Overcoming the Challenges of Digital Closing
For most lenders, using e-signature plus delivery, workflow and compliance from application through to closing are table-stakes; not managing these aspects of the mortgage process digitally means missing out on easy efficiency, cost-effectiveness, and quality borrower experiences. Closing, however, introduces new stakeholders and complexities that make creating and implementing an end-to-end, fully digital mortgage process challenging.
Joe Evans, sr. product marketing manager at DocuSign and Jim Rosen, vice president of document and interface solutions at Mortgage Cadence sat down for a webinar hosted by Housing Wire to examine some of the main challenges lenders face in digital closing and how they can be overcome to help make digital closing a reality, delivering consistent, secure, and easy-to-use digital mortgage experiences for all stakeholders.
eNotes and eNotary
Paper might be less efficient and secure, but it sure is familiar. That familiarity can create what Jim Rosen calls “chaos of convenience.” It’s easier to do the thing everyone involved in the mortgage process knows, understands, values and trusts. Nowhere does this obstacle come to life more in the digital mortgage process than with eNotes and eNotary.
The only difference between eNotes and traditional, paper promissory notes is that eNotes are created, signed, and managed digitally. Being able to transfer an eNote to the secondary market in seconds or minutes, rather than days or weeks, makes eNotes an appealing option in the mortgage process. However, lenders need to be able to transfer those assets to secondary markets, and so it’s imperative that investors recognize that these digital assets are as equally negotiable as paper, and value eNotes the same as traditional promissory notes. While the use of eNotes is expanding at a rapid pace, it still has a long way to go to achieve the mainstream acceptance of other digital mortgage tools like eSignature.
A major growth opportunity in digital closing is taking the notarial experience and making it digital via eNotary, or remote online notary. The challenge that lenders face is that notary laws are controlled at the state level, vary state by state, and those laws may take some time to trickle down to the county level. While notary laws catch up with digital transformation, lenders will need to stay plugged in and be aware of what they are actually able to do, based on their geography. This list of DocuSign supported states and eNotary summaries is a great asset for staying up to date on state eNotary laws.
Throughout the mortgage experience, the lender and customer have a close, personal relationship in which more often than not, lenders are providing customers with a digital experience. Once that experience is handed off to title and settlement, a new stakeholder is introduced, one who may not be as far along on the journey to a full digital mortgage process. Jim Rosen notes that the key to extending the borrower experience into a smooth, effective, and efficient closing process is flexibility.
All title and settlement providers, regardless of their size and technology stack, have the same goals: facilitating the closing experience, doing so cost-effectively, and ensuring the borrower has a good experience. Settlement has to work with as many different tools and technologies as they have lenders to partner with, so bringing more and varied technology into the mix can create challenges for them that slow the adoption of a digital closing process.
Additionally, while two-thirds of borrowers are interested in a fully digital mortgage, there are always going to be those who crave the familiarity of paper.
Lenders who approach the relationship with settlement openly and flexibility, supporting what settlement is already doing, will have the most success. In the mortgage process, lender and settlement are business partners; they both have ways of doing business that need to be supported, not necessarily replaced. Flexible solutions like DocuSign Rooms For Mortgage—which creates a secure, digital workspace for everyone involved in a mortgage and feels as familiar and comfortable as eSignature—can help solve collaboration challenges between borrower, lender, and settlement.