As discussed in our last post on digital mortgage, we are in the midst of transformational change. Factors such as legal frameworks, increased processing costs, and evolving borrower expectations set the stage for true digital mortgages to become common place.
With the promise of a digital workflow comes more than just easing tensions posed by industry challenges, it also means benefits to your business – increased efficiencies, reduced time to secondary market, more secure transactions. So, who has adopted? How have they scaled? Let’s consider this change in earnest and address why widespread adoption and scale is yet to be seen.
Transformation Slows with Complexity
Meaningful adoption of the digital mortgage will be no easy feat for the industry and will take time.
DocuSign has a long history of driving digital transformation in other industries (real estate agents/brokers, wealth management, insurance, government, life sciences, and more), and we know success comes from a solution that is beyond just being “legal.”
For a digital mortgage solution to be right for your business it needs to deliver on security, flexibility, and dynamic support. Think about it this way, it takes lenders about one year to implement a new LOS system. Introducing an end-to-end digital mortgage means not only new software but also a new workflow for internal and external participants
Changing processes means changing behavior, a difficult task that requires a partner committed to your success.
Adoption and Scale
In addition to implementation hurdles, we should consider how a solution can scale. For example, consider how security challenges change as number of participants, number of transactions, and document retention increases. These critical security requirements will need to play well with the business processes and workflows that are unique to each company.
The good news is there is adoption across borrowers should be a manageable feat. Borrowers are now accustomed to the digital home buying experience (i.e. Zillow, Redfin, DocuSign), setting the tone for their experience well before they reach lenders. Stunting this experience with a slow, unsecure analog closing is a disservice to the industry and something we look forward to overcoming.
Keeping Pace with Change
Beyond these intracompany notions, it’s worth keeping an eye on how the regulatory industry continues to evolve.
- Notarization laws are still changing (eNotary and rNotary), as seen by recent legislation in TX, OH, NV in Summer 2016. There are now ~20 states that support eNotarization and 5 that support remote Notarization (VA, MT, TX, OH, NV)
- For a truly liquid secondary market, investor acceptance of eNotes beyond the GSE’s will be necessary (i.e. private investors, warehouse lenders, etc.).
- Servicing companies need to get more involved and part of the solution.
- eRecording requirements by the 4,000 counties in the U.S. need to align so lenders and escrow companies can transact digitally with confidence.
- A list of counties that accept forms eRecording is found here (PRIA). It does not yet include the different levels of acceptance (Levels 1-4).
So where do we go from here? The need has been addressed as have the challenges. Our next post addresses DocuSign’s recommendation for adopting a digital mortgage workflow and ensuring success the first time.