It is probably no surprise that closing on a mortgage digitally gained significant traction during the height of the COVID pandemic. However, years later, this digital trend continues to gain popularity every day as a better way for lenders and title agents to grow their businesses.
According to Pew Research, about 30% of US adults are almost constantly online. Thanks to the introduction of the internet and online shopping, shopping preferences have changed drastically over the years. At Stavvy, we believe the same can be said for real estate purchases and mortgage transactions. Traditional in-person closings are becoming a thing of the past, making way for more digital closing options. But this shift benefits more than just homeowners.
The mortgage industry has always been a people business—a business rooted in the connection and collaboration of homeowners, lenders, title agents, lawyers, realtors, and online notaries. Today, that means working with mortgage stakeholders where they are most comfortable—online.
Enter mortgage eClosings—or in other words, a digital approach to the traditional mortgage closing process.
At Stavvy, we talk a lot about the rise of remote online notarization (RON), and digital closings being the mortgage industry's future. Yet we field quite a few questions about eClosings, so we decided to answer them here. Keep reading for clarity on mortgage eClosings and how this method can help you grow your business and facilitate a better experience.
What is eClosing?
An eClosing is the digital approach to a traditional, pen-and-paper mortgage closing where some or all closing documents are executed and accessed electronically. Additionally, in states where it is available, electronic notarization, like remote online notarization (RON), would also be included in the eClosing process.
What are the different types of eClosings?
Below are the most common types of eClosings: IPEN, RIN, eSign hybrid, and RON. The availability of each method depends on state and county-level notarization laws.
In-person electronic notarization (IPEN)
IPEN allows documents to be notarized electronically during an in-person closing. A notary seal is created, attached to an electronic record, and stored digitally.
Remote ink-signed notarization (RIN)
RIN involves a wet signature on physical paper and an online notary witnessing the signature through a live video platform. The homeowner must overnight the documents to the online notary so they can manually apply their notarial seal to complete the notarization process.
An eSign hybrid closing occurs when a closing package and official mortgage documents are electronically signed before or during the closing session. The signer and notary are together in the same physical location for in-person notarization.
Remote online notarization (RON)
RON is the electronic notarization of documents. This notarization form uses secure audio-video, identify proofing, eSign, and eNotarization technology. The transaction is carried out online, and the signer and notary can be in different physical locations.
With more and more states passing RON legislation and the Revised Uniform Law on Notarial Act (RULONA), the mortgage lending industry is setting the legal foundation for mortgage eClosings.
Legislation like the Uniform Electronic Transactions Act (UETA) and ESIGN Act have also paved the way by making eSignatures and eNotes permissible throughout the United States. eNotarization and eRecording regulations vary from state to state; however, in 2019, ALTA reported that 55% of the country allows eRecording.
What are the benefits of eClosing technology?
Mortgage eClosings benefit title and settlement agents, real estate attorneys, lenders, and homeowners. Below are the top six benefits of eClosing technology:
Benefit #1: Convenience
With eClosing technology, stakeholders can sign documents from anywhere, at any time. Pertinent closing documents are available in a single secure location and easily accessible to the right people. With mortgage data and documents available digitally, shipping and document loss is no longer an issue, an operating cost, or a risk to the closing process.
Benefit #2: Cost and time savings
According to McKinsey and Company, in 2021, the average loan origination cost was $7,000-$9,000. Due to manual loan processing and underwriting, on average, 10-14 mortgages are closed per full-time employee per month, resulting in an average closing time of greater than 45 days, significantly impacting customer satisfaction levels. Mortgage eClosing capabilities can lower the cost to close a loan, ultimately decreasing origination costs for lenders. In addition, digital closing options can speed up the overall closing process, and dazzle homeowners come closing day.
Benefit #3: Security
All mortgage closing documents and consumer information are stored on a secure platform with multi-factor authentication (MFA). With digital audit trails, title agents, lenders, real estate lawyers, and online notaries can spot altered information and understand who has viewed and executed what and when.
Benefit #4: One source of digital truth
Digital mortgage platforms today allow lenders to close a mortgage from a single tool. There is no need to use numerous methods or tools that waste time, effort, and money. Investing in and implementing one platform helps lenders, title agents, and online notaries omit manual work, easily hit closing dates, and boost office productivity and potential revenue.
Benefit #5: Fewer delays and errors
There’s no need to double-check signatures or checkboxes manually. eClosing technology allows less room for mistakes in closings, easily detecting discrepancies and allowing lenders and title agents to do more accurate closings—saving time and effort.
Benefit #6: Better closing experience
With eClosings, homeowners, title agents, and realtors don’t need to travel, spend unnecessary time or money, or deal with the back and forth of physical paper. A more digital approach to mortgage closings provides a faster and better experience than traditional methods.
What to look for in an eClosing platform?
While transitioning from traditional to digital has advantages, there are a few things lenders and title agents should consider.
At the bare minimum, eClosing technology should be MISMO® compliant, have security measures in place to ensure data protection, and include industry compliance guardrails.
An eClosing platform, product, or tool should be user-friendly and include industry-specific features like eSignature, eRecording, eNotarization, digital audit trail, document management, and audio-visual communication to name a few.
But perhaps most importantly, the eClosing platform should work for you as the end user. We also strongly encourage mortgage professionals to align with a product that can offer access to supportive implementation, training, and customer success teams committed to your digital success.
Making a case for mortgage eClosings
Any opportunity to support your homeowners and business partners, save money, and lessen the burden on your staff is an opportunity to grow your business. Mortgage eClosings create so many of these moments by allowing you to meet people where they are and where they feel most comfortable. Whether it’s electronic signatures, remote online notarization, eRecording, or all of the above, digitizing the closing process is an invaluable way to dazzle homeowners, decrease operational costs, and rid yourself of the headaches of manual, paper-based closings.