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If you think you know what an e-mortgage is,
you are probably wrong. But it’s not your fault.
The industry has been confusing terms, concepts
and realities for years when it comes to the digital
transformation of the mortgage. Much of what
the industry “knows” about digital mortgages is
based on facts that are 10 years old. This is like
getting your latest rate-card information from
data published 10 years ago.
The fact is that rising origination costs are
finally driving us to consider legitimate and sustainable ways to reduce costs and streamline
the process. What better way to do that than to
digitize the mortgage process? And yet, we still
hear mortgage professionals say, “That’s years
away. There are too many legal barriers, technology gaps and practical considerations to iron out
before truly digital mortgages become a reality.”
These experts are wrong. Here’s why.
Talk of e-mortgages is heating up again. It probably started with the wild marketing success
of Quicken Loans’ “Rocket” mortgage. In addition, lenders are finally admitting that ramping
up and down for market spikes, or flipping the
switch back and forth between outsourcing and
bringing processes in-house are not sustainable
strategies for managing costs anymore.
In theory, pulling the virtual junkyard of disparate technologies, multiple vendors and
winding processes together is an obvious way
to save time and cost. But, as a practical matter,
it doesn’t work that way. Not only are many
mortgage company, lender and vendor systems
incompatible, we often cannot even agree on
E-mortgages, e-closings and e-notes are all
different things. And, even the term e-mortgage
is dated and calls up too many images of the ’90s
when the electronic mortgage was just a theory
or a vision. Here are a few key terms that get
thrown around and help to muddy the waters of
what is possible with today’s digital-mortgage
■ ■ End-to-end/cradle-to-grave mortgage:
A lot of businesses claim to have an “
end-to-end” digital-mortgage solution, but the actual
products are only end-to-end for part of the
process — the loan application process, for
example. Right now, there are no true “
end-to-end” solutions that begin at pre-qualification
and end with recording the deed and the note,
bringing together loan origination, underwriting, title insurance, valuation, curative, escrow,
disclosure, closing and recording. So don’t be
fooled. The end-to-end applications that exist
right now are no more comprehensive than a
bumper is in providing “end-to-end protection”
for your car.
■ ■e-signing/e-closing: Here are those
e-words again, which make people think of the
dot-com boom. In a truly digital closing, borrowers receive their closing documents online.
In a truly digital closing, smart docs are the
norm and the signing may be done remotely,
quickly and painlessly online. A truly digital
closing doesn’t mean bringing docs to the
settlement table on an iPad or showing borrowers the docs in a safe, online portal prior to
close. It’s all digital, throughout. These exist
right now — in states that allow them.
■ ■ e-note/e-vault: This part is still in its infancy
— at least when it comes to adoption. E-note
refers to an electronic promissory note — the
digital version of the notarized loan docu-
ments that must be filed with the county clerk.
E-vaults are secure storage facilities for digital
mortgage files — the equivalent of locked file
cabinets in a secured storage room.
The e-note and e-vault are not digital closings,
nor do the terms describe the entire process.
In fact, if you haven’t already implemented a
digital-closing platform, e-notes and e-vaults will
be irrelevant to you. These elements, however,
are necessary to make a truly digital, end-to-end
solution into a widespread reality. The technology is in place and getting better by the day. The
elements just need to be widely adopted. This
will require a change of perception and a willingness to change on the part of the industry —
In addition to the terms above, it also is important
to know about hybrid closings. This newer term
represents the best, current state of digital closings. Because not everyone will accept e-notes,
several states still require in-person closings
and/or “wet signing” of certain documents,
where borrowers sign in ink with a quill on parchment — or, at least, with pen on paper — with a
In a hybrid closing, borrowers see closing documents and disclosures electronically in advance.
Any documents that are not required to be wet-signed by law can be signed digitally online or
in-person with the closing agent. Hybrid closings are shorter and easier, because only a few
documents remain to be signed.
Mark McElroy is president and CEO of Pavaso, a provider of digital collaborative technology solutions
for the real estate life cycle. He began his career in Fortune 100 application development and technology deployment. In 2001, along with several other investors, McElroy purchased RamQuest Inc., a
provider of solutions for the title and settlement industry. In 2011, RamQuest began to widen its focus
and develop products and services under the Pavaso brand. Reach him at email@example.com.
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