Technology has long played a growing role in the evolving mortgage origination process. At the onset of the pandemic, those gradual changes accelerated, putting a spotlight on technology needs. As the mix of increased volume met social distancing, demand for remote and digital offerings in mortgage origination skyrocketed.
During these remote conditions, the closing process increasingly began to evolve to a digital format known as eClosing. eClosing—the process of closing a loan electronically—can be performed either in-person or remotely with electronic documentation existing in a secure portal. It can also be a partial process, or a hybrid eClosing, with a combination of wet sign and eSign.
While the pandemic expedited the scramble for new technology, the adoption of eClosings has lagged behind other aspects of the mortgage process such as applications and communications. According to a 2020 survey from the Stratmor Group, digital closings only have a 16% net adoption when factoring in use by lenders and consumers. Further, while 43% of lenders had the capability to perform at least a hybrid eClosing, only 12% had achieved at least 75% adoption.
While adoption has been slow, consumer demand is rising. The 2022 ICE Mortgage Borrower Insights Survey showed 82% of borrowers who secured a mortgage during the pandemic would have signed and notarized all documentation electronically had they been able to. Plus, 60% of borrowers surveyed responded that offering electronic signature and notarization influenced their choice of lender. Giving borrowers the enhanced experience they want through digital mortgage processes can elevate a lender above their competition in an increasingly technology-driven market.
How eClosing works
To be a champion for eClosing adoption, you need to know what it entails and how it can benefit your business. A full eClosing takes place entirely electronically, including documentation, signing, notarization, review, and recording. Once a loan is cleared to close, the loan package is annotated for signatures, initials, and dates and uploaded to the eClosing portal. This shared portal is visible to the lender, borrower, and settlement agency, allowing all parties to review documents well ahead of the closing appointment, checking for accuracy and addressing any questions that may arise. The borrower can even sign many of the documents ahead of the appointment, cutting down the time of the closing, sometimes to less than 15 minutes.
With an electronic package, the closing appointment can take place virtually or in-person, allowing for flexible scheduling for all parties. eNotarization can be handled through In-Person Electronic Notarization (IPEN) or via a secure portal and a webcam with Remote Online Notarization (RON), allowing for an entirely digital experience. Even the promissory note can be handled digitally via an eNote, allowing for a paperless transaction that removes the need for physical document shipping and storage. The completed package is readily available for electronic transfer to the appropriate county for eRecording, simplifying, and expediting the entire closing process.
These processes are automated and digitized, reducing or even eliminating the need for paper, decreasing the error rate associated with a manual process, and cutting the time your team takes to produce documentation. This creates efficiencies for your entire organization, saving time and money and allowing your teams to focus on driving business instead of flagging signature lines.
By streamlining the process with automation, eClosing delivers a faster, more efficient experience to the borrower while also delivering an impact to your bottom line. National Mortgage News reported that ROI for a full eClose process averaged $9.86 for every dollar invested and can save lenders up to $444 per loan. Even if you opt for a hybrid eClose, with some documentation wet-signed and others eSigned, the ROI checks in at $7.73 per dollar.
Executing the plan
The benefits of implementing an eClosing solution are many; but how do you take the technology from implementation to adoption—and eventually standard operating procedure? It’s not a one-step process that you can turn on and forget about. It takes a plan that accounts for your entire business and requires buy-in from all stakeholders. It’s also necessary to understand any regulations surrounding an eClosing solution and any requirements of your current vendors and partners.
Get on board
It’s important to share with your entire team how eClosing can impact not only the business’s bottom line, but also the borrower and ultimately each team.
- Show executives the bottom line impact.
- Show your loan officers they will be able to automatically generate annotated loan packets without a manual process.
- Show your compliance team the reduction in risk.
- Show your tech teams the simplified workflow that will be put to use after they implement the solution.
Sharing the light at the end of the tunnel and making that real and personally meaningful from the beginning can make the work worthwhile for your entire team right away.
Know your own needs and capacity
Like any change management project, you must have a realistic idea of your own needs as well as your capacity to execute a successful implementation and adoption of eClosing. Understanding what technology you already have in place and have access to is part of the equation. Ensuring that your LOS can handle an integration with an eClosing solution is one example. Addressing potential workflow issues is integral to a successful launch.
You must also factor in the capacity of your IT assets to complete the development work necessary to launch an eClosing solution. The Stratmor Group survey showed that IT development capabilities was the biggest barrier to digital mortgage implementation as perceived by lenders.
Building an appropriate roadmap for implementation and launch can set lenders on a course for near-term and long-term success. Setting goals and milestones that serve the immediate need (perhaps a hybrid eClose) while working towards a long-term solution (full eClosing capabilities) can help to bring along meaningful technological change without overwhelming your teams and systems.
One way to remedy these headaches is to proactively seek a partner that offers both a point of sale solution as well as eClosing to give you a streamlined workflow that is already in place. Maxwell Point of Sale has a built-in eClosing solution to provide lenders an end-to-end origination experience with a single integrated solution, eliminating the need to investigate system compatibility or burden your teams with an additional implementation.
Local regulations and partner compatibility
Technology has continuously advanced to meet customer demand, but regulation isn’t always quite as quick to adjust. Making sure that your state and local regulations allow for eClosing is a key step in this process. For example, according to the National Notary Association, IPEN is allowed in most states, though some states have special regulations. Likewise, RON also has certain state-specific restrictions and regulations.
It’s equally important to understand your partners and their capacity to accommodate eClosing. Settlement agents, quality assurance providers, trading partners, and other vendors and partners must be factored into your plan. Maintaining these relationships is vital to your business continuity and thus should be accounted for as you push forward with an eClose solution.
Snapdocs focuses on digital closings, processing more than 250,000 closings per month. Their eClosing platform is equipped with a network of notaries settlement agents, connecting lenders to thousands of partners who are already well-versed in digital closings, removing the confusion associated with regulations and partner capabilities. The platform brings all stakeholders together online for scheduling, notifications, documentation, and the closing itself. This holistic and collaborative approach lets all parties review the documentation ahead of the closing, resulting in an 80% reduction in errors and a quicker, smoother closing experience for you, your settlement partners, and your borrowers.
Educate and empower your team
A tool is only as good as how you use it. Having an eClosing solution implemented, integrated, and ready for use is great. However, if your people don’t know how to effectively use it or can’t manage the process efficiently, it can become a shiny new toy that stays on the shelf. To have a successful launch and a productive tool, you have to educate your teams and let them test the solution before a widespread release.
Getting adequate training for all impacted staff and making sure that the solution is sufficiently tested with all necessary stakeholders can help find gaps in knowledge and functionality before you take the solution live on a wide scale and can ensure a smooth transition into using your new digital closing tool. While there is work to be done up front, these are the integral pieces to reap the benefits you shared at the beginning of the project.
Finding the solution
To remain competitive and profitable in a market with tightening margins and an ever more digital savvy consumer base, local lenders need to evaluate their technology regularly. Diligently investigating new innovations makes sense from a lender-borrower-relationship perspective as well as a financial stance. Deciding to implement a solution like eClosing using the right vendor as your partner in the project is one way to move towards meeting consumer demands in a cost-efficient manner.
Maxwell understands how important eClosing can be to the growth of local lenders, so much so that it is included as a part of the Maxwell Point of Sale. In partnership with industry-leading digital closing platform Snapdocs, Maxwell Point of Sale comes with a native eClosing solution, removing the need to vet and integrate an additional vendor and solution into your tech stack. This creates a simplified closing process to allow loan officers to work more loans efficiently while exceeding borrower expectations throughout the entire mortgage cycle.