By Austin Kilgore
In what is being billed as an industry first, Mountain America Credit Union closed its first electronically-signed FHA mortgages Monday under the Federal Housing Administration's new e-sign policy.
Two loans, one refinancing and one purchase mortgage, were closed at a Stewart Title office in Midvale, Utah, using a combination of technologies provided by Stewart and DocMagic. The borrowers had received and e-signed all the closing package documents last week, except for the promissory note, as the FHA will not begin accepting e-signed notes until Dec. 31.
The closings offer a glimpse of how electronic signing is expected to dramatically streamline industry operations in the future. The process took about 15 minutes for each loan on Monday — compared to the hour-long process of ink-signing 100 to 200 pieces of paper on the day of closing.
In addition, the e-signing process speeds up funding of the housing transaction.
"In a regular closing you would have a day or two in between for funding because the document package would have to be sent to the lender," says Amy Moser, Mountain America's vice president of mortgage services. "With everything electronic, it allows for same-day funding. They could move in today, once the closing's complete."
The FHA enacted its long-awaited e-sign policy on Jan. 30. It allows mortgage lenders and servicers to use e-signatures on the FHA's documents for insurance endorsements, servicing and loss mitigation, insurance claims and real estate owned property sales. Over the long term, the policy is expected to cut costs and simplify processes for mortgage lenders, but there are several hurdles to widespread adoption.
"We've been working on this for several years, but we couldn't move forward until the FHA was ready to go," Moser says. "Now we can use our same paperless processes and procedures for both FHA and conventional loans."
Mountain America's claim to be first is hard to prove with absolute certainty, particularly given that the Department of Housing and Urban Development's offices were closed Monday due to inclement weather. Still, given that the FHA policy is less than seven weeks old, it is highly likely the two Mountain America mortgages are at a minimum, among the very first loans to take advantage of the FHA's e-sign policy.
To facilitate the e-signed FHA loans, Stewart essentially created a new investor configuration in its SureClose transaction management platform to support FHA's document requirements. While adoption remains voluntary, lenders are increasingly looking to adopt paperless mortgages for a variety of compliance reasons, says Nancy Pratt, director of e-strategy for PropertyInfo, the technology division of Stewart Title.
"I've seen a lot of renewed interest this year. A lot of that is being driven by the CFPB and having to have audit trails from origination to closing," she says.
Mountain America used Stewart's e-sign engine, while DocMagic provided the electronic documents in the loan package. When Mountain America begins closing e-notes with FHA loans next year, the lender will use DocMagic's e-vault to store the documents.
Freddie Mac began accepting e-signatures on documents for the mortgages it purchases in 2001, followed by Fannie Mae in 2002. In 2004, the first electronically signed promissory notes, or e-mortgages, were originated. The Internal Revenue Service began accepting e-signatures on its 4506-T forms last year, following pilot testing from 2011 to 2012. The form, also known as the "Request for Transcript of Tax Return," gives lenders permission to review borrowers' tax returns for income verification.
"E-sign has never just been about the upfront disclosures," Tim Anderson, DocMagic director of e-services said in a press release announcing the Mountain America closings. "There really is no excuse now not to provide this service to borrowers, who have been demanding it for some time."