Tim Anderson has been watching the progress of the e-mortgage for 20 years. Now the mortgage technology visionary sees an unlikely ally in the process of getting all those stacks of paper off the closing table: the Consumer Financial Protection Bureau.
That’s because he is expecting—soon—the CFPB to mandate a new workflow requiring electronic proof of consent and receipt of documents from the borrower, and to require docs to be machine readable—in other words, to have a paperless trail.
It’s called the Integrated Closing Disclosure reg, and it’s anticipated to be finalized and announced Nov. 20.
Why will this reg be a kick in the pants to move e-closings along? Anderson says because part of the new reg will mandate a new workflow requirement for the lender, to produce the new closing disclosure three business day prior to closing for the borrower to review.
“This mimics the current initial disclosure requirement for the upfront application doc package. And as proof of consent and receipt of documents the lender has to retain this evidence in machine readable format,” he says.
The CFPB wants to see an electronic loan (date and time stamp of who and when the lender disclosed info to the borrower) and promises to audit the electronic file, as well, as lenders and title agents work to get closed loan fee data correct three days prior to the close, to ensure an accurate GFE and TIL disclosure.
“I just don’t see how a lender is going to live in a paper world,” says Anderson, currently director of e-services for California-based Doc Magic.
The push for e-closings is also included in the upcoming Jan. 10 qualified mortgage implementation, Anderson says, as the CFPB wants machine readable docs for the verification of ability to repay, a key component of the QM.
In addition, he said that Charles Coulter, HUD deputy assistant secretary for single-family housing, announced during a committee meeting at the MBA annual conference in Washington that FHA will, within 30 to 40 days, be announcing that they, too, will be accepting e-sign documents for both origination and servicing documents.
“They are the last big government agency that has not accepted them,” Anderson says. With this big addition to the ranks of agency e-mortgages, “there really is no excuse for anybody not to do true e-closings today.”
A third major factor, he says is that with a Fannie and Freddie safe harbor rule now requiring a complete audit of the loans within 150 days after delivery, lenders will have to adopt e-practices in order to avoid mortgage buybacks.
Not just originations will benefit, but the servicing side too, he says. One of the big features of the robo-signing debacle was that servicers couldn’t replicate missing critical docs, sometimes to the point of not being able to prove clear title.
“Now we have the e-notary, to eliminate the robo-signing,” he says.
Individual states can be good laboratories for the e-mortgage as well, he claims. In Virginia, he says, it is possible to conduct closings via web conferences, since the state redefined “physical presence” to include an online presence.
Anderson took up evangelizing for the e-mortgage in the wake of Clinton administration-era laws like the E-Sign Act and UEDA (Uniform Electronic Disclosure Act).
“I said, oh my God, this is radical. We have to build up smart docs,” he remembers.
Anderson is well known as a technology guru. Ten years ago, he won the Steve Fraser Visionary Award from Mortgage Technology magazine, about the time he was starting the E-Mortgage Alliance, which tried to yoke vendors together, each to automate a specific part of the mortgage process.
Now, he says his job is “to start defining the way regulations affect electronic compliance,” he says, adding “This is all about compliance.”
How long will it take for, say 50% adoption of e-closings? This is a question that’s been asked many times over the last 15 years, and Anderson is cautious, noting the new CFPB disclosure won’t go into effect for another year. Two years, he finally estimates.