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The More E-Mortgages, The Better

Electronic mortgages are happening today. Mid America Mortgage, Inc. will utilize DocMagic’s  SaaS-based compliance and mortgage loan document engine together with the on-premise solutions of DocMagic’s recently acquired eSignSystems patented eSigning, eNotary, eVaulting, eRegistration and eRetention solutions. This is the first time since the acquisition of eSignSystems in October, 2014 that the combination of technologies will be jointly utilized to facilitate a complete eClosing and validate DocMagic’s eMortgage model.

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“We made the decision to sign with DocMagic and its subsidiary division eSignSystems because of the unique capabilities of the combined technology components, together with the most powerful eMortgage reputation and expertise in the industry,” said Jeff Bode, president of Mid America Mortgage.  “The blend of these technologies integrated with our loan origination system (LOS), Mortgage Machine, establishes the path for us to close our loans electronically.  DocMagic’s solutions are ready today for eClosing, and now that the GSE’s are accepting eNotes, their advance readiness for electronic closings is critical to Mid America’s short and long-term eStrategy.”

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“The marriage of our SaaS and on-premise solutions delivers a unique value proposition for Mid America,” said Dominic Iannitti, president and CEO of DocMagic. “DocMagic’s SaaS model compliantly delivers dynamic, intelligent, data-driven loan documents and disclosures with a full eClosing for borrowers.  eSignSystems’ on-premise platform provides Mid America with internal controls and tools to configure the solution to their specific business processes and the ability to efficiently work with third parties to achieve an eMortgage.”

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Our Industry Has Reached A Tipping Point

You may think that eSignature usage in the mortgage space is slow, but it is picking up quickly. How do I know that? Vendors that offer this technology are seeing their lender clients use it. For example, DocMagic announced today that its eSign platforms have  now processed more than 100 million mortgage-related eSignature transactions.

“We are very pleased with the sheer number of eSignatures that we are seeing executed among our client base,” said Dominic Iannitti, president and CEO of DocMagic.  “This is positive news for the mortgage industry as a whole. In previous years, eSign adoption was much lower among lenders working with borrowers. We have always encouraged clients to take advantage of our eSigning technology; this impressive number of transactions certainly reflects that.”

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DocMagic is the undisputed leader in the mortgage industry for eSign technologies. The company has a long-standing reputation for developing innovative eSign solutions that integrate seamlessly with mortgage workflows.

DocMagic has two eSign solutions for clients to take advantage of.  eSignSystems’ SmartSAFE XL eSigning, eDelivery and eVaulting platform was added to the DocMagic family in 2014. DocMagic’s eSign platform is a separate SaaS-based solution that features the company’s proprietary ClickSign™ technology. SmartSAFE XL is ideal for companies that require more flexibility, extendibility and control over eSigning processes. DocMagic’s eSign technology is highly intuitive, simple to setup, and walks signers through the entire document review process to efficiently, expeditiously and compliantly submit eSignatures.

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Notable is that in 2011, in an effort to encourage industry-wide adoption of eSignatures, DocMagic made its eSign technology available to anyone to sign any type of document at no charge.  Users can visit DocMagic’s website to quickly and easily eSign documents such as contracts, NDAs, proposals and more.

Documents executed using DocMagic’s eSign technology are as legally effective, valid and enforceable as documents printed and signed in ink.

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A More Sophisticated E-Signing Strategy

As electronic signing adoption continues to evolve, so have the technologies that lenders can use to embrace this time- and money-saving strategy. For example, eSignSystems, a division of DocMagic, has launched its new SmartSAFE XL platform that marries sophisticated functionality with elegant simplicity, resulting in a highly intuitive e-signature process. Here’s the scoop:

Benefits of the new application include greater scalability, increased transaction volume, and a simplified user interface, resulting in a very smooth and intuitive process.

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SmartSAFE XL is a complete modernization of prior versions of the SmartSAFE interface and infrastructure. The new codebase has been redesigned using Microsoft technologies such as ASP.NET MVC 5.0 and Entity Framework 6 as well as HTML 5. The search fields are smarter, and modifications to participants and annotations can be done on-the-fly.

“Users of SmartSAFE XL will experience a clean and intuitive user experience in the management of documents and SigningRooms, increased workflow efficiencies, and streamlined administration of the system, making SmartSAFE XL one of the most robust and powerful eSignature and eVaulting solutions on the market,” said Kelly Purcell, EVP of sales and marketing at eSignSystems. “The new platform is ideal for companies that require more flexibility, extendibility and control over their eSign processes.”

SmartSAFE XL provides a centralized, user-friendly interface to prepare documents and establish “SigningRooms” for anything a user may want to electronically have signed, from loan documents to functional areas such as sales departments to contracts and NDAs, human resource departments for employee paperwork and benefits, in-house legal departments, partner networks, and more.

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The platform is completely secure and provides legally-binding audit trails that are automatically initiated, collected and retained for the lifetime of the electronic record.

SmartSAFE XL is fully compliant with the Uniform Electronic Transaction Act (UETA), Revised Article 9 of the UCC, ESIGN, The Electronic Signatures in Global and National Commerce Act, ESIGN, and Federal ESIGN eSignature and eRecord retention laws as well as international governance bodies such as the EU Electronic Signatures Directive.

“eSignSystems has been very successful in helping companies of all types leverage electronic signatures within their operational workflows,” said Dominic Iannitti, president and CEO of DocMagic, Inc., which acquired eSignSystems last year. “The launch of SmartSAFE XL takes eSigning to the next level for organizations that have specific needs for more customizable eSigning solutions.”

It Was The Year Of …

There were a lot of high points and low points this year. Certainly it was the year of the CFPB, more oversight, decreasing loan volume, falling unemployment, and a whole host of other things. But for me it was the year of mergers and acquisition. We saw a lot of fire sales and strategic sales, as well. My guess is that we’ll see more of the same next year.

For one, STRATMOR Group, a consulting firm that helps mortgage banks build profitable mortgage lending operations, reported that customer inquiries regarding its M&A advisory services business are trending upward, indicating the possibility of more industry consolidation in 2015. Already in 2014, STRATMOR’s team has been an advisor to either the buyer or seller on 5 deals this year, three of which are expected to be closed this year and two more that are past the Letter of Intent stage.

“The conditions are right for more transactions and buyers are stepping forward, seeking new acquisitions,” said Jeff Babcock, the STRATMOR Partner who heads up the firm’s mergers and acquisitions advisory practice. “In fact, it is clear to us that there is currently more demand for well run retail mortgage lending platforms than there are well-run platforms available to be acquired. Based on the conversations we’ve been having with our clients, we expect to see more consolidation in the mid-size independent mortgage banking sector next year.”

Evidence for this trend came last month when Caliber Home Loans, Inc., Dallas, a leading residential mortgage origination and servicing company, acquired Cobalt Mortgage, Seattle, one of the major privately-owned distributed retail mortgage lenders in the U.S. The combined entity will create one of the largest independent mortgage companies in the country. The terms of the transaction were not disclosed.

“In representing Cobalt in this transaction, the STRATMOR Group has insight into the motivations of both the buyer and seller,” Babcock said. “Even though Cobalt will have originated almost $4 billion by the end of 2014, its ownership recognized that greater production capability is quickly becoming a requirement in order to compete in an environment where compliance costs, infrastructure investment and economies of scale are key success factors.”

“At the same time, Caliber is targeting substantive acquisitions as the most expeditious strategy for expanding its business into key new markets. These complementary goals made this a natural marriage between two powerhouse organizations,” Babcock said.

Babcock said his team is ready to serve more lenders as the M&A marketplace continues to heat up going into next year. He said STRATMOR would welcome conversations with mortgage banks that are considering their sell side strategic objectives.

I’m sure that some will take STRATMOR up on this offer.

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Exploring The Big Trends To Come

The ENGAGE Event brought to you by PROGRESS in Lending had record RSVPs this year. Despite the tough mortgage market, executives gathered to share their ideas about how to improve the mortgage industry. Here is some of what was said:

Tim-ENGAGE-2014When discussing the new regulatory environment, Michael L. Riddle, the co-founder and managing partner of the Middleberg Riddle Group, a preeminent mortgage banking law firm, noted, “There is a new level of consistency from a regulator that is organized and effective. We some times think the larger lenders have the most trouble dealing with change, but that’s not the case anymore. We as an industry just went through a cycle of huge change and we’re still living with that. Going forward, when we talk about complying with new rules, it’s not just about mechanical change, it’s about improving the whole process and how all the different parties interact.”

“Quite frankly,” added Tim Anderson, the head of DocMagic’s eServices Division. “Lenders are wondering when the next shoe is going to drop. Regulators are going after everyone. Everyone is liable. So, these new rules are forcing fundamental change. What should lenders do? I have one word: ‘e’. I just don’t know how you comply with all these new rules in a paper world.”

Lisa-S-ENGAGE-2014So, what’s next for mortgage lending? According to Lisa Binkley, Senior Vice President at Platinum Data Solutions, “2015 is going to be the year of integration. Vendors are going to have to work more closely together. We’re seeing those talks happen now. There’s lots of interest.”

However, when it comes to implementing new technology, lenders are still going to take things slow. “Lenders are risk averse,” said Lisa Springer, Managing Director, Chief Operating Officer at STRATMOR Group. “As a result, technology vendors have to be more transparent. To the vendors I say: Do what you do best. Don’t try to step outside of your area of expertise. Don’t dilute your focus.”

From the vendor’s perspective, lenders are certainly automating more out of necessity. Kelly Purcell, Executive Vice President, Global Sales and Marketing for eSignSystems, pointed out, “People understand that we’re not just selling technology, we’re selling compliance.”

Jennifer Miller, President of a la mode’s Mortgage Solutions Division, added, “With manual processes, things start to break down. The liability is with the lender so they have to automate.”

Lee-ENGAGE-2014All around, industry participants expect there to be a continued focus on compliance into next year. “Proof of compliance is going to be the big issue in 2015,” concluded Lee Gillispie, Managing Principal, Financial and Risk Management Solutions at Fiserv. “Lenders have to ask if they have the right data, documents, policies and procedures. Beyond that, everything has to be fully documented and executed. So, lenders shouldn’t just automate to be more electronic, it’s about being more efficient and proving that you did what you said you were going to do when it comes to putting together every loan.”

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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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Watch Much TV These Days?

What makes a television show stretch on for years and years? The ratings of course, the ROI of television. Did you know that Seinfeld was almost not renewed for a second season? It did not have substantial ratings—the financial numbers to justify the investment. Luckily there was a studio visionary that saw the intangible of “something promising in the future” and took a risk and continued to invest despite the ratings. As they say the rest is well, yada, yada.

Today’s economic environment has forced companies to make technology investment decisions on the financial numbers with an expectation of return in the first season. How many Seinfelds has your company canceled, or better yet never even premiered? ROI should be a combination of financial data and risk analysis. So what cast of characters need to be engaged to create a technology winning series in today’s ever changing mortgage market? I’ll tell you.

Everyone assumes the “easy part” of the ROI analysis is the financial data. If only it was that simple. Most companies struggle with assessing a specific process and its associated cost. While companies track “operational” expenses there is little data associated to a specific process. How can one really measure savings assuming a technology investment is about a better, faster, less expensive process when the baseline data is not available or inaccurate? In addition there is typically a lack of data around the actual “ business process.” This type of data represents the analysis of cycle times, conversion rates, and the exception process. The first re-write in producing a technology winning series occurs when there is basic information that is not available—one must know the current process and cost in order to make future technology investment decisions.

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 track that process from start to finish. For example, disclosures in the paper world are delivered via regular mail, priority mail, email, courier, fax, etc., which gives you several different points of origin for that transaction. There also could be several different inputs of data based on the output option. How do you quantify cost there? In an electronic process you know down to the second about when the disclosure package was created, sent, received and signed. That is almost impossible to track in a paper world.

So let’s look at the risk analysis portion of the ROI. What are those intangible risk factors? Compliance. A winning series that addresses compliance before a problem has occurred will be sure to bring in the ratings. In an automated process there is less risk of not meeting certain compliance requirements due to better tracking and audit controls. How do you factor that into your ROI? That’s priceless. Intangibles associated with ROI are equally as important to factor in as part of the overall ROI analysis.

Another example of an intangible ROI factor 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 and convince them that part of the ROI is based on potential fallout. But think about it, there is a lot of cost associated with a loan that is not saleable. The future cost of non-compliance has to be a part of the technology buying process, it just does. 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 need to ask themselves: What future risk is offset by this potential technology purchase? Those facts are out there and they are real but they are not used to make technology decisions. What the mortgage industry needs is to understand the value of technology to drive measurable change.

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And The E-Signature Momentum Continues

*And The E-Signature Momentum Continues*
**By Tony Garritano**

TonyG***You all know that I’m a big proponent of electronic signatures. This technology is far overdue to go mainstream in the mortgage space. Thankfully more and more inroads are made each day. For example, QuestSoft has added electronic signature (e-signatures) gateways from six providers, broadening the options for its customers using QuestSoft’s Internal Revenue Service (IRS) 4506-T and Social Security Administration (SSA)-89 verification services.

****In addition to its highly automated direct integration with Communication Intelligence Corporation’s (CIC) e-signature technology, QuestSoft can also accept 4506-T submissions with six other e-sign companies including: DocMagic, DocuPrep, DocuSign, eSignSystems, IDS and Silanis. Each of these companies successfully completed a certification process mandated by the government agencies and enforced by QuestSoft as part of its security procedures.

****“We discovered some of our clients were already using e-signature services from other providers, and we wanted to make sure they were accommodated,” said Suzanne Mosher, national manager for 4506-T and SSN verifications for QuestSoft. “As our in-house partner, CIC helps assist companies to easily gather signatures for 4506-T services. Connecting with our clients’ vendors can also help them with their workflow.”

****QuestSoft’s verification software, Desktop VERIFY, assists companies with tracking and organizing their 4506-T requests with the IRS, and now with the inclusion of e-signatures, it can provide a paperless workflow.

****“With the IRS-approved electronic signature requirements, those who handle 4506-T requests no longer have to maintain both an electronic and paper loan file,” said Mosher. “It’s all centralized with Compliance VERIFY.”

****Desktop VERIFY is part of QuestSoft’s new Compliance VERIFY service, which offers the software free of charge to QuestSoft’s 4506-T clients along with a free software development kit to integrate their LOS and document vendors.

****“Compliance VERIFY is flexible in that customers can use the Desktop VERIFY solution, or have it integrated into their software or loan origination system,” said Bhavin Shah, vice president of development and technology for QuestSoft.

Who Said E-Signatures Aren’t Gaining Traction?

*Who Said E-Signatures Aren’t Gaining Traction?*
**By Tony Garritano**

TonyG***Electronic signatures are picking up speed. For example, I just heard that Veri-Tax, LLC, a provider of verification and ability-to-pay solutions, has recently partnered with six electronic signature providers to deliver fast, compliant tax transcript requests, which are used by mortgage lenders to verify a borrower’s income when applying for a mortgage loan. Adobe EchoSign, DocMagic, DocuSign, DocuTech, eLynx and eSignSystems (Wave) have all been certified to provide electronic signatures on the IRS Form 4506-T when customers request tax transcripts through Veri-Tax. These certifications allow lenders to continue to leverage their existing e-sign partnerships without needing to make internal changes in order to meet IRS electronic signature guidelines.

****Income verifications through Veri-Tax are a key tool used by lenders to meet the upcoming ability-to-pay rules recently established by the Consumer Financial Protection Bureau. Scheduled to go into effect in January 2014, the new rules will require lenders to show their borrowers have the means to pay back loans.

****Veri-Tax, a participant of the IRS’ Income Verification Express Services (IVES) program, offered a 4506-T electronic signature method by partnering with Adobe EchoSign on January 7, 2013, the day the IRS began accepting electronic signatures. Because the ultimate responsibility of an e-signature’s validity and authenticity falls on each IVES participant, Veri-Tax implemented an e-sign vendor certification process to ensure that the electronic signature providers used by its customers also adhered to the IRS’ electronic signature guidelines.

****“Veri-Tax proactively sought out these key e-sign partners in the mortgage space to reduce the compliance efforts of Veri-Tax customers,” said Maria Kirgan, Veri-Tax’s senior director of product management. “Our ultimate priority at the end of the day is making sure our customers’ internal processes do not become a hindrance to meeting new regulatory requirements in the market, which are really the main drivers of our certification process. Because our systems are flexible and open, we can quickly adapt to industry changes.”

****Veri-Tax continues to expand its e-sign vendor network, which will allow additional customers to use their existing e-sign partners to expedite the income verification process and meet the upcoming ability-to-pay rules before 2014.

****“eSignSystems is excited to be a part of the Veri-Tax community that is committed to providing a more efficient 4506-T process for the borrower and lender,” said Kelly Purcell, executive vice president of Wave’s eSignSystems division. “eSignSystems’ SmartSAFE solution meets all of the eSignature IRS requirements with round trip communications from start to finish of the 4506-T process, ensuring both lender and Veri-Tax (IVES) compliance.”

****Compared to wet signatures, e-signatures have been shown to reduce the 4506-T rejection rates of Veri-Tax customers by more than 10 percent, saving lenders substantial time and money otherwise spent on resubmitting orders. Veri-Tax’s electronic process also eliminates illegibility problems caused by faxing or scanning forms and allows borrowers to verify their personal information, such as their address, before the forms are submitted, thus reducing the largest reason for a 4506-T rejection.

****“When e-signatures are utilized, our quality control process is condensed into seconds. Since every form is validated for completeness before submission, we are able to send the order to the IRS within a few minutes of a borrower’s signature,” said Charles Young, Veri-Tax senior director of operations. “Using one of our certified e-sign partners’ solutions reduces our customers’ operational costs, and more importantly, expedites the income verification process.”