Showing little sign of progress on e-closings
On July 6, I wrote an article talking about the future of the mortgage-closing experience, suggesting that eventually most loans will be finalized using electronic signatures. What is taking so long for us to get this done?
To answer that very question, my company traveled to the 2015 New England Mortgage Expo at Mohegan Sun in January.
When we arrived the night before, we networked with local and regional lenders. In attempts to be discrete, I approached a few chief lending officers and engaged them in small talk, asking about business, new regulations, etc. It didn’t last. I couldn’t wait.
“Why aren’t you using electronic-signature technology to close your real estate files?” I blurted out.
The universal response? There’s a lack of “warehouse lenders” who will accept electronically signed notes and mortgages. For those of you who don’t know, warehouse lenders provide the funding for retail mortgage companies, and, in many instances, are the ones who buy the loan after it has been funded. Currently, there really are not many warehouse lenders who will buy an electronically signed note and mortgage. Why? The default answer is that they often are not familiar with the system the lender uses to capture the electronic signature and aren’t confident that those signatures have been properly vetted and verified.
For this convenience to gain significant momentum, banks that offer mortgages need to advocate for it. This would get the warehouse lenders onboard. Credit unions already have seen the light.
Credit unions, unlike mortgage lenders, are different in that they use their own funds for lending. “Many of our e-mortgage customers are credit unions,” said Michael Cafferky, senior product manager for e-mortgages at Fannie Mae, “as they often self-fund and are not constrained by the lack of warehouse funding for electronic notes, which is holding back some traditional mortgage bankers.” Credit unions have a unique advantage because they can originate a loan and then sell it to a government-sponsored enterprise.
As I observe these technological changes in our industry, I am shocked that we are not further along in innovating this process. The law allows mortgage companies to use electronic signatures, but most of them choose not to. I think we are just too comfortable with and unwilling to give up paper documents.
Return on investment data suggest that lenders can save money with this process and improve customer service. It seems like a no-brainer to me.