Improving the Mortgage Experience with eClosing
By Harry Gardner
March 18, 2019
Harry Gardner is Executive Vice President of eStrategies for Docutech, a provider of document, eSign, eClose and print fulfillment technology. He is a 2018 MBA Insights Tech All-Star and a frequent contributor to MBA Insights.
At the start of 2019, experts anticipated only a slight increase in new purchase originations for the coming year. Coupling this with predicted continuing declines in refis, the importance of reducing costs in loan originations is now at an all-time high as lenders strive to capture new millennial borrowers.
With new technologies and integrations continuing to be introduced and further solidified, the mortgage industry's reliance on digital offerings will only increase, opening up new benefits for lenders and the valued borrowers they serve.
As the technology wave continues to wash over the mortgage industry, lenders are aiming to further optimize the mortgage process with a more digitally focused borrower experience, while also streamlining their own internal processes to reduce risk, enhance loan quality and drive down costs. But how? In order to make these goals a reality, lenders must first invest in the right tools to not only make each transaction as digital as possible, but also move that much closer to a fully digital mortgage experience. In other words, it's time to get serious about eClose.
Choosing the Right Technology
In response to lenders' continued focus on reducing origination costs and improving the overall mortgage experience for their borrowers, leveraging the latest technology innovations to transition from paper to digital processes has evolved from an optional investment to an absolute necessity. As the buzz around eClose continues to reach new volumes as a result of the operational benefits of deploying a more efficient and secure process, the need for integrated digital mortgage solutions that provide true end-to-end eClosing functionality within a single platform is at an all-time high.
While the move to adopting eClosing technologies may be in its early stages, top lenders understand the importance of taking action now rather than waiting for eClosing to become the norm. For example, although widespread eNotarization acceptance may still be a ways off, eRecording has successfully broken into the mainstream with more than 83% (1,800+ counties across the U.S.) already accepting electronically recorded documents today.
In addition to eSignature capabilities, the mortgage industry has already seen select leading technology providers gain approval from Fannie Mae and Freddie Mac for eClosing, eNote and eVault functionality. These platforms provide an answer to growing lender needs by providing a comprehensive integrated eClosing solution complete with eSigning efficiencies spanning from the initial document generation all the way through post-closing. Furthermore, some available platforms provide added eVault functionality, which directly integrates with the MERS® eRegistry to provide greater efficiency for all eNote management transactions.
The best available eClose platforms can also integrate with the lender's existing document generation engine to automatically generate digital, data-driven documents in alignment with rules-based intelligence and calculations in order to precisely meet the specific criteria of each loan. One leading platform even offers an eEligibility engine to ensure each closing package is as "e" as possible while maintaining compliance with various state, county and investor regulations.
Understanding the Benefits
While a more digitally driven eClosing process certainly promotes an enhanced borrower experience through greater access, review and eSign opportunities, there are also major benefits for lenders on the back end. By leveraging available technologies, lenders gain the ability to easily transition from paper to hybrid or even full eNote eClose processes, which aids in strengthening loan quality, data accuracy and compliance while also speeding up the loan process as a whole.
Not only does this promote greater efficiency from an operational standpoint by eliminating reliance on outdated processes, it also provides major cost savings and proven ROI for lenders willing to make the switch. How much you ask?
As an example, a non-warehouse lender originating 12,000 mortgages per year with an average loan value of $250,000 can save $155 per loan by transitioning to a hybrid eClose process, adding up to a whopping $1.8M in savings annually.
If the same lender were to move to a full eNote eClose offering, savings could increase to $224 per loan, resulting in more than $2.6M in annual savings. Lenders using a warehouse line can recognize additional benefits, reducing average days on the line from 15 to 5 or less, allowing them to turn their lines more quickly, reducing their cost of capital and liquidity requirements, and enabling them to do more volume with a given-sized warehouse line.
Based on predicted trends in the mortgage origination space over the next 12-24 months, cost-optimization and efficiency, as well as delivering an experience in line with millennial demands, will be key decision makers for lenders, meaning the time to make the transition to a more digitized mortgage process is now. By implementing the right tools and identifying the best methodology for managing loan processes moving forward, lenders can not only improve the mortgage experience for their tech-savvy borrowers, but also capitalize on the significant benefits eClosing can provide them on the back end.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at email@example.com; or Michael Tucker, editorial manager, at firstname.lastname@example.org.)