The future of mortgage hinges on digital closing
A look at the mortgage industry shows that consumer demand for a digital close are already here. At present, 81% of consumers responding to a recent survey say they prefer to sign loan documents electronically,i and 51% are comfortable with a completely digital mortgage experience.ii
While consumer readiness is clear, many financial institutions aren’t able to deliver on the growing demand. An eClose requires tightly integrated loan origination and document management systems, with embedded eSign, eNote and eNotarization capabilities. Local and state requirements also play a part as remote online notarization is not supported by all states.
Mortgage lenders, however, are demonstrating that where there is a will, there is a way. Across the industry, the number of eClosings continues to grow, as financial institutions find the right solutions to support electronic signatures and notarizations.
Advantages of electronic closings in mortgage
Electronic closings make for happier borrowers by decreasing the length of the funding cycle. eClosings can reduce signing sessions by 2.5 hours,iii allowing borrowers to close 2.3 days faster than the traditional in-person experience.iv
The reduced time to funding is generated through the efficiency enhancements generated by emerging digital solutions, particularly in the area of document preparation and management. With leading technology, the borrower and settlement agent are automatically invited to the closing process as soon as the electronic document package is generated.
This important step provides borrowers with the ability to review their document package in advance of closing day and sign up to 90% of the package electronically.v In states where remote online notarization is permitted, lenders may even be able to offer full electronic document signing, saving borrowers time and hassle, while supporting the institution with cost savings and stronger profitability.
In 2021, mortgage closing costs rose over 13%,vi but lenders who implemented eClosings saved up to $444 per loan.vii Settlement agents also trimmed per-loan costs by as much as $100 with a digital close.viii
However, there is no one-size fits all mortgage process, and hybrid eClosings can also help lenders to reduce costs and improve customer acquisition efforts when a fully digital experience isn’t possible. With a hybrid eClose, lenders continue to provide digital review of the document package to borrowers, but incorporate different options for signing:
- Hybrid eClosing 1: Borrowers eSign the ancillary document but physically endorse the note and any documents that require notarization.
- Hybrid eClosing 2: Borrowers electronically sign ancillary documents and the eNote but continue to paper out notary documents.
- Hybrid eClosing 3: Lenders paper out the note but facilitate electronic signatures on ancillary documents and notarized documents.
Hybrid eClosings offer lenders options in states that do not support electronic notarization and can also act as a runway for financial institutions to ramp up to a fully digital close. Lenders realize solid ROI in the process, reducing costs by $153 per loan.ix When electronic signatures and notarization are included, loan originators have saved $231 per loanx and realized an ROI in excess of 1200%.xi
Moving forward with electronic closings
To facilitate compliant electronic closings, lenders need to ensure that document preparation, compliance and delivery solutions are fully integrated with loan origination systems and support the various loan closing permutations available in each state. A primary component of an eClosing is remote online notarization (RON). In states that allow RON, documents are notarized virtually, often by conducting an online video conference with the borrower.
As of August 2022, every state now allows electronic signatures on ancillary documents, but only 43 states allow remote online notarization.xii In person electronic notarizations (IPEN) are supported in 47 states.
While ensuring compliance with regulations can be tricky, it is another area where technology is rapidly transforming the process. State-of-the-art closing systems perform eligibility tests, confirming eNotarization admissibility, according to the state where the property is being purchased. Eligibility tests will also alert lenders when eRecording is supported at the county level.
For financial institutions looking to upgrade to electronic closings, implementation is fast and easy. Lenders can be up and running in a matter of days and go live with hybrid eClosings in as little as a week. If the financial institution plans to facilitate eNotes, the process may take a little longer, to give the loan originator time to become a member of the MERS eRegistry, a system of record for eNotes.
If you’re ready to start improving customer satisfaction and reducing costs through electronic closings, visit our quick, ten-minute webinar on the world of eClosings or contact Finastra directly.
i Dan Putney. “Three Reasons the Mortgage Industry Is Embracing eClosing.” Finastra, Jan. 11, 2021. Web.
ii Ayush amdan, et al. “Competing on Customer Experience in US Mortgage. “McKinsey & Company, Dec. 10, 2019. Web.
iii “Mortgage eClosing: The Path to eSignatures.” Finastra. Finastra webinar, Sep. 2022. Web.
iv Maurie Backman. “What Is eClosing and How Is It Helping Home Buyers?” Nasdaq, Apr. 7, 2022. Web.
v “Mortgage eClosing: The Path to eSignatures.” Finastra. Finastra webinar, Sep. 2022. Web.
vi Spencer Lee. “Closing Costs Shot up in 2021.” National Mortgage News, Apr. 26, 2022. Web.
vii Brad Finkelstein. “EClosings Can Save Lenders $444 Per Loan, Report Finds.” Arizent. National Mortgage News, Feb. 8, 2022. Web.
viii Brad Finkelstein. “EClosings Can Save Lenders $444 Per Loan, Report Finds.” National Mortgage News, Feb. 8, 2022. Web.
ix “Mortgage eClosing: The Path to eSignatures.” Finastra. Finastra webinar, Sep. 2022. Web.
x Terri Davis. “Are Digital Closings Really Worth It?” Housingwire, Mar. 1, 2022. Web.
xi Terri Davis. “Are Digital Closings Really Worth It?” Housingwire, Mar. 1, 2022. Web.
xii Isabelle Bousquette. “Virtual Real-Estate Closings Go Mainstream, but Some States Hold Out.” The Wall Street Journal, Aug. 8, 2022. Web.
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