November 01, 2022

Hybrid Closing: The Shocking Truth

BY Jeremy Potter - VP, Product Strategy

Hybrid closing is a popular buzzphrase in the mortgage industry, as lenders decide which technology investments and digital modernizations to undertake. It is often used to describe a closing process with a digital component, like eSign

What I’m about to say next may shock you. 

Hybrid closings are an incremental step forward for lenders to address digitization and help save time at the physical closing table. However, a hybrid closing requires the homeowner to do more than they’d do for a traditional, paper-based closing with little gain.

What is a hybrid closing?

The term “hybrid” in this case refers to the fact that some of the consumer’s closing documents are reviewed and signed electronically at home (usually on a personal computer, tablet, or even a phone) and the remaining documents are ink signed in person on closing day. The option of digitally signing some documents saves time when the in-person component begins and allows the signer more time to review the documents. These are clear, important benefits that address the challenges that title agents and signers face. 

But when it comes to a hybrid closing, many of the pain points associated with in-person closings still exist for signers. 

For one thing, a hybrid closing still requires the signer to show up physically to an assigned location at a specific time. Signers must take time off work, drive to the closing, and sit in an office while the documents are passed around and signed. Even if there are only ten documents to sign in person at a hybrid closing instead of forty, the signer still has to pay for gas, childcare, and lost time at work. 

Yes, it saves some time in the moment. Still, between the eSignature at home, and the in-person closing component, a hybrid closing generally takes longer to complete than a traditional, in-person closing. 

This begs the question: who benefits from a hybrid closing? Is it the signers, the lenders, or no one at all? 

Hybrid closings are a disjointed solution

Hybrid closings are a disjointed solution to many obstacles on the road to digital mortgage transformation. Admittedly, in the highly decentralized, fragmented world of mortgage lending, even a slight movement toward progress gets attention, whether that’s the benefits of remote online notarization (RON) or knowledge-based authentication (KBA) through a video call. 

But there is more we can do, like adopting eClosing with RON

Benefits from transitioning from hybrid closing to digital closing

It is not just the signers who benefit from eClosings. Here are other stakeholders and the intended positive impact of digital closings: 

  • Closers and post-closers within lender operations can see the status of documents and signings.  They always know who is assigned and where they are in the process. Imagine error-free mortgage closings where “trailing documents” no longer exist.
  • Capital markets and risk professionals can better gauge the volume and timing of loan pools with the visibility that digital workflows provide, as better execution happens through faster delivery. Lower costs around hedging and trailing documents improve the bottom line on the first loan and compound for every closing after that.  
  • Title companies and law firms have better communication and collaboration if they use the same system the lender uses. In addition, transaction communication, including wiring instructions, is more secure. Title agents and lawyers have no shortage of technology tools, but what if they could use the same platform for every signing, transaction, and business partner? (The very thought excites me, and hopefully, you too.)  
  • Warehouse lenders get access permissions that align with their legal rights and no longer have to wonder about the status of any particular loan.
  • Loan aggregators and loan buyers cut down on wasted time and fees associated with collecting and verifying data. The loan delivery process offers data certainty and visibility to interim servicers, mortgage servicers, and subservicers.  

The savings and benefits of digital closings (and therefore the compelling value) stretch across so many different areas of a lender’s business and stakeholders that no one company has ever made the case to all these players that conversion to digital is worth it. To appreciate the overall value, you must start with the end in mind.

Making the shift from hybrid closing to digital closing

I’ve spent the last year at Stavvy learning about the obstacles to digital mortgage adoption and the potential solutions we offer the industry. Stavvy enables hybrid closings on a platform built for the future. Stavvy aims to bridge the gap between hybrid closings to eClosings, with all stakeholders benefitting. 

The reality for mortgage-based businesses is that nationwide authorization for digital and remote closings will happen soon, and competitive pressure will drive more of the process to technology solutions. A digital mortgage platform like Stavvy streamlines the workflow. In other words, it frees up lenders, title agents, online notaries, and real estate attorneys to spend more time with their mutual clients, building relationships, strengthening referral business, and meeting homebuyers at their exact point of need.

The lenders who are early adopters of a digital mortgage lifecycle will capture benefits far beyond cost savings, lower risk, and operational efficiencies. Product development, digital innovation, and new market experiences (for customers and referral sources) are just the beginning. Stavvy is committed to a 100% digital mortgage process and the millions of people who want greater access and transparency on the road to homeownership. 

That aside, if you walk away from this blog with one unshakeable nugget, I hope it is this. Until we, as an industry, offer digital closing options at scale, we’ll continue to be behind the technology curve and unable to meet signers’ expectations in an increasingly demand-focused consumer landscape. 

So, what are you waiting for? Are you ready to help transform the mortgage process? 

To stay connected to Stavvy and learn more about digital transformation trends in the industry, subscribe to our blog.

Jeremy Potter - VP, Product Strategy

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