Originators have been linking loan origination systems that don’t have certain e-mortgage capabilities to everything from document management systems and e-signature technology to electronic fax-receiving automation in the slow but inexorable transition toward the e-mortgage, something that is about to take another small but significant step forward this year.
Specifically, the IRS has made it a goal to accept electronic signature authorization of the 4506-T form they have been testing by yearend at the latest, according to DocMagic attorney Silvia San Nicolas.
The form is significant because when it comes to mortgage predisclosures on many loans, “That’s the only document…that’s still required to be done on paper,” said Robert Al-Jarr, an EVP in Silanis’ e-signature division, and something that has been “pretty much holding everyone up.”
“While initial disclosures can be electronically signed” the requirement to “wet” the 4506-T “slows the process down,” San Nicolas said.
Some vendors have been offering e-signature capabilities for free recently, which appears to have been increasing their momentum. DocMagic’s CEO Dominic Iannitti made them complimentary with the goal of increasing market acceptance over the past year, according to San Nicolas, and Silanis earlier this year was giving small and midmarket mortgage bankers the opportunity to “test drive” the technology on a complimentary basis.
“There are different forms of digital signatures, but it’s the ‘click sign’ that is used most commonly on the initial documents. We think it’s the simplest and most efficient,” said San Nicolas, a corporate strategist at the document services company. “Many use this through LOS systems. They just click a button. It’s not much of a process. It’s relatively instant.”
While being able to click-sign a 4506-T authorization moves the industry further down the road toward the e-mortgage, it does not “open up the gates of automation heaven,” she said. “We still have work to do.”
The FHA, for example, is not as far along in terms of making e-signing of predisclosures possible.
“Right now the FHA only accepts e-signatures on purchase and sale agreements from third parties,” San Nicolas said.
But she thinks that with the 4506-T e-signature barrier coming down in the agency market, the FHA is now more likely to follow suit and expand its e-signature capabilities.
While an increasing number of industry-related governmental agencies and borrowers are getting more comfortable with technology, not all are yet ready—psychologically or otherwise—for e-originations.
Originators and vendors are still using what might be thought of as “bridge” technologies that meet borrowers or government agencies wherever they are in terms of automated or manual transactions, while still providing as many automated efficiencies as possible on the business side.
For example, DocMagic will mail out hard copies for wet signatures if click-sign authorization is not received after a certain period of time, and, in another example, a Denver-area mortgage brokerage executive recently told this publication he has found technology that provides encrypted processing, tracking and annotating of faxed-in documents online has helped when volume has surged this year.
“eFax is one of the things that we use with the volume of business we have” to eliminate paper costs, said Mike Trenkle, owner of MK Mortgage Group.
The eFax Corporate service supports several interfaces for integrations with origination systems that run over common Internet protocols and can be added to the back end of an LOS to enable users to either fax out new forms to applicants or receive completed forms back into the system, according to information provided to this publication by the company that provides it, j2 Global Inc. These include encryption options aimed at meeting federal guidelines that protect information that otherwise could be used to identify individuals from potentially leaking out to third parties.
Nathaniel Udell, a sales executive for j2 Global and the eFax Corporate product, said the fax-to-electronic transition generally occurs via a barcode on the faxed document that both puts it in an online format and helps the user’s system identify and categorize the document as information associated with a particular borrower. “It’s simply another way to get a document into a document management system,” he said.
Trenkle said, “Half the files we do are purely digital.” But on the consumer end, a certain amount of faxing still gets done, generally from workplaces during breaks, he said.
While there have been questions since the downturn as to whether a particular outfit’s volumes and revenue are high enough to support technology initiatives, weighed against the efficiencies they can provide, Trenkle said in this case it was, particularly given a pickup in HARP 2.0 and local purchase volumes the company has seen.
The technology is low cost relative to cases of paper that sell for $35/$40 a pop and it also saves time because it can be accessed through mobile devices such as cellular phones, he said.
“We were going through five cases [of paper] a week,” he said, noting that this has gone down to a “case or two” a month.
Trenkle said eFax alone is not responsible for the efficiency but did “contribute to it greatly.”
He said he agrees that initial disclosures have become more automated and borrowers are more comfortable with online technologies, although he notes that there continues to be a lot of papering out at closing.
Users have to be sure that add-ons to their origination system are really necessary, Binh Dang, president of LOS LendingQB, told this publication in an interview at the Mortgage Bankers Association’s secondary market conference last month. He noted his company’s technology, for example, grew out of product and pricing engine PriceMyLoan and includes both PPE and LOS functions in one system. Newer companies like LendingQB with relatively smaller current market shares have been generally been arguing that they can build more comprehensive systems without legacy issues, while larger LOS providers that tend to have larger market shares but also systems created longer ago, have chosen at times if they have the resources to buy third-party providers in order to add the latter’s functionality to the former’s systems.
As far as whether ancillary technologies that pave the way for e-mortgages like the aforementioned e-doc/e-signature and e-fax services are essential, two LOS executives interviewed by this publication for this article agreed doc services/doc prep companies as well as e-signature providers tend to have a necessary specialist expertise when it comes to ensuring origination forms and their authorization are compliant, and this is especially attractive given the current tumultuous regulatory environment. While they were less certain of the need for faxes, both the mortgage industry and the title industry have high usage rates, Udell said.
Wil Armstrong, CEO of LOS provider Blueberry Systems, said in a phone interview that while he advocates for a single system of record in originations, he agrees doc prep is perhaps a necessary specialty. He said, as a result, Blueberry ensures “you don’t have to leave our system to use a doc vendor” that the company works with. It also has some imaging capabilities although not fax-specific ones.