With the TRID deadline behind us, the industry is breathing easy again. But should it? Recently ComplianceEase, a provider of automated compliance solutions to the financial services industry, released an analysis of compliance defects for closed loans and estimated that the cost of correcting these errors is increasing the cost of origination, on average, by approximately $28 for every loan. The analysis was based on a cross-section of 700,000 audits that were performed in ComplianceAnalyzer and RESPA Auditor during the first quarter of 2015. It found that 17 percent of the loans failed for Truth in Lending Act (TILA) reasons. Another 6 percent of the loans—or one in 15—failed for being outside of the Real Estate Settlement Procedures Act (RESPA) tolerances.

So, this industry clearly is struggling with compliance. The answer to ironclad compliance is migrating to a truly data-driven process according to Dominic Iannitti, president and CEO of DocMagic. DocMagic is a leading provider of fully-compliant loan document preparation, compliance, eSign and eDelivery solutions for the mortgage industry. Founded in 1988 and headquartered in Torrance, Calif., DocMagic, Inc. develops software, mobile apps, processes and web-based systems for the production and delivery of compliant loan document packages. The company’s compliance experts and in-house legal staff consistently monitor legal and regulatory changes at both the federal and state levels to ensure accuracy. Here’s what Iannitti thinks the industry should do to forever revolutionize lending:

Q: How did you get started in the mortgage industry?

DOMINIC IANNITTI: I was originally very interested in data and putting data together, re-packaging data, and being able to sell data in a different format. I read a story that focused on the manipulation and modification of data. I thought that it was wild to be able to take data, and change it, and format it, and turn that into a marketable service. I immediately got interested in this idea, started to look at technology, and created a business plan for a document production company for the mortgage industry. That’s where it all started. We began to migrate and leverage that data to actually select appropriate forms, to apply rules around that process, and make forms very intelligent. Later we added the ability to electronically deliver those forms. In the end, it’s because of that interest in the raw data that brought me really into the mortgage finance area.

Q: Over the time that you’ve been in the industry, how do you think mortgage lending has changed?

DOMINIC IANNITTI: It’s changed a lot. When we first got involved in mortgage lending, we were delivering documents. We would produce those documents and then literally take the packages out to the car and drive them to the client. We were limited in our reach from a customer perspective. Then modems were created and we had a way to actually send the ones and zeros on the form remotely to another office from another location, which was amazing. Then the laser printer was created and that radically changed documentation. The rules engine behind the document became more powerful. We created our own rules engine within the DocMagic product, which enabled us to be very dynamic in selecting forms and making sure the correct forms were there. Ultimately we were leveraging this technology to pick the client’s rules, validate them, make calculations, ensure regulatory compliance, etc. The industry has changed a lot.

Q: What about Doc Magic as a company? How has it evolved since you started it twenty some years ago?

DOMINIC IANNITTI: When we started DocMagic was very focused on documents. It’s still focused on documents, but it’s become much more of a compliance company, much more of a technology company. So, we were very production oriented in the beginning. You would take in information, and create a document, and manually deliver everything. It was all about documents and creating those documents. Today we have evolved into a compliance company that delivers everything electronically. You could also make the argument that we’ve become a software development company, as well. We’ve had to become very quick at creating solutions, and that means having a large development staff. When we think of an idea we have to create a prototype and ultimately bring a product to market. The company is dramatically different as compared to what it was when we first started off. Now we have one particular department focuses on document production, which is all the original company used to do.

Q: Over the past year, you’ve made two acquisitions, eSignSystems and Document Express. How did they come about? How are things going with them now? Where do you see them going in the future?

DOMINIC IANNITTI: DocMagic has become a very large company. We are serving in excess of 7,000 lending institutions at this point. When requests come in, there’s sophisticating systems and metrics and sophisticated technology to make sure that we’re doing what we promised our clients we would do, service their needs as quickly as possible. We’re always looking for ways to improve that efficiency. Real-time data is coming back from our clients about how we performed. It’s not unlikely that we’ll get somewhere in the neighborhood of 8 to 10,000 requests each week. It’s an insane amount of requests that come into the system. So, when we looked at Document Express, it was a small, boutique company, much the same way we were when we first started out. What we liked about that was the fact that they had a good group of clients and they were very boutique oriented in the way that they were handling those clients. It was very hands on. It was very mundane. It was exactly the opposite of what the company had evolved into. Not to say either one is better or worse, but to say we were interested in that acquisition because it reminded us of what we were when we first started. We looked at that acquisition as a way of bringing that mentality back. When we brought them on, every client that they had stayed with the company. We’ve not lost a single client. The group of people that run that organization are phenomenal and they’ve done an incredible job. We extended our toolset to them, as well. Their systems now integrate to all of the DocMagic clients, the DocMagic calculations, and the DocMagic evolving and electronic delivery technologies.

The eSignSystems relationship is a little bit different. There was a different motivation for that acquisition. DocMagic focuses on the mortgage industry and we learned during the time that we were trying to transition the industry to start to think about DocMagic as a compliance company, which we felt was critical, that was an uphill battle. When people think of you as a document production company, it’s difficult to change that mindset. We have been on the cutting edge of electronic delivery, and electronic signature technology here at Doc Magic. All of that is integrated into the Doc Magic products. Our clients don’t have to go out and look for an electronic delivery service because those services are tightly woven into the very fabric of our product because we have that expertise. We realized that in order for the mortgage marketplace, and other industries as well, to consider adopting an electronic signature strategy, it would be necessary for us to bring on another company that has that expertise as a strategic advantage. eSignSystems had great technology. Most of their technology was designed to be on premise. It was designed for much, much bigger organizations. So, we felt that the marriage of the two companies would be great. We would bring our SaaS offering together with the on-premise offering at eSignSystems. Now very large organizations could come to us and we would have the right solution for them. We’ve been doing a lot of work retooling their technology, as well. eSignSystems also gives us the ability to reach beyond the mortgage industry, and expand to serve other industries. For example, now we have a number of insurance clients and we’re hoping to bring on some automotive dealerships. That’s been very exciting.

Q: Are you still in an acquisition mode? Are you actively looking for other acquisitions? Or do you think that those acquisitions were just opportunistic that came up at the time? How would you describe your M&A strategy?

DOMINIC IANNITTI: We’re always actively looking. There are certain companies that we are always watching. We’re also opportunistic at the same time. If the situation presents itself and we feel that we can it work, we are open to acquisitions. Our eyes are always open and we’re absolutely keeping a very close watch on a number of different types of companies that we’re very interested in.

Q: You recently launched a product called SmartCLOSE. Describe the evolution of the product. What’s the value proposition behind the product and where you see it going in the future?

DOMINIC IANNITTI: We realized very early on that collaboration is going to be key to making the mortgage system work. Lenders, settlement agents, and other have to collaborate and the changes to the loan that happen as a result of that collaboration need to happen in real time. If I’m in the system and I make a change, but you don’t see it for five minutes, that’s not collaboration. We researched and came up with a new technology stack that would enable us to provide real-time collaboration, much the same way that Google Docs works. We wanted to allow for real-time updates. If I’m in the system, the settlement agency sees exactly what I’m doing. It is truly dynamic. If I make a change and I need to make sure you know about that change, SmartCLOSE will notify you. So, the communication within the system is very sophisticated. If you’re in the system you will see the update in real time and if you are not in the system you will be notified of the update in real time.

In addition, the system handles data. It handles an immense amount of data. That data moves and hits the disclosure forms, for example. So, the forms are created and updated dynamically. The system also maintains a record of all the changes. I can go into, for example, the origination fee and I can see in that fee all the communication, conversations, and messages that went on about that fee. You know who made every change and why they made that change. We had no idea when we started the project how important communication was. At every step the system is creating a record and audit log.

The most exciting part about SmartCLOSE is the fact that it establishes the relationship between the lender and the settlement agency. That just never existed before. Again, it’s so simplistic, but it comes down to communication. Really, if you play in this arena, you faxes and e-mails and all kinds of things going back and forth, but there’s nothing that brings it all together. There’s nothing that unites all of those communications. SmartCLOSE does that.

Q: DocMagic surpassed 100 million e-signed transactions this year. How did you do that?

DOMINIC IANNITTI: What’s really exciting is that we can create these disclosures perfectly with e-signatures. We feel like we are uniquely situated to move the industry forward when it comes to the usage of electronic signatures. We are so proud of our e-signature number. We have even opened up this service to other industries. You can bring your own docs into our system and apply an electronic signature even if you are not in mortgage. We also have strategic alliances with other companies where they will leverage our electronic signatures for appraisals, for example. There has been an outpouring of interest in electronic signing.

Q: What’s the future of doc prep as an industry category within mortgage lending?

DOMINIC IANNITTI: Doc prep has become much more dynamic. For example, closing disclosures get messy really fast if you’re just using templates. The reality is that you have to create a document dynamically for closings to work these days. Very early on DocMagic realized that there has to be a lot of intelligence embedded in the form itself. For example, our documents can audit themselves. So, if a calculation is wrong it will throw that alert back into the main system to show that something may be out of compliance. In that case, the doc is actually performing a regulatory audit on itself. Increased intelligence within mortgage documentation is something that you are going to see more and more of.

INSIDER PROFILE

Dominic Iannitti is President and CEO of DocMagic, Inc., the mortgage industry’s preeminent provider of fully-compliant loan document preparation, compliance, eSign and eDelivery solutions. Since founding the company in 1988, Iannitti has been responsible for the company’s wildly successful track record as a leader in closing loan document production software and eServices solutions. DocMagic’s innovative technology and company growth is the result of his leadership and vision. Most recently, Iannitti spearheaded the development of SmartCLOSE™, the leading Collaborative Closing Portal for TRID compliance.

INDUSTRY PREDICTIONS

Dominic Iannitti thinks:

1) Most collaboration closing portals for TRID will fail, with only a handful being viable long-term solutions.

2) Current TRID requirements and the CFPB’s commitment to eClosings will drive lenders to implement a true eClosing process — sooner rather than later.

3) Because of QM, ATR and now the TRID MISMO 3.3 data requirement, many investors will push their post closing QC process to a more automated pre-closing QC process that ensures better data and document integrity, compliance and control.

As featured by Progress In Lending, December 2015

By Bonnie Sinnock

A plan by the government-sponsored enterprises to begin electronically collecting the new Closing Disclosure data is designed to promote Fannie Mae and Freddie Mac's loan quality and risk management goals. But the initiative may also prompt broader use of electronic signatures and paperless processing in the mortgage industry.

The Closing Disclosure is one of two new borrower forms implemented under the Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure regulations that took effect Oct. 3. To facilitate lender submission of the document, Fannie and Freddie have developed the Uniform Closing Dataset, a digital file that allows the individual data points in the document to be stored in a database and analyzed.

"We're hoping these standards help the industry digitize the loan file or at least some of the critical documents," said Samuel Oliver, a vice president at Freddie Mac, in an interview.

The project is the latest component of the Uniform Mortgage Data Program, which has previously included efforts to collect fully electronic appraisal documents and an upgraded loan delivery file. The GSEs plans to start collecting the UCD file no later than the fourth quarter of 2016, and mandatory submission will begin no earlier than the second quarter of 2017.

"You don't have to go paperless but you must be able to deliver an electronic copy of the UCD," Oliver said.

The GSEs' intent with the UMDP is not to force lenders into paperless transactions like an e-closing, but to improve the pre-funding due diligence on loans sold to Fannie and Freddie.

"The GSEs, like other organizations, are trying to be more efficient in the processing and gaining access to the loan application data available upfront from origination and underwriting through closing," said Jeff Knott, an Equifax assistant vice president who chairs the Electronic Signature and Records Association.

But the new requirement for lenders to submit a digital file in the specific UCD format — combined with existing regulations that mandate lenders deliver the Closing Disclosure to borrowers three days before closing — pushes lenders to further automate the flow of information in the most stubbornly paper-intensive and manual part of the origination process.

"We'll continue to keep lenders posted on the specifics as to how they can deliver this data," said Fannie Mae spokesman Andrew Wilson. "There will be appropriate and sufficient lead time for lenders to get up to speed. That's the goal."

The timeline "gives the industry time to concentrate on the TRID implementation," added Oliver.

TRID implementation "was painful" and required the expansion of industry data standards by as many as 300 data points, said Tim Anderson, a director at mortgage software vendor DocMagic.

The UCD, which is in testing now, adds a few dozen more data elements to the Mortgage Industry Standards Maintenance Organization guidelines and is "manageable," he added.

Both the UCD and TRID data standards add more momentum to efforts to electronically close mortgages, said Anderson. DocMagic is a member of the Electronic Signatures and Records Association.

In a recent pilot program, the Consumer Financial Protection Bureau found borrowers who had an electronic mortgage closing, as opposed to an manual one, had 7% higher positive feedback in terms of their feeling they understood the quotes and final costs of the loan.

UCD adoption should be similar to previous UMDP efforts like the Uniform Appraisal Dataset and the Uniform Loan Delivery Dataset. But unlike the appraisal delivery requirement, where Fannie and Freddie built a joint portal to collect the electronic documents, each GSE will have a separate delivery system to collect the UCD files — which will require lenders that sell to both agencies and their technology vendors to train and test for two separate processes.

"We'll certainly be providing training and implementation support for the UCD," Oliver said.

Concerns that there is insufficient borrower identity verification in electronic documents and signatures persist as roadblocks to a completely automated process.

Although government agencies that dominate the secondary market encourage electronic transactions, private investors are a different story. A warehouse lender, for example, might not accept an electronic promissory note.

"The biggest hurdle has been the [private] secondary investors. They are slow to accept electronically signed mortgage documents," said Alec Cheung, vice president at technology vendor eLynx. "My impression is they feel more confident knowing that they have a paper document and that feels more secure to them."

Although some private investors have a different view, Cheung said he has confidence in e-signatures' validity as a means of authentication because they've stood up in court.

Difficulties involved in getting all county recorders' offices and notaries automated also have been barriers to e-closings but Anderson was dismissive of these as technical challenges. The barriers to e-closing are more about adoption than lack of sufficient automation, he said.

About 70% of the U.S. population is represented by county recorders equipped to handle the process, he said. Also federal law allows electronic notarization, and closing attorneys are only questioning it because there is more-spotty state authorization of the practice, he said.

"I'm biased, but I think most of the technical issues including counties and notaries, that's pretty much done now," Anderson said. "And whether an investor will accept it or not, that's business practices, not technology."

As featured by National Mortgage News, November 2015

With technological advances happening constantly in the mortgage industry, lenders may still be passing up opportunities to reach potential borrowers due to a lack of focus on mobile channels.

Mobile activity is less common in the mortgage industry compared to other consumer finance market segments such as banking, but the opportunity to reach consumers is open for the taking, commentary from Fannie Mae's Director of Business Strategy and Economic Strategic Research Steve Deggendorf showed.

"The lower priority that lenders are placing on mobile channels, and the differences in lender and consumer views on mobile tool functionality, could place lenders at risk of not meeting consumer demand or encouraging new entrants to address this growing demand at the expense of existing firms," Deggendorf said. "Getting the right mix of traditional (person-to-person), online, and mobile channels and tools may be a key to future success."

According to Fannie Mae's Mortgage Lender Sentiment Survey, 40 percent of lender plan to offer a mobile application in the next year, but there are some lenders that have already got the jump on mobile technology.

Vladimir Bien-Aime, president and CEO of Global DMS told MReport that "there is clearly a growing need for mobile in today’s consumer market and lender reluctance to adopt mobile strategies may hinder them in the future due to the millennial market growth."

He added, "As this particular market segment continues to grow, it will become increasingly important to have mobile strategies wherever possible. We have incorporated mobile technology into our product mix and have learned that the industry does have a deep appetite for it. We will continue to make mobile applications a large part of our product offering in the future.”

In addition, Global DMS also launched their Appraisal Technology On Mobile (ATOM) mobile app in 2104, which allows mobile access for appraisers to access, update, and submit appraisal orders via mobile device.

Snapdocs is another company that is offers mobile options to consumers through secure document transfer on an encrypted technology platform that connects and updates all involved in a real estate transaction via email or text message throughout the mortgage closing process.

"Many industries are already capitalizing on the fact that consumers are ever-connected via their smartphones and tablets, but mobile is a mostly untapped opportunity for the mortgage industry. Today's consumers expect ease and accessibility in every facet of their daily lives, so meeting consumer demands for mobile interactions is critical, as Fannie May emphasizes, said Aaron King, founder and CEO of Snapdocs in an MReport interview. "The thirst for face-to-face contact revealed by the research, however, should also be duly noted. Referrals are the lifeblood of the mortgage industry, and a positive experience at the closing table is critical for leaving a good impression. Mobile closings–or out-of-office closings by a notary–are multiplying, and they have many moving parts.

He added, "Mortgage companies that embrace modern technology will have a significant advantage over those who take a 'wait and see' approach. In nearly every industry, the company who leads in consumer experience has the lead over competitors."

As more borrowers want to use smartphones and tablets to communicate, it is important for communication lines to function effiecintly and effectively, according to Tim Anderson, Director of eServices, DocMagic, Inc. The company's BorrowerMobile application solves this issue by accelerating the loan process by making communication faster and easier.

"Lenders and borrowers need to be able to easily interact, share information, and check things like conditions, documents, loan status, eSign documents, and much more, Anderson explained. "Using mobile apps for borrowers and lenders to communicate is becoming very important, and very quickly I might add. The Millennials are ready to purchase homes and this generation wants to do more online and via smartphones and tablets. As Millennials become potential borrowers, having a robust mobile app won’t be a nicety, it will be a necessity. If lenders don’t offer a solid mobile solution, they’ll be at a competitive disadvantage pretty quick."

Sanjeev Dahiwadkar, CEO of IndiSoft, has a different perspective and approach to mobile technology on today's market he shared with MReport.

“We understand that in the mortgage industry it is better not to rush into the latest technology in order to make sure all of the dots are connected," he explained. "For example, the white elephant in the room in regards to using mobile technology is TCPA. Companies have to be cautious because the interpretation is very vague regarding reaching consumers via the phone. This is just one reason why it is better for companies in the mortgage space to be cautious entering the mobile era. They have to proceed with caution otherwise the penalties are huge.”

As featured by The MReport, November 2015

By Tony Garritano

D+H has completed integrations with both DocMagic and Optimal Blue into its MortgagebotLOS loan origination platform, as well as a compliance readiness platform called Barometer. “We are constantly working to build or integrate the best technology and find new ways to improve the end-to-end experience for our lending clients,” said Bill Neville, president of D+H’s Lending and Integrated Core Solutions business. “But every one of these efforts must be supported by the same foundation of compliance expertise that protects clients now, and into the future. They are part of the company’s overarching commitment to being the industry leader in compliance excellence.”

Optimal Blue is a cloud-based provider of managed-content, product pricing and eligibility (PPE), secondary marketing, point-of-sale, and compliance technology and services to the mortgage industry. The integration will give mortgage lenders seamless access to Optimal Blue’s family of enterprise lending services, including product pricing and secondary marketing functionality which syncs in real time, directly from the MortgagebotLOS environment.

“Optimal Blue is excited to deliver this comprehensive integration with D+H and MortgagebotLOS. Market and customer demand has been tremendous for this partnership, and we’re pleased to now be able to meet that demand,” said Mark Coupland, vice president of Business Development at Optimal Blue. “Working with the D+H team has been a great experience and it is reflected in the work we have done together. The feedback from our beta testers has been outstanding, and we are now making this available to the entire market.”

D+H also expanded its existing integration of MortgagebotLOS and DocMagic, a provider of fully compliant loan document preparation, compliance, eSign, and eDelivery solutions. Under the agreement, D+H becomes an official reseller of DocMagic products and services.

“We are pleased to have D+H as an approved reseller of our products,” said Steve Ribultan, director of Business Development at DocMagic. “D+H and DocMagic have always worked extremely well together by providing lenders with an efficient, seamless and compliant process that is second to none. As a reseller, D+H is now empowered to independently introduce our solutions to their prospective clients.”

These integrations provide D+H clients with a fully compliant, streamlined, and comprehensive workflow, moving from the institution, through loan documentation, all the way through to secondary marketing. D+H was able to safeguard compliance for these integrated solutions by tapping its own extensive understanding of TRID, led by the company’s Compliance Legal department and network of Federal and State Counsel.

D+H also saw opportunities to share its understanding of the regulatory space directly with clients, which led to the development of Barometer, a role-specific, scenario-based preparation tool to assist lenders in complying with the TILA-RESPA Integrated Disclosure rule.

Barometer facilitates learning by testing users’ understanding of the TILA-RESPA rule against real-world scenarios created by D+H experts, and includes video, audio and written content. Barometer was rolled out as a free service to 300 clients and 1,500 end users to help clients prepare for TRID.

“Most financial institutions do not have a single or consistent solution for compliance training and were scrambling to prepare for the arrival of TRID,” said Sue Britton, vice president, Innovation and Commercialization, D+H. “We were glad to be able to offer so many of our clients complimentary access to Barometer. This service combines our insight and expertise with a state-of-the-art learning solution, giving clients the confidence that their teams can succeed with TRID.”

As featured by Progress In Lending, October 2015

DH Corp., Lake Mary, Fla., announced integrations with both DocMagic and Optimal Blue into its MortgagebotLOS loan origination platform, as well as a compliance readiness platform called Barometer.  

The integration will give mortgage lenders access to Optimal Blue's family of enterprise lending services, including product pricing and secondary marketing functionality which syncs in real time, directly from the MortgagebotLOS environment.  

D+H also expanded its existing integration of MortgagebotLOS and DocMagic, a provider of loan document preparation, compliance, eSign, and eDelivery services. Under the agreement, D+H becomes an official reseller of DocMagic products and services.  

Barometer is a role-specific, scenario-based preparation tool to assist lenders in complying with the TILA-RESPA Integrated Disclosure rule. Barometer facilitates learning by testing users' understanding of the TILA-RESPA rule against real-world scenarios created by D+H and includes video, audio and written content. Barometer was rolled out as a free service to 300 clients and 1,500 end users to help clients prepare for TRID.  

As featured by MBA Newslink, October 2015

By Brena Swanson

The industry is changing, with or without you. The good news is that we are here with answers.

HousingWire is launching the first of many webinars to cover the ever-changing industry. 

And what better way to start than a webinar on the largest cohort of homebuyers to storm the industry, Millennials.

The largest generation is growing up, and quick. And contrary to popular belief, they do want to buy homes; but it won’t be in the same way as their predecessors. Millennials demand social media, online banking -- and yes, online mortgages.

To help transform lenders into experts on all things Millennials and homebuying, HousingWire rallied experts in the industry who are executing on this topic.

Ginger Wilcox, chief industry officer with Sindeo, Joe Caltabiano, senior vice president of Mortgage Lending with Guaranteed Rate and Tim Anderson director of eServices with DocMagic, will give their own insight on what they are seeing in the industry with Millennials.

The three bring over 60 years of experience in all aspects of the industry, giving a full range of tips and inside knowledge of what does and doesn’t work.  

Here’s a bio on each panelist.

Click to enlarge

Topics of discussion include:

• An inside look at who the home-buying Millennials really are: demographics and defining characteristics
• The challenges Millennials face in the home-buying market, and how to overcome them
• What a modern business relationship means, feels and really looks like to the next generation of homebuyers
• What Millennials definitely don't want in the home-buying process

To register click here

As featured by HousingWire, October 2015

TRID went live on Oct. 3. Some industry analysts say one consequence of the new consumer-disclosure rules will be that paperless eMortgages will become standard in the post-TRID world. Tim Anderson, director of eServices for DocMagic, spoke to Scotsman Guide News on why the regulations and consumer preferences might inevitably push the industry toward a paperless mortgage.  

How would you define an eMortgage?

My definition of an eMortgage is a full and complete paperless process from initial loan application all the way to closing.

Why is it difficult from a technical standpoint for mortgage lenders to cross over to paperless?

You are dealing with so many different parties from application to closing and also to investor delivery.  Everybody has got to sign off on an electronic process and agree to it. That has been part of the problem. The majority of the steps have all been automated by various partners, like notary, title and closing and [document preparation]. The major obstacle is that you still have to get the investor to buy it. That is the last barrier to adoption. You have [Fannie Mae] and [Freddie Mac], but most of the mid-tier guys don’t sell direct to Fannie and Freddie. They sell to Chase, [Wells Fargo] and others. Until they start buying eNotes, it is still going to be limited adoption.

How far has the industry gone in going paperless?

There is wide adoption on initial disclosures. Already, it is an easy package to put together. You don’t have to sell to an investor. It is the initial three-day application package, and the regulations are only that you have to show that you delivered it, or sent it out within three days of your application. There has been mass adoption [of that], probably close to 70 percent [of companies] already. That is the first step. The consumer says, ‘Well, I can get the initial disclosures that way, why can’t  I do the closing?’ That is the second step. You are seeing pretty quick adoption of the hybrid [closing]. You can execute the majority of the documents you sign, but you still have to paper up the notary or recordable documents.

Why might TRID push companies in the direction of paperless mortgages?

The regulator that designed the rule, the [Consumer Financial Protection Bureau], is pushing hard for eClosings. The regulation itself almost mandates that you start electronic right from the loan estimate. This is all about electronic proof of compliance. Right from the loan estimate, to intent to proceed to the delivery rule around the final disclosures, all of these are critical compliance milestones that the CFPB is going to audit a lender for compliance, and you have to be able to prove this. Again, it is very hard to do in a paper world. Finally, it is just a business decision. In the paper world for a closing, people are projecting 10 to 15 days  added on to the closing process because of the three-day-mail-delivery rule. In the electronic world, I can cut that in half if we go with eConsent and eReceipt-of-delivery. All those things contribute to a better process for compliance and for the consumer.

Are there any other factors aside from TRID that would encourage paperless mortgages?

It is the consumers themselves. The millennials are all online. They want everything immediate, and they want it online. They don’t want to deal with paper. Who mails stuff anymore, right?

How receptive are the government-sponsored enterprises (GSEs) and other investors to purchasing eNotes?

There is no barrier at all from the GSEs. In fact, Fannie has basically doubled down, created a brand-new website to educate lenders and consumers to get on board. There are a lot of myths about whether it is still legal or not. There is a huge educational curve still. It is not an issue on the consumer side. They are already into eSignings and doing everything online. It is basically old, traditional players that have done business for 30 years the same way.

How long do you think it will take for the eMortgage to become the standard?

It is going to be critical when the CFPB begins enforcing compliance, when they start auditing these lenders for compliance around TRID, and not just TRID, but the [qualified mortgage rule] and ability-to-repay [rule]. When [companies] start getting audited, we’ll see mass adoption very quickly because they will not be able to comply in a paper world. It will push them to go electronic to prove electronic evidence at the next audit. Within a year, you will start seeing auditing for compliance. Once they start imposing fines, the pocketbook will force compliance very quickly.

As featured by the Scotsman Guide, October 2015

As the clock ticked down to Saturday’s deadline for the start of the new TRID consumer-disclosure rules, mortgage trade groups continued to lobby for more time.

Industry groups this week pressed federal regulators for an emergency rule that would grant lenders and other participants a four-month grace period from enforcement actions, including a safe harbor from private lawsuits.

This past Tuesday, the Mortgage Bankers Association (MBA) also released a survey of 71 of its members indicating a third had not had time to test their systems. Half of those surveyed also feared the transitional period will create problems with loan closings and add costs for consumers.

In a letter sent to its members on Sept. 30, the American Bankers Association (ABA) also cited a lengthy list of concerns, ranging from the late delivery of software systems needed to generate the new disclosure forms to a lack of clarity in the rules.

“Even at this late stage, many banks find it challenging to fully comply with these reforms,”  wrote ABA Executive Vice President Robert Davis in the letter.

The mortgage industry is also supporting a bipartisan bill that was passed by the House Financial Services Committee in July, which would extend a grace period through Feb. 1. This week, House Majority Leader Kevin McCarthy, R-Calif., said that bill would be introduced next week for a full House vote.

TRID requires the industry to produce new forms for the initial rate disclosure and during the closing process. The rule also mandates a mandatory cooling off period, which effectively locks the rates for a minimum of three days. TRID stands for The Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure rules. It is also known as the “Know Before You Owe” rule.

Although the forms are intended to be clear and readable, the entire system is data dependent and presents great technical hurdles for lenders. Essentially, the rule changes the entire way the industry discloses information to consumers. Lenders are jittery because their federal regulator, the Consumer Financial Protection Bureau (CFPB), hasn't been clear on when it will begin cracking down on the industry.

The industry says the bureau has also been vague about what constitutes "a good-faith effort to comply," the standard to which the CFPB intends to hold lenders during an initial soft enforcement period. 

But not everyone believes that TRID will be hugely disruptive after Saturday. TRID was originally supposed to start on Aug. 1, but has been delayed twice. According to the MBA survey, two-thirds of the surveyed members indicated that they were ready and expect no problems.

“It is just typical of this industry to push back on anything that is new,” said Tim Anderson, director of eServices at DocMagic, a document and compliance vendor.  “They don’t adapt well, especially if it is technology, and then [there is] the mistrust of this agency.”

Anderson predicted that TRID will cause no major issues for lenders for several months. The problems will likely only come in the latter half of next year, he said, when the bureau begins to audit the companies for compliance using an automated system that has yet to be implemented. Anderson said the penalties for failing such an audit are potentially severe.  

“You will eventually see these fines like there have been on the servicing side,” Anderson said. “They are minimum $1,000 a day. They are major fines, and we don’t know what they are going to audit.”

In testimony before the House Financial Services Committee this past Tuesday, CFPB Director Richard Cordray said the bureau’s approach will be corrective and diagnostic in the initial period, and not  "punitive."

He also said federal regulators will release a letter that explains their policy during the transitional period. 

CFPB spokesman Samuel Gilford confirmed that some written assurances for the industry will be coming.

“We plan to issue a letter in conjunction with other federal agencies that simply puts into writing what we’ve been saying for months. We are looking for good-faith compliance with our 'Know Before You Owe' rule,” Gilford said. 

As featured in the Scotsman Guide, October 2015

By Brena Swanson

Users can now access DocMagic's eSign/eDelivery technology

DocMagic, a provider of compliant loan document preparation, compliance, eSign and eDelivery solutions, announced a multi-year license agreement withPHH Mortgage (PHH) to use its products to help ensure compliance with TRID.

Under the agreement, PHH, its clients and their borrowers can access DocMagic's eSign/eDelivery technology that enables the electronic delivery of TRID documents and the electronic viewing of closing disclosures and related documentation.

“We have worked closely with DocMagic for the last year to thoroughly evaluate, test and integrate their technology and compliance solutions, and we will use various components to ensure we are TRID compliant," said Eric Sadow, chief compliance and fair lending officer with PHH Mortgage.

In addition, DocMagic's Audit Engine el ectronically tracks and logs transactions touched by all parties working with its Compliance Engine as well as its SmartCLOSE portal.

DocMagic developed SmartCLOSE in order to integrate with loan origination systems for a seamless exchange of data and related information.

As featured by HousingWire, October 2015