Paperless mortgage loan closings almost a reality
One of the great promises of the digital age and the internet was the eventual elimination of paper. Prob-ably no industry relies more on paper than bank-ing and finance sectors.
As anyone who ever has closed a mortgage loan knows, we love our paper. To some extent, the mortgage industry’s love-hate relationship with paper stems from the over-all complexity of creating loan programs that techni-cally must endure for 30 years.
here are a lot of what- ifs, wherefores, ands and buts in something that must be designed to stand the test of time. A typical loan applica-tion package can easily start at 80 pages and if tax returns are involved, run into the hundreds of pages. If several wealthy individ-uals get together and buy a property and we go ” full doc” ( meaning we use tax returns and fully document their assets) the loan file for one property can easily run 500 pages or more.
In recent years there has been a trend to try and reduce the amount of doc-umentation required in the application side of it, and rarely do we see files more that 50 pages or so ( which, in my opinion is still far too much).
However, until this year there has been no attempt to cut down on the papers needed to actually close the loan. Borrowers must still sit for at least 30- 45 minutes and sign a mind-numbing number of docu-ments, and I have seen people actually be in con-siderable pain from writer’s cramp at the con-clusion of closings.
Now, however, some relief is in sight, both for borrowers and for all those beautiful trees that give their all every year to become paper. It is a pro-gram called ” e- sign.” It is now possible to digital-ly sign about 80 percent of your loan documents with the click of a mouse and never touch a piece of paper except for the 20 percent or so of documents that will still require ” wet signatures” ( which is the new name for original sig-natures).
Our company is cur-rently one of the very few in the nation that offers this convenience, and right now we are only offering it on some versions of our 30- year fixed rate con-forming loans. We hope to offer it on more prod-ucts in the near future, and I would predict in a few years it will become the norm for all lenders.
In a conventional clos-ing we e- mail a large file of documents to the title company to print out and physically present to the borrower. The title com-pany then sees that every-thing is signed and disburses the money to the appropriate parties, returns the physical loan package to us and sends a copy to the borrower for their records. The title compa-ny also prepares their own documents that they require as well.
With ” E- sign” we give the title company a pass-word to log onto a web site and the loan documents are there. The borrower( s) then sit in front of a computer moni-tor and each document is presented to them for their review. They then click a mouse acknowledging they agree to the terms of the document and move onto the next one.
The only documents requiring a ” wet signature” are the deed of trust as that is filed with the county and certain documents the title company generates for its own records.
We can also supply the borrower with a password to allow him or her to review the documents in detail prior to sitting down at the closing. This should result in a better- informed, less- overwhelmed con-sumer and give borrowers more time to consider the transaction they are com-mitting to. When the transaction is complete, the title compa-ny can either print out a paper copy for the borrow-er’s own files or e- mail a copy of everything or burn a CD for the client. The loan package is then instantaneously e- mailed back to the lender ( saving the borrower a courier fee). The advantages of this technology are enormous. Many times something doesn’t get signed at clos-ing and it is an inconven-ience for everyone involved to chase one piece of paper for a week or more to get the entire loan package completed. That problem should be eliminated. Closings will also take far less time for all involved, resulting in better efficiency for all parties, resulting in lower closing costs for all par-ties.
And over time, millions of trees will live to see another day and provide shade, wildlife habitat, erosion control and purify the air we all breathe. And millions of borrowers will no longer suffer writer’s cramp!
Chris Neuswanger is a loan officer at Macro Financial Group in Avon and may be reached at 970- 748- 0342. He wel-comes mortgage- related inquiries from readers.
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