BLOG VIEW: Although electronic document (e-doc) and electronic signature (e-sign) technologies are coming to the fore and will be essential in helping lenders comply with the Consumer Financial Protection Bureau's new integrated disclosure rules going into effect Aug. 1, it is going to take a while longer before the mortgage industry transitions to a purely e-originated mortgage.
That's because most lenders will continue to allow borrowers to download, print, fill in and sign ‘wet’ documents and then scan and upload them into the system – or flat mail them in for processing.
Why would lenders continue to offer these legacy systems, with all their latency and inefficiency? Simple: customer satisfaction. There's still a fairly sizeable percentage of the population that isn't all that tech-savvy and is wary of such advances as e-doc and e-sign technology. More importantly, there are still people out there who prefer to put pen to paper and sign – rather than click – when it comes to important life decisions, such as buying a home, and lenders don't want to alienate these folks.
Further, as Tim Anderson, director of e-services for DocMagic and member of the Electronic Signature and Records Association, points out, ‘UETA and ESIGN require the lender to support 'opting out' to paper at anytime. So both options – wet or 'e' – must be presented and supported. Further, some jurisdictions may not support a total e-closing process.’
Anderson says for now, most lenders will continue to take a hybrid approach, ‘where a majority of the documents and disclosures can be e-signed and only the notary or recordable documents will be papered-out, wet signed and then scanned back in.’
Of course, one could argue that this defeats the purpose of getting all borrowers to use e-documents – which is now the ultimate goal of lenders and regulators. But one must also consider that the number of ‘dinosaur’ borrowers who insist on wet signatures is shrinking rapidly – so this is a case where the old technology will one day be obsolete. (However, that's also partly a question of how much lenders can steer more traditional borrowers away from wet docs and get them to embrace e-doc and e-signature technology.)
It's interesting to note that, according to Anderson, no lender, vendor or other organization is tracking how many borrowers use wet-docs versus e-docs – and of those, for which docs. However, he estimated that about 40% of docs processed through closing are now electronic.
Part of the problem in tracking that statistic, he says, is there are so many different proprietary systems used in the origination process and it's hard to get a uniform dataset that is a true representation of all activity.
‘Of course with e-closing, all loans need to be submitted to MERS to be e-registered, so there are better stats on those loans,’ he says.
Other than that, lenders can basically only guess how big of a job they have – in terms of getting borrowers to embrace the new way of doing things.
Anderson says he is seeing rapid adoption and implementation of e-disclosure technology for the initial application package.
However, investors continue to want copies of certain docs ‘and these are often scanned and sent.’
So, it appears that optical character recognition (OCR) technology is going to be in need for quite some time longer. And that's too bad, because, as good as OCR is, it still requires lenders to continue to do manual checks of their scanned mortgage docs, using the old ‘stare and compare’ technique, thanks to OCR's inherent shortcomings.
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