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New Acquisition Invites Future Innovation

By now the news has hit that DocMagic has acquired eSignSystems. Over the course of the last 12 to 18 months we have seen a lot of mortgage technology firms get acquired and that trend will likely continue. However, in my mind, this acquisition stands out and is worthy of special note. Here’s why I say that:

DocMagic is known to be a market leader in terms of overall market share when in comes to the mortgage document creation business. In this case, eSignSystems was looking for a more strategic parent. Industry events such as the I.R.S. accepting e-signatures, FHA opening its doors to e-mortgages, The CFPB’s new disclosure rule set to hit the mortgage industry in August of next year and the new CFPB e-closing pilot, have really made the demand to migrate to full electronic processes very apparent.

With all of these industry events happening within the span of just a year, the marriage of DocMagic and eSignSystems really makes sense. DocMagic is a leader in providing an enterprise-level, Software as a Service document creation and fulfillment service. eSignSystems on the other hand has been offering eSigning, eDelivery, and eVaulting technology on-premise to technology providers and lenders since 1999. As a result, the combination of these two companies will enable these two companies to offer industry participants a more turnkey, end-to-end electronic process however they want it, either on-premise installed or as a Web-based solution.

Why is this significant? First, because you now have the combined brain-trust of both executive teams that have been heavily involved in and have been actively pushing electronic processes for almost 20 years. It’s important to note that eSignSystems will continue to operate as a standalone business and the entire executive team is staying in place. Specifically, Kelly Purcell remains EVP of sales and marketing, Jonathan Kearns stays SVP of technology solutions, Brian Pannell continues as VP of client services, etc. In fact, the development team at eSignSystems is expected to grow considerably.

“The acquisition of eSignSystems by DocMagic is a marriage of extraordinary talented and visionary people with incredible SaaS and on-premise products and services,” said Dominic Iannitti, President and CEO of DocMagic. “The management team at eSignSystems has done an exceptional job bringing innovative solutions to the forefront of e-mortgage adoption, and their contribution to the eMortgage revolution cannot be overstated. By combining the best of eSignSystems on-premise software with DocMagic’s SaaS solutions, eSignature patent, compliance and enterprise infrastructure, there is no question that this acquisition was meant to be. Simply put, we are just better together.”

As a result, those lenders that want to turn on eSigning, eDelivery and eVaulting like a switch in an Internet-based environment can now do just that. On the other side of the coin, those lenders that want an installed on- premise e-process can do that, as well.

Kelly Purcell described the industry advantages of the acquisition this way, “Enabling electronic disclosures was great as a starting point, but now because of several crucial industry events, you can implement the full e-process, including closing. The combination of DocMagic and eSignSystems gives our customers and industry stakeholders additional choices. To use a sports metaphor, we’re no longer playing a two-inning game, we’re playing the full nine innings.”

What are the broader industry implications of this acquisition? Purcell answered, “As the migration away from paper to electronic processes becomes more pronounced this acquisition is poised to help our customers and the lending community embrace true innovation. This represents a big step forward in making electronic solutions available to all technology providers and lenders, regardless of size, to realize better efficiency, greater compliance and an improved borrower process all at the same time. This acquisition makes that possible.”

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Innovation Simplified: The Truth About Return On Investment

*The Truth About Return On Investment*
**By Kelly Purcell**

***Lenders too often associate return on investment with hard numbers. ROI is about both hard numbers and intangibles. It’s important to also note that lenders don’t always know how much a given process costs. There’s just not good data. And if you don’t know how much something costs how can you measure how much you’d save by automating?

****Lenders would be well served to take a closer look at their own operation first. Why? There are so many pieces to the mortgage process and they’re all so disjointed it’s hard to put a cost on any one process. That all changes in an automated world. It’s easier to associate a cost with an electronic process because you can more easily track an electronic process from start to finish. How so? I’ll tell you.

****For example, disclosures in the paper world have been mailed via regular mail, priority mail, courier, fax, etc., which gives you four different points of origin for that transaction. You also don’t have a way to track when the document was created before it was sent to one of these four different outputs in a paper world. How do you quantify cost there? In an electronic process you know down to the second about when the disclosure package was sent, received and signed. That is impossible to track in a paper world.

****Not to mention, there are also compliance implications. How do you factor in potential regulation violations in a paper world? That’s an unknown cost. In an automated process there is less risk of having financial fallout. How do you factor that into your ROI? That’s priceless. Intangibles associated with ROI are equally as important as the hard cost savings analysis that most lenders do.

****Another example of an intangible ROI that lenders may not think of is the competitive gain achieved by automating. You can capture more business and reinforce the strength of your brand with automation. You become a trusted source for the borrower. All it takes is one class action lawsuit to ruin your brand. Everyone’s fear is to be on the front page of the Wall Street Journal being called predatory. That’s what CEOs lose sleep over night after night.

****So, where are lenders in understanding the value of both tangible and intangible ROI? There is certainly more awareness. However, it is harder to articulate the intangible ROI to a board or to investors when trying to justify the technology buy. It’s harder to convince a board that they should buy something based on potential fallout.

****But think about it, there is a lot of cost associated with a loan that is un-saleable.  The future cost of noncompliance has to be a part of the technology buying process, it just does. We’re seeing more interest in this area but the need to document intangible ROI is still not something seen in many technology proposals. Too often it’s not in the final analysis in front of the deciding committee. People are talking about it but we’re not seeing it in many RFPs or RFIs.

****Lenders may ask: What future risk is offset by this technology? Those facts are out there and they are real but they are not being used to make technology buying decisions. What the mortgage industry needs is to understand the value of technology to drive measurable change. I joined PROGRESS in Lending Association to promote this type of thinking and analysis around the purchase of technology.  Stay tuned next week for an in-depth case study around ROI.

Magazine Cover Story

*Get A New Start*

**Executive Interview**

***It seems like every day brings more bad news for the mortgage industry. What bad news? Originations are on the decline. Foreclosures are on the rise. More regulation is lurking around every corner. Investor confidence has not returned. Housing prices haven’t bottomed. Unemployment remains above 8.5%. Should I go on?

****When will we start seeing some good news? There are no immediate fixes for any of these problems and the host of other problems the industry faces that were not listed. However, in the midst of all this gloom and doom, Kelly Purcell of eSignSystems has always been an innovator who sees opportunity, not adversity. Sometimes you just have to hit bottom before you can see the best way forward. Kelly is very positive about the future of mortgage lending.

****Why does she feel this way? Coming back from the brink and becoming successful takes a lot of hard work to accomplish. Personally, Kelly started an e-signing and e-vaulting company back in the 1990s when there was no market for this technology at all. So, she had to be a constant evangelizer. The bottom line is that she’s a hard worker and she thinks most mortgage professionals are as well. She talks candidly about her own experience and where she sees the mortgage market going from here.

****Q: When is the mortgage space going to see a new beginning?

****KELLY PURCELL: I believe that we are on the forefront. The shakeout from the crisis is pretty much stabilized as far as who the players are going to be in the new mortgage arena. Those that have weathered the storm the past few years are obviously committed to the mortgage industry. The storm cloud hovering still is what will happen to Fannie Mae and Freddie Mac. Speculation varies—but in the interim lenders are dealing with the limitations of the secondary market and adjusting their business accordingly. I see everyday lenders wanting to think differently and making changes. So, I am optimistic that the mortgage industry is already in its new beginning. The cleanup is underway and it will take some more time, but the housing industry is too critical to our economy to not give it the attention and resources to make it better.

****Q: But with origination volume predicted to decline by as much as 40% this year, how does the mortgage industry reinvent itself in such a challenging market?

****KELLY PURCELL: The good news about origination volume being down is that it allows mortgage participants to play catch up. With a lot of the regulatory changes coming into effect in 2011, most companies have been scrambling to buy or build solutions to help meet those requirements. Historically speaking, most technology changes occur in a down market. When companies are at peak volumes it is hard to implement change. The challenge now is that even though volumes are down, resources have been cut quite drastically in the past few years so finding the “talent” to reinvent will be difficult. I think that is part of what is driving the utilization of the SaaS model in all areas of the mortgage process, namely the lack of resources within a company. That is why our SaaS partners are so important as they offer e-signatures and e-vaulting embedded within their products and services creating many options for lenders today. Companies will be very focused on the ROI of technology investments and how it can improve their competitive advantage.

****Q: Also on the down side, foreclosures hit a record high last year and that number is expected to increase more this year. As someone who is fortunate enough to serve both lenders and servicers, what do servicers do to reinvent themselves this year to deal with all these foreclosures?

****KELLY PURCELL: Yes, we participate in all market segments. Servicers have been challenged over the last 24 months in particular and continue to be challenged. Having said that, the technology providers that service this segment have been working very diligently to improve their products and services not only on the foreclosure process, but also the modification process, as well. An example of that is DRI, who won an award for their contribution to improving this market segment. What we’ve seen as a result of these market conditions is that servicers are reaching out. They want technology solutions. Most servicers are a part of a larger company or entity and those larger companies realize that technology dollars need to be allocated to servicing. To fully address future issues, everyone now understands the impact of efficient servicing or the lack thereof. Who knows where the housing recovery would be today if response times and programs had been different. I believe there has been a real window of opportunity for technology providers and many of them have stepped up to the plate. E-signatures  have made a significant positive impact.

****Q: One issue that we continue to hear from lenders and servicers is that regulatory uncertainty is stalling innovation. Are people more or less willing to innovate given this uncertainty?

****KELLY PURCELL: I actually have seen the opposite. I see the technology providers working day in and out to make the engineering changes necessary to provide products and services to help lenders meet those regulatory changes. They want more information as to how technology is going to solve a particular regulatory issue. We have resources to stay on top of all the regulation out there and we are actually providing guidance around regulatory compliance to our customers. We feel comfortable in this area and are glad to be viewed as an additional resource to our customers/partners.

****Q: One positive development is that recent research shows that technology spending will be up by 15% this year as compared to last year. Is that good news or was technology spending just abysmal last year?

****KELLY PURCELL: Many sources have indicated that tech spending will be up this year. I understand that companies will spend $600 billion dollars by 2012 on mobile payment applications alone. Now that is a number to notice. There continues to be focus on technology. Organizations continue to spend, just more carefully. Many technologies are very mature and proven. I don’t see a lot of new technology surfacing, more just improvements of existing technology. I see mobile applications as an area of growth. I also see more interest in secure authentication of both the data and the individual and of course e-signatures.

****Q: So, how would you define the state of innovation? Is it alive and well or are mortgage companies just getting up to speed?

****KELLY PURCELL: Most companies are still playing catch up with the fallout and new regulations that have taken place over the last couple of years. Technology is approached from the point of view that I as a mortgage professional want to automate to make this one process better. I think technology usage today is more about process improvement. Do you call that innovation? I’m not really sure, but there is a more defined approach to solving process problems with technology. This approach by market participants is encouraging to me, but it isn’t necessarily the earth-shattering innovation that comes to mind when thinking of huge technology advancements.

****Q: You have been an innovator in the area of e-signing, having brought to market a solution in the 1990s, long before there was a market for this technology. How has the industry’s perception of e-signing changed over the years?

****KELLY PURCELL: The numbers speak for themselves. Adoption continues to grow. If you look at the increased number of companies producing e-disclosures from three years ago to today it is pretty impressive. Not only is that area growing, but now companies are realizing they can spill the e-signature process over into other parts of their business, to include contracts, HR documents and virtually any document that needs a signature. Most  e-signatures are being done at the point-of-sale today. On the closing side you can see the MERS numbers continuing to increase as well, though. When the investors have an easier process for the seller/servicer to get “approved” to sell e-notes—then we will really see traction on the closing side. In addition there are a couple of pioneers in the warehouse lending community that will help with liquidity in the sale of e-notes. It is all finally coming together. Our company continues to support technology platforms and lenders in preparing their company with a complete product roadmap of products to get them from e-disclosures to a full e-mortgage and everything else in between. It is very exciting.

****Q: You’re not just an e-signing vendor, you also offer e-vaulting. How has the industry’s perception of e-vaulting changed over the years?

****KELLY PURCELL: E-vaulting is a specific offering. I believe that there will be a handful of organizations that will commit and be successful as a long-term e-vault.  However, even if you touch an e-note for 30 seconds, 30 minutes or 30 years, a lender does need access to an e-vault in the closing process. This is where there is some controversy in the industry as to what that means. The term is thrown out there with a lot of different definitions. An e-vault should provide to a lend,r at a minimum, the ability to e-sign a SMART Doc, audits around all processes and of course the whole integration with the MERS eRegistry as the loan moves through its lifecycle. Then there is the e-delivery piece and then the final resting place of the e-note – in an e-vault. The good news is that you can perform all of these functions with existing platforms that are out there today. I am hoping to see more direction from non GSE investors as it pertains to the purchase of e-mortgages this year.

****Q: So, what’s ahead in 2011 for eSignSystems?

****KELLY PURCELL: In 2011 we have enhanced several of our modules. We are emphasizing smart reporting and putting business intelligence around our e-signature solutions. That’s unique because I don’t think our competitors offer that type of intelligence around e-signature and e-vault usage. We continue to be committed to the financial services marketplace and the specifics as it relates to the mortgage industry. As we talk about things like business intelligence, we think it’s critical that companies can take the data and document information and track trends, etc. How do you provide a more transparent process if you can’t track every part of your workflow? The answer is that you can’t. Lenders want and need that control in every aspect of their business, including their usage of e-signatures.

****Q: What would your closing thoughts be about how the mortgage industry can recover from this meltdown and be better for it in the end?

****KELLY PURCELL: To recover is to rehabilitate and that is what the industry has been doing the past 24 months. The mortgage industry is looked upon as a major barometer of the U.S. economy. Everyone takes that very seriously. The mortgage industry has been vilified of late, but I believe that the industry can and will play an important role in bringing our country back from the brink of disaster. However, this will take continued commitment from everyone in the mortgage space to continue to innovate and improve the quality and delivery of a sound asset to the investment community. We can and will rise to the challenge.

****INDUSTRY PREDICTIONS:

****Kelly Purcell Thinks:

****1. Online authentication and single sign on will be a top priority for companies this year.

****2. Regulatory compliance concern will continue to drive technology adoption.

****3. In particular, e-signature adoption will grow conservatively by 20% this year.

 

****4. Mobile applications will drive the banking industry and will spill over to the mortgage industry.

****ABOUT KELLY PURCELL: Kelly is Executive Vice President, Global Sales and Marketing for eSignSystems, a division of Wave Systems Corp. eSignSystems is a provider of e-signature and e-vaulting solutions. She was co-founder of eSignSystems and has over 25 years of mortgage and technology experience. Kelly is recognized as an evangelist and advocate of e-signature and e-vaulting technology driving e-mortgage adoption. She held prior positions at GE Capital and Transamerica Financial Services. In 2009, eSignSystems was the recipient of Mortgage Technology Magazine’s Lasting Impact Award.***

*****http://www.progressinlending.com/TME0411/TME0411-36.pdf*****

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