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Pavaso’s Digital Close solution seeks to solve multiple problems for lenders by creating a controlled, repeatable and auditable closing experience that fosters better communication and transparency throughout the home purchasing lifecycle.
“Digital Close is not a click-to-sign solution — it’s much more robust than that,” said Chris Ayoub, Pavaso’s chief operating officer. “What we’re doing is leveraging technology to bring lenders, consumers and Realtors together to operate off of common data, so everyone is able to communicate with one another.”
The Digital Close process starts when either a real estate agent submits a new order to their title company, or when the lender delivers early disclosures, which the consumer can then review digitally on Pavaso’s web-based portal. At closing, the final package is digitally signed by the borrower on one of the company’s electronic closing platforms.
The consumer education materials that the CFPB is requiring from lenders are embedded in Digital Close and easily accessible for borrowers throughout the process, Ayoub said. This benefits not only the consumer, but leaves an audit trail for regulators.
“Our goal is to provide education, fairness and transparency, with a more confident customer showing up to the closing table,” he said.
The consumer was the missing piece to the puzzle in most closings, Ayoub said. The lack of communication with the borrower — from title companies and from the lender — meant that the potential for lenders to make mistakes was high. Pavaso designed Digital Close with controls to make sure a loan file is complete before closing; if anything is missing — a signature, date or time stamp, for example — the loan won’t close.
“Our process gives lenders more control. They are able to use technology to mitigate risk — reputational, financial and, compliance risk, by using our Digital Close solution,” he said.
Digital Close also creates a loan file that travels throughout the closing process, and beyond, consolidating information on the borrower and ensuring a smooth transition into the secondary market.
“We are offering a kind of closing forensic data — all of the who, what, when and how are being captured. It’s important and critical as the loan goes into the secondary market that each closing is done the same,” Ayoub said.
“When the investors in the secondary market look at a loan from a particular mortgage company and they know that it was done through Digital Close, and the forensics traveled with it — there’s a peace of mind there that it was done right,” he said.
Compliance is on everyone’s mind as the regulation deadlines from the CFPB roll out to lenders. Trying to accommodate those rules without an electronic solution will cost lenders both excessive time and money, Ayoub said.
“If you try to meet the upcoming rule with more paperwork-based compliance, it doesn’t to take an economist to realize that profit margins are going to shrink, or you’re going to have to raise costs.
“I see a huge crisis coming up with people trying to become compliant at a high cost without technology, Those companies who are leveraging technology will be saving money, and margins will widen; there will be a huge gap between the companies that are leveraging technology and those who aren’t,” he said.
With even more regulation coming next summer — the TILA-RESPA rule’s effective date is Aug. 1, 2015 — Ayoub thinks now is the time for companies to seek out solutions.
“Finding a solution is not something that takes a week to do. Any software technology has an implementation process to it and companies should use this time to take advantage of the time the CFPB has given them. They need to find a solution to help automate the compliance piece of it, reduce costs, mitigate risks and increase stakeholder participation,” he said.
To get more information on Pavaso’s Digital Close solution, visit pavaso.com.