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Six Hidden Costs of Paper

Article in Mortgage Originator

By Lambert Jemley
February 2008

While every business today depends on a range of computer applications and Web-based communication tools like e-mail and instant messaging to get the job done, there are still plenty of times when documents get printed out. Those documents then get shipped, mailed, signed, faxed, filed, scanned and ultimately shredded before going into the recycle bin or landfill.

The mortgage industry uses more than its share of paper and there have been many paperless initiatives that seem to stall out for one reason or another. About the only reason mortgage originators and others still use paper in their process chain is to get somebody they want to do business with to put their signature on a piece of paper. With the advent of business-class, Web-based electronic signatures services such as DocuSign, this continuing use of paper is looking more outmoded.

One of the reasons that mortgage originators and others still use paper is that they haven’t really analyzed all the hidden costs behind it. Paper-based processes are well accepted and they work well enough. Why fight the system? Taking a closer look, however, reveals that paper-based processes are dragging your business down — impacting your sales efforts on one hand and cutting into your profits on the other. And that’s something that becomes even more painful when the industry faces a rough patch.

To understand the problems with paper, let’s first examine the current process for disclosing to borrowers. While this may vary from originator to originator, typically one takes an application over the phone or Internet. After this, the originator prints, highlights and sends the documents to the client via overnight carrier with a pre-paid courier envelope enclosed in the package. While this may sound straightforward enough, here are six ways the continuing use of paper is dragging you down in today’s tough real estate and mortgage market.

Paper and printing costs—Hewlett Packard recently reported record profitability. A key growth driver for the company was printers, and more importantly, printer ink and toner sales. Every time you hit “print,” you are helping to improve HP’s financial outlook, but not your own. Take a look at what you’re spending on paper and printing supplies; the number might be shocking. What if you could take that number almost to zero?

Courier bills—If you are like most originators in the market, you dread the day every month when you get your courier bill(s). Whether you use local couriers or national companies like FedEx or UPS to send documents to clients, the day those bills arrive is not a good day. In contrast, the cost of getting electronic signatures is about a quarter of the cost of a round-trip using an overnight letter carrier. Imagine immediately cutting your courier bill by 75 percent every month.

Lost deals—In the origination business, when is a customer committed? The fact is that customers are not truly committed until they sign the application and disclosures. Under the current constraints of the courier system, most originators are looking at three to five days to get a signed application and disclosures back from the borrower. This is unacceptable because, as we all know, a lot can happen in three days. With electronic signatures, you can reduce that amount to less than 30 minutes. Switching to electronic signatures is by far the single easiest thing you can do to grow revenue almost overnight.

Quality assurance—How many originators have sent packages to clients only to get it back with a missing signature or faxed back with a missing page? And after a document gets faxed around a few times it is no longer readable. All this adds up to a big hassle for you and your customers. This leads to unhappy employees and frustrated customers. With electronic signatures, documents can’t be returned to the originator with missing signatures or pages. Customers can’t change wording or just say I don’t understand what this means therefore I’m not going to sign. With electronic signatures, a customer must complete the full package before they will receive validation of completion.

Wasted staff energy—Paper documents have to be collated, stuffed into envelopes, faxed or scanned and then filed. There’s a lot of work to do with paper even when everything works. In the real world, printers and fax machines jam up, clients misplace pieces of paper, and packages get lost in shipment. Every mistake and problem has to be fixed by someone (you or one of your employees) cutting into productivity day in and day out. With electronic signatures, the need for all this paper is eliminated, so your team can spend time on activities that help your business to grow.

Security—Contrary to popular belief, electronic signatures have been proven to be more secure than a wet signature on paper. When a borrower signs something that you’ve couriered or e-mailed to them, how do you really know whether they signed it? What’s the cost to your business if you write a loan to a fraudster? At a minimum your insurance rates go up. With electronic signatures, everything is password-protected. Signatures can be traced back to e-mail accounts and even IP addresses. High-end electronic signature providers offer e-verification capabilities that implement additional security measures like out-of-wallet questions (relationships, past addresses, etc.) that can be used to further verify the borrower is the actual signer.

While the use of electronic signatures on closing packages is still working through government committees, the use of electronic signatures for initial applications and disclosures is fully legal and universally accepted. This technology is becoming increasingly common for many originators across the country as they look for every advantage in this market. Given the many ways that paper drags down business, in the future there will be two types of originators: those who have adopted electronic signatures and those who have gone out of business.

LAMBERT JEMLEY is vice president of Marketing at DocuSign, Seattle, Wash.