e’ are gone. E-Sign Act is law, 4506T has been accepted, lenders accept it, the GSE’s accept it, 1,096 counties currently accept ‘e’ representing over 65% of total transactions, e-notary is live and supported. Technology exists today to support all, but it is not convenient, efficient or friendly.

The pieces are in place for an end to end ‘e’ delivery. New solutions that tightly integrate process provides low hanging fruit for those companies that recognize opportunity. It is not inconceiveable those solutions can be delivered from technologists not in or fringe players in the industry today. These companies are not hampered with, ‘what is, or what was’, engrained process. They look through the glass with the design to introduce a totally new, comfortable, friendly experience. It is easy to imagine and not difficult to implement. Efficient data aggregators, outside of the traditional industry will recognize the opportunity and capitalize on it.

Nontraditional technology vendors have a clean slate on which to start. They are not saddled with legacy baggage. Regardless of the industry they invent, or recreate, they have the culture to obsolete existing ideas quickly. They have shown the willingness to spend big money to enhance earnings and market share. An ‘e’ document and digital signing offering, with high transaction volume and steady reoccurring revenue is attractive to any company that is willing to buy the ticket and take the ride.

The prospect of companies more effiecient in data aggregation, storage and mining, which already have tremendous stores of personal and property information moving into an ‘e’ vertical integrated with a lender shouldn’t be discounted. There isn’t any need to develop an application to manage loan origination. Data feeds throughout the process could interface with many existing origination systems real time. The complexity that state, federal and investor regulations bring as it applies to document availability, validating calculations, notification and presentment, can be solved easily with the acquisition of a document services company.

All of the roadblocks to a succesful ‘e’ process have been removed, with the exception of a well defined end to end solution. The solution needs to be a seamless; not cobbled together with disparate technologies, (loan origination system, document service, notary, title & closing agent system). It needs to be complete, functional, conveinent, user friendly.

Introduction of technology which provides a well choreagraphed, secure, easy to use solution for both the lender and borrower is the last barrier to gaining acceptance, thereby distinquishing lenders above others and establishing that competitive edge. When these standards are met acceptance is broader and confidence in the process is stronger. The question is will the road be paved by the existing mortgage technology providers or will they become speed bumps, as other non traditional providers develop a better solution.

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Simplifying The Closing Process

You Can Download This Entire Article As A PDF HERE

TME-Alec-CheungIn April, the Consumer Financial Protection Bureau (CFPB) released a report titled Mortgage Closings Today that summarizes the key challenges generating consumer frustration around the mortgage closing process. Their assessment is based on data collection efforts that included reviews of consumer complaints, analysis of closing packages, industry interviews, an RFI calling for consumer and industry comment, and more. The purpose of this analysis was to shape their approach to achieving their long-term vision of a mortgage closing in which the consumer is “an empowered, knowledgeable homebuyer experiencing a more efficient, consumer-friendly process.” The CFPB’s resulting view is that electronic closings (eClosings) combined with the reduction and simplification of the documents in a closing package is how they can best achieve this vision, and I believe this approach is right on target.

To add further to their perspective, I thought it would be interesting to look more closely at best practice methodologies in customer experience design and management to see what guidance they could offer in the re-thinking of mortgage closings. Having spent over a decade working for a customer service outsourcer, I know that the field of customer experience management (CEM) has some very well-developed practices. One newer reference that I particularly like is The Ten Principles Behind Great Customer Experiences by Matt Watkinson. Watkinson recently received Management Book of the Year accolades for 2014 by the UK’s Chartered Management Institute. Of the ten principles he espouses, I found five that are easily relevant to the design of a more consumer friendly mortgage closing.

Satisfy Customer’s Higher Objectives

The highest objective in getting a mortgage is the actual purchase of the home – the acquiring of that proverbial American Dream. That’s why those in our industry fixate so intently on on-time closings. Financing and move dates have been carefully lined up so that buyer and seller can respectively turn over the keys and move in and out in sync. Anything that delays this carefully orchestrated timing will most certainly leave the consumer unhappy. The use of technology to reduce errors or discrepancies and simplify the signing of documents helps minimize this risk. Unexpected closing delays are most often caused by last minute corrections that require a restatement of all the closing paperwork. The CFPB’s new rule requiring lenders to provide consumers with closing documents three days in advance is intended to give consumers more time to review documents, partly so that errors and discrepancies can be caught. But the rule has the potential to also hurt consumers. Even if errors are caught before closing, if it’s within three days and the errors are beyond tolerance ranges, the close date must be re-scheduled.

There are other equally important objectives to a mortgage closing that consumers often don’t fully appreciate, either because they don’t sufficiently understand the financial implications of committing to a mortgage, or because they are rushed so fast through the paperwork that they don’t have time to contemplate their actions. Here is where eClosing technologies alone are not enough. To truly enhance the consumer’s understanding and empowerment, closing documents need to be simplified and reduced in number. The new Loan Estimate and Closing Disclosure are monumental first steps in this direction. I am hopeful (and eager to see) that these important forms will do a better job of helping consumers understand the details of their mortgage and what they are financially committing to, but the effort can’t stop there. Even though a majority of the closing documents are owned or regulated by other stakeholders, the CFPB has to continue taking a leading role in reshaping the format and nature of closing documents.

Leave Nothing To Chance

A well-designed customer experience takes into account every possible detail from beginning to end. As Watkinson notes, “We care about details, because they show that the business cares about us.” In fact, it’s the attention to detail that often makes the difference between an acceptable and superb experience. The CFPB has described some of the measures it thinks would improve consumer understanding, empowerment and efficiency at closings. These include ideas such as prescribing a specific order in which documents should be viewed, providing explanatory information up front to describe the meaning and importance of the documents in the closing package, and online access to educational resources if they have questions about terms or terminology. A closing process designed from the consumer’s point of reference, and with attention to every detail will create a much more understandable and positive closing experience.

Make It Effortless

Any time you can make things simpler, more convenient or faster, customers are likely to be happy. In the world of customer service and support, the latest research suggest that reducing the amount of effort a customer has to make in order to resolve problems is a much stronger driver of long-term customer loyalty than the conventional wisdom of exceeding customer expectations or “delighting” customers through above-board service. This simple insight has profound implications in the world of service and applies equally well to customer experience design. Obtaining a mortgage is not something consumers should take lightly. They certainly SHOULD put forth effort to review the terms and obligations of the mortgage, to understand what title insurance is and what it does and doesn’t protect, to rationally assess their own financial ability to repay the mortgage, and more. There are, however, ways to reduce some of the process effort so that closings are easier. Electronic signing is one such example. A “click-to-sign” signature process helps complete documents quickly and easily. So does the use of a “Next” button to move the consumer through documents efficiently, stopping at all areas that require signature or initials. Some consumers may prefer not to read large volumes of documents electronically. Providing an easy-to-find print button would be a welcome convenience.

Make It Stress-Free

The CFPB reports hearing from consumers who say they “often felt pressured to sign documents during the allotted time in order to avoid risking delays or even losing the house.” Furthermore, the CFPB found that “the timing of delivery was the most commonly cited challenge… appearing in 43 percent of [consumer] responses.” For this reason, the sending of documents to consumers in advance is one of the most important improvements the CFPB believes it can make. This is what drove the CFPB to hold firm with their requirement for lenders to provide borrowers with the new Closing Disclosure form at least three days prior to closing. However, we have to remember that having additional time is only one aspect of reducing stress. Just because consumers have more time to read the documents doesn’t mean they will understand them any better. This is why form and document re-design is needed. At a minimum, we have to look at ways to provide consumers with access to expert resources or information when they need it. To this end, Watkinson describes several techniques that can be used to reduce stress, including:

>> Considering the consumer’s level of competence – Consumers have different levels of comfort and familiarity with financial terms and legal language. Where possible, easy access to definitions or additional resources should be provided.

>> Clarifying the reason for the task – Consumers often don’t understand the purpose of many of the documents in a closing. Not knowing what you are signing certainly creates additional stress. Providing simple and clear explanations of what each document is and why it is important can help alleviate the consumer’s concern. Typically, the settlement agent is the one providing these explanations. If consumers are instead reading documents on their own, a “read this first” reference guide could be quite helpful.

>> Providing responsive feedback – Not knowing how long a process will take or what comes next can be unsettling for many. This kind of stress can be alleviated by providing a visual indication of progress made. For example, each time a document is completed, a check mark can be displayed along with a countdown of how many additional documents remain until completion.

Set and Meet Expectations

Notwithstanding the hyperactive refinancing market of recent years, where some consumers refinanced mortgages multiple times within a few years, most homebuyers go through a mortgage closing only a handful of times in their lives. It’s therefore rather difficult to know or remember what to expect in the process, especially for first-time buyers. Setting expectations up front about what the consumer is going to go through during closing, and then meeting those expectations, will go a long way in creating a positive closing experience. In an eClosing, this can be done by providing an overview document which is presented to the consumer first, before moving ahead with the actual review and signature of documents. The overview document should explain, for example, what happens in the closing process, the kind of documents the consumer will be reviewing, where to go for help, and more.

* * *

This is an exciting time for those of us in the field of paperless or electronic workflows. Thanks to a healthy push from the CFPB, the vision of a complete eMortgage, which initially formed many years ago, but then stalled due in no small part to the financial meltdown, is likely to get back on track. All of us – vendors and lenders, alike – should look to the principles of great customer experience design to help make us as successful as possible.

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E-Closings Go Mainstream

You Can Download This Entire Article As A PDF HERE

“In an electronic age, mortgage closings stand out as particularly cumbersome transactions. Come closing day, hundreds of pages of paper land in a thump before the borrower, who must then physically sign and initial them in dozens of places.

“While the technology for paperless closings has long been available, few lenders have adopted it. But they now have new incentives to do so, which will mean a faster, more-streamlined process for borrowers in the next few years.”

I’ll bet that seems like old hat to most of you reading this. Myself and others have written a myriad of articles throughout the years with the same exact sales pitch. So, what makes those first two paragraphs so significant?

They were written by Lisa Prevost of the New York Times. Yes, the New York Times had an article promoting electronic closings. My point is that when the mainstream media takes notice and starts writing about and promoting electronic closings, you know that things are changing.

Does this mean that every lender is going to automatically jump on the e-closing bandwagon? Of course not, but e-closings are presented like a forgone conclusion in the article. So, even the mainstream media is getting behind electronic closings. That’s significant folks.

In the New York Times article, Kelly Purcell, an executive vice president of eSignSystems, a division of the Wave Systems Corporation, put e-closing adoption this way:

“The industry is now talking about the 20-minute close. With e-mortgages, borrowers will be able to review all their documents on a secure site, then sign all but the one or two documents that need to be notarized. Then, instead of spending two hours at the closing, you go in and in 20 minutes, boom, you’re done.”

I can’t agree more with Purcell. It’s so easy, and it makes so much sense. Surely if mainstream media outlets like the New York Times have finally started extolling the virtues of e-closings, lenders should at least be paying closer attention.

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The Best Way To Ensure Compliance

The mortgage industry faces a liability that threatens both the accuracy of our public record and our ability to comply with new federal regulations, according to Myron Finley, Chief Legal Officer for Nationwide Title Clearing and co-chair of the Business Processes and Procedures Committee for the Property Records Industry Association (PRIA). Finley made his comments at PRIA’s Winter Symposium held earlier this year.

“A significant amount of the liability in the industry exists in the gap between the closing of the loan and recording of the documents,” said Finley. “That’s why e-recording is so important in our industry. In our increasingly digital society, an entirely paperless process is the next logical step in ensuring accuracy, as well as compliance.”

According to Finley, a number of sessions at the recent symposium further solidified the importance of adapting industry standards to fit the new compliance landscape, in general, and e-recording, in particular. E-recording differs from traditional recording methods because the original documents never leave one’s possession—they are scanned and submitted within minutes, and are then returned electronically immediately after recording, making processing land records and property documents simple, fast and secure. Documents can be submitted 24/7, and the process is cost-effective, reducing paperwork.

PRIA, an organization which develops and promotes national standards and practices within the land records industry, holds annual conferences with a goal of providing a venue for industry officials to discuss how to meet local needs with national knowledge.

“Conferences such as the PRIA Symposium are the perfect forums in which proactive and professional leaders can educate themselves on issues that are impacting our industry,” said John Hillman, Nationwide Title Clearing CEO. “PRIA sets standards, and that is, to a large measure, what NTC is all about; adopting practices that establish uniformity will help to protect our nation’s land records, the mortgage industry, and homeowners.”

Surely this is a message that everyone can understand and get behind.

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A Huge FHA Advance

We’ve reported on the FHA accepting electronic signatures. This has been seen by many as a significant tipping point in the adoption of e-signatures and e-closings. Now there’s evidence to prove this hypothesis. Here’s the scoop on how this FHA advance is already reshaping the industry:

DocMagic, Inc., a provider of fully-compliant loan document preparation, compliance, eSign and eDelivery solutions for the mortgage industry, announced today that its eSign compliant loan documents were chosen by Stewart Title and Mountain America Credit Union to complete the industry’s first ever eClosing of an FHA loan, in conjunction with Stewart’s eClosingRoom. DocMagic is the exclusive licensee of patent rights that enable its eSign technology.

FHA’s recent announcement supports the ability to eSign all documents with the exception of the note. The announcement states that the agency will begin accepting electronically signed notes by the end of the year.

“eSign has never just been about the upfront disclosures,” said Tim Anderson, director of eServices for DocMagic. “That’s where we started and we’ve done that for a long time now. Our ability to use this technology to help lenders realize a fully paperless mortgage is the real story here. There really is no excuse now not to provide this service to borrowers, who have been demanding it for some time.”

Anderson added that better compliance risk management is an additional benefit of paperless lending. “The ability to provide electronic proof as evidence of compliance will be critical for lenders in the future,” Anderson said. “When documents remain electronic, it’s easier to create and maintain an audit trail that can support the lender during a bank audit.”

“Being the first lender in the country to conduct a live eClosing of an FHA loan and doing it with Stewart’s eClosingRoom platform powered by SureClose and DocMagic’s eSign enabled compliant loan documents is truly an exciting event for us,” said Amy Moser, Vice president and mortgage services manager for Utah-based Mountain America Credit Union. “eClosing gives us a tremendous competitive advantage because it enables us to provide superior customer service to credit union members who demand an efficient loan experience.”

Nancy Pratt, director of eStrategy for PropertyInfo, the technology division for Stewart Title, added, “Our eClosingRoom platform enables lenders like Mountain America and title agencies not only to to eSign, but also to eNotarize and eRecord the closing package in the title office, delivering a fully paperless eClosing experience for all participants. Stewart had its first electronic closing in May of 2005. Having the first FHA loan electronically closed in our system truly is a milestone for the mortgage industry.”

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