By Anthony Garritano, Editor, Mortgage Technology Magazine
In total, 87% of respondents say electronic signing and delivery of upfront docs is still not mainstream. "Nonetheless, forward-thinking lenders have been using them for years, but they're not mainstream in the sense that a majority of today's borrowers could expect to receive them from most lenders," said SigniaDocs chief strategy officer Harry Gardner. "E-disclosures are commonly thought of as the low-hanging fruit in an e-mortgage implementation – they can be easily and quickly implemented, ahead of the full set of e-closing docs. Lenders can gain immediate ROI from e-disclosures, saving on paper, mailing and tracking costs, and that can be used to help executive management see the value of "e" and gain support for a full e-mortgage implementation."
However, The new Mortgage Disclosure Information Act is prompting many lenders to lean hard on their document preparation providers to help them comply through automation. MDIA is a huge catalyst in the process of furthering market wide e-disclosure adoption, according to Dominic Iannitti, president and CEO at DocMagic. Let's hope he's right.
"The waiting period involved with MDIA is prompting a lot of lenders to automate," noted Mr. Iannitti. "There's a three-day waiting period so the loan is just waiting, but if you can get e-consent within one hour, you've just shaved 70 hours of waiting out of the process and you can order the appraisal.
"At the end of the day, if you are out of tolerance when it comes to close you have to re-disclose and wait another 72 hours. Since we generate the APR, we'll do the calculation to let the lender know if they're in tolerance and electronically re-disclose if needed."
Through an e-disclosure process, the lender gets the compliant initial disclosure package, the borrower is notified via e-mail that they are invited to sign the disclosures online, the system captures their electronic consent to receive documents electronically. At that point, the system performs a "reasonable means test" which proves the borrower can read the disclosure documents, and allows them to (optionally) electronically sign the disclosures. Once that is done, the documents are submitted back to the lender.
Every step in the process is date stamped with the time, and the doc provider supplements this with the company's own print and mail facility whereby the doc firm can paper out as needed based on the lender's business rules, delivering paper disclosures to borrowers on behalf of the lender. This single process completely satisfies both RESPA and ESIGN, and does so much more quickly and cost-effectively than they are doing today in a paper world, said Mr. Iannitti.
"We've been making a lot of headway on e-disclosures," said Mr. Iannitti. "We've included our own click sign technology. We also added a dashboard/system console to enable lenders to track the process. We like to consider DocMagic a compliance company first. Docs are just a bi-product of compliance nuances. For example, with ESIGN you have to capture borrower's consent before e-signing and givie them the ability to paper out at any time."
But will lenders get behind electronic signature? "Lenders like click sign because we only charge if they get an actual e-signature," answered Mr. Iannitti. "If the borrower declines consent or if after 48 hours an e-sign isn't obtained we won't charge and we'll notify the lender they have to paper out or we can paper out for them. The borrower will get a pdf of both the consent and the e-signed documents. For the lender, they get a full audit log."
"E-disclosures are even more valuable now with the Mortgage Disclosure Improvement Act rules that require 7- and 3-day waiting periods after initial and re-disclosures before closing," added Mr. Gardner. "With e-disclosures, the lender knows exactly when the borrower viewed and signed their disclosures. In this regard, it's important not to confuse true e-disclosures (electronic documents that are delivered to the borrower for secure electronic signature) with electronic ordering of paper disclosures from a third-party document service. While the latter may provide some cost and labor savings, they are still paper disclosures that are then shipped to the borrower."