Why Short-Term Closing Fixes May Be Holding Lenders Back

2020 became a record year for eClosing and eNote adoption

During the pandemic, the mortgage industry did its best to close loans on time under extremely difficult circumstances. As a result, 2020 became a record year for eClosing and eNote adoption—in fact, eNotes registered on the MERS eRegistry soared 261% between December 2019 and December 2020.

In their rush to close loans under social distancing requirements, however, the closing technologies many lenders chose were no more than bandages. They may have done the job, yet they were poor substitutes to a true electronic closing. As the post-pandemic housing market heats up, it’s now time for lenders to rip off those bandages and start thinking about the bigger picture.

Cumbersome and Fragmented

This is not about whether the typical eClosing technologies work or not. It’s about how disjointed they are, and how they fail to move the needle on creating a better borrower experience — which is the single biggest competitive advantage a lender can have. In fact, they often complicate the closing process, which doesn’t bode well for repeat business.

When it comes to eClosing technology providers, there are plenty of players — yet the vast majority only have partial solutions that don’t integrate well with other systems. During the pandemic, many lenders relied on these one-trick-pony providers for a short-term fix while inadvertently fragmenting the entire closing process.

For example, lenders typically send borrowers to one solution for eSigning disclosures. When it’s time to close the loan, they send the borrower to another platform. If they are using an eNote and their current document provider doesn’t support it, the borrower may go to a separate signing room from another provider for the note. And if the borrower chooses a remote eNotary… well, you get the point.

During the pandemic, lenders didn’t have much time to think these things through. One might say they have little time now, with the summer housing market in full swing. But it is never a bad time to think strategically about technology, especially when it involves the customer experience.

Lenders need to take diligence, security, consistency, and connectivity into account.

Creating a Seamless Experience

Whether lenders are aiming for a completely digital mortgage process or want to continue offering hybrid eClosing options to borrowers, there are certain capabilities that they absolutely need.

One is being able to let borrowers sign everything that needs to be signed—from disclosures to closing packages, eNotes, or any other document — in one seamless environment. If their goal is a true digital mortgage, they’ll need technology that incorporates the all-important online notarization piece, which has been the missing link for some time—but with today’s technology, it’s finally available.

They also need technology that supports the lender’s brand, not somebody else’s. Currently, when lenders shift borrowers from one technology provider to another, the borrower may not see the lender’s logo but all these different technology logos that mean nothing to them, which creates a sense of confusion and disconnect.

Lenders need to take diligence, security, consistency, and connectivity into account as well. For this reason, they’ll need a platform capable of creating a SMART Doc for every loan document, structured or not.

Keep in mind that most providers just focus on the eNote being a SMART Doc, which means they are usually manually tagging PDF of other documents for signing. Access to an entire SMART Doc library, on the other hand, gives lenders digital versions of every document in the loan file, which eliminates tagging and allows faster, electronic due diligence reviews. Ultimately, this enables lenders to manufacture loans properly and securely, so if they hit a bump down the road, no one questions the validity of their documents.

Lenders should also look for providers with serious digital mortgage experience on staff. When reviewing eClosing providers, it’s important to ask whether they have leaders with experience collaborating with the Mortgage Industry Standards Maintenance Organization (MISMO) on data standards for electronic transactions — or whether they are veterans of MERSCORP and understand the MERS eRegistry backwards and forwards. Very few providers do.

The Cost Of Inaction

Most lenders have no idea what the true costs of their technology investments are, especially when one factors in the cost of customer frustration. But while the borrower experience may be difficult to quantify, it definitely exists. When borrowers have so many lenders to choose from, it’s often not rates but a lender’s reputation and record of customer service that truly matter.

With today’s technology, all the stars are aligned for lenders to achieve a true digital closing and a better borrower experience. All the tools, capabilities and expertise are out there for lenders to defragment their entire loan ecosystem and turn it into a well-oiled machine. All they need is a comprehensive strategy and the willingness to execute it.

This article originally appeared in Mortgage Banker Magazine, on the week of November 1, 2021.