Is Your Company Prepared For E-Closings?
Since the Electronic Signatures in Global and National Commerce (E-Sign) Act became law in 2000, there’s been a lot of speculation as to when the use of e-sign and e-closing would take over as standards in the mortgage industry. At a glance, it appears that TRID compliance should have been the factor that pushed e-closing over the brink and into common use, but in fact, TRID’s messy and chaotic implementation has done more to set back the widespread adoption of e-closing in the immediate term. Everyone in the mortgage production chain is still a bit seasick from the waves TRID caused, and no one is eager to generate new waves. In the near future, though, TRID requirements, combined with new regulatory pressures and a significant shift in the demographics and attitudes of consumers, will create new demand for widespread use of fully digital e-closing.
- CFPB Project: In 2014, the Consumer Finance Protection Bureau (CFPB) released a report outlining a study of lenders and consumers comparing e-closing to paper closing for residential mortgages. The study found that consumers who used e-closing understood the process better and felt more empowered; they had higher confidence in the accuracy and efficiency of the digital process and demonstrated better understanding of the fees, terms, and actual costs of their loans. The CFPB is actively advocating for the adoption of e-closing. Currently, they’re promoting the use of e-closing as a Best Practice, but they’re also working with other regulatory agencies toward integrating the use of e-closing into the rules governing the industry.
- ULAD: In order to protect investment by Government-Sponsored Agencies (GSAs) like Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) developed a set of requirements for loan application data intended to allow more accurate verification of a borrower’s ability to repay. The Uniform Loan Application Dataset (ULAD) creates applications that are compliant with the Mortgage Industry Standards Maintenance Organization (MISMO) reference model 3.4. Although ULAD was specifically designed to protect the investment interest of GSAs, it also creates a uniform standard for assuring sound mortgages, which encourages other investors to accept digital mortgages where they had previously been hesitant to do so.
- Shifting Consumer Attitudes: Consumer attitudes and demands have changed significantly as the baby boomers are no longer the loudest voice in the consumer market. Boomers were the last generation of consumers who grew up without digital technology and, on the whole, they place greater confidence in paper transactions and view digital transactions with suspicion. As their Millennial grandchildren enter the home-buying market alongside Generation X, though, the attitude shifts and the demand for more efficient digital transactions grows.
E-Closings Are Soon To Take Center Stage
The forces which slowed the adoption of e-closing in residential mortgages are subsiding and the regulatory push toward digital closing continues to gain strength. Closing agents, title agents, and real estate attorneys can help ease the transition by ramping up toward full digital production now. Easy Soft Real Estate Closing Solutions helps smooth the way with a relational database that means you reduce the chances for human error by entering the data for each transaction only once. After that, any form or worksheet you select for that transaction automatically populates from the database. EasySoft also offers e-jackets and closing protection letters for title agents. The forms library includes more than 200 standard forms and you can add custom forms and share them among your licensed workgroup for even more efficient and accurate workflow. Try Easysoft Real Estate Closing Solutions free and start preparing your firm for a smooth transition to e-closing.