Hybrid closing is a popular buzzphrase in the mortgage industry, as mortgage lenders, title and settlement professionals, and real estate closing attorneys decide which technology investments and digital modernizations to undertake.
eClosing looks different for everyone. Some mortgage professionals opt for full eClosing, whereas others prefer to scale and begin by offering hybrid closing.
Hybrid closing, also known as hybrid eClosing, is an option for mortgage lenders, real estate attorneys, and title agents looking to dip their toes into digital mortgage closing. Hybrid eClosing offers time and cost savings and paves the way for full eClosing with remote online notarization (RON) or in-person electronic notarization (IPEN), making future implementation easier to tackle.
Throughout this blog post, we answer top-of-mind questions surrounding hybrid eClosing for mortgage transactions, including:
- What is hybrid closing?
- What's the difference between hybrid closing and eClosing?
- How does hybrid closing work?
- What are the benefits of hybrid closing for mortgage professionals and homeowners?
What is hybrid closing?
Hybrid closing is a form of eClosing where at least one of the required mortgage closing documents is executed using pen and paper. Typically, lenders adopt hybrid eClosing so consumers can sign the non-notarized documents within a loan closing file electronically, leaving the documents that require notarization, like the security instrument, to be executed using pen and paper and in the physical presence of a notary.
For example, during hybrid eClosing, a homeowner can sign closing disclosures, the loan estimate, and the completed loan application electronically before the closing. During the in-person closing ceremony, the consumer will review and sign the promissory note, security instrument, and any remaining notarized documents using pen and paper.
The option of electronically signing some documents before the scheduled closing saves time for everyone involved in the transaction. It also gives signers ample time to review their mortgage documents at home and raise any questions, issues, or concerns they may have on closing day. Because less paperwork requires a signature during the closing ceremony, you can answer signer inquiries without prolonging the meeting.
What's the difference between hybrid closing and eClosing?
Digital closing, or eClosing, became more prevalent in the mortgage industry due to COVID-19 social distancing restrictions. However, now that you and your partners are back in the office, you can explore various eClosing methods to improve the consumer experience and become more operationally efficient without feeling pressured to opt for a fully digital closing process.
It’s important to think of eClosing as a spectrum ranging from hybrid to full, with different variations in between. There is no one size fits all approach. Below we define and provide examples for four flavors of eClosing, so you can determine which closing options make sense for you and your business.
eClosing is the digital approach to a traditional closing where some or all closing documents are accessed and executed electronically. Digitally closing a mortgage generally involves, at a minimum, a digital platform like Stavvy to support eSignatures and the electronic presentation of closings documents and may include audio-visual technology for remote online notarization. eClosing can but does not need to result in an eNote. Lenders can adopt various eClosing methods to fit their business model, and Stavvy supports them with our flexible eClosing solution.
When a mortgage lender or homeowner opts for hybrid eClosing, generally speaking, the signer will eSign closing documents before the closing date, except for anything that requires notarization. In this instance, the official closing ceremony takes place in person, and the homeowner signs the remaining documents in front of a notary with pen and paper. Despite still having to sign some documents in person, the process is much quicker than traditional in-person closing and requires less paper.
Hybrid eClosing with eNote
Hybrid eClosing with eNote is the process where the promissory note is included as part of the documents signed electronically and executed in a platform that meets the requirements necessary for the executed note to be a transferable record and MISMO®-compliant SMARTDoc® eNote.
eClosing with IPEN
eClosing with IPEN is the process where the notarized documents within a closing file are accessed, signed, and notarized electronically during a closing ceremony in the physical presence of a notary who uses technology to apply a digital notarial seal to the signed documents. This form of eClosing allows lenders to choose whether the consumer can sign the non-notarized documents before or during the closing ceremony concurrent with the notarized documents. An eClosing with IPEN typically involves creating an eNote, providing lenders with additional post-closing efficiencies.
eClosing with RON
An eClosing with RON is the most convenient method of eClosing where the notarized documents within a mortgage file are signed and notarized remotely, allowing all parties to meet virtually using audio-visual technology. Much like an eClosing with IPEN, the platform allows the notary to apply a digital notarial seal to the digital documents upon execution.
How does hybrid closing work?
A hybrid eClosing workflow can take many forms depending on your capabilities, preferences, and technology provider. Therefore, for the sake of explanation, we're sharing one possible hybrid closing scenario with you below:
- Signers receive their non-notarized closing documents from the mortgage lender electronically with instructions for eSign.
- The signers electronically sign the identified closing documents before the in-person closing ceremony, including the mortgage note if the lender opts for an eNote.
- The remaining closing documents are presented to the consumer for wet signature during the in-person closing ceremony and witnessed by a notary.
What are the benefits of hybrid closing for mortgage professionals and homeowners?
Hybrid eClosing offers operational efficiencies that will continue to increase the more you digitize your mortgage closing process with eNote, IPEN, RON, and eRecording. Most importantly, hybrid closing provides your consumers with flexible, digital closing options, a better real estate customer experience, and time savings.
From fewer physical documents to sign on closing day to more time to review and comprehend each mortgage closing document, hybrid eClosing requires less time, resources, and paper than a traditional, in-person closing. A hybrid eClosing process also lays the foundation for full eClosing should you choose that path forward.