The digital world is slowly creeping its way into mortgages, as more lenders start to unveil digital mortgage applications and boast a fully online digital mortgages.
There is one caveat, however, that’s making the “fully online digital mortgage” look not as digital as marketed: the closing process.
Borrowers can start and track their mortgage application process online, but when it comes time for the closing process, it’s back to paper and pens.
But this piece of the mortgage process is finally starting to change, with states, lenders, and title companies working together to bring the process online.
And according to United Wholesale Mortgage President and CEO Mat Ishbia, this will soon become the standard way of doing closings.
“eClosings will be more of a standard practice next year and I think the majority of closings will be done this way by the end of 2019,” said Ishbia.
Ishbia’s company recently announced its first virtual e-close, allowing buyers to never have to leave their home or wet sign a single document for refinance loans.
UWM’s new solution allows borrowers to Facetime or Skype with the notary, making it the first e-closing borrowers can complete remotely, with a notary not having to physically be present.
Usually, eClosings still require either some in-person contact or a notary to eSign closing documents via a shared tablet.
Once complete, Ishbia said UWM sells the loans to Fannie Mae or Freddie Mac, like most other types of closings.
“These are just regular conventional loans. eClosings aren’t anything out of the ordinary, they just present a different way that docs are done,” said Ishbia.
Before UWM introduced FaceTiming or Skyping, eClosings were all digital, but a notary was still present in the room, as noted above.
This is the type of closing that occurred in North Carolina back in May. The state, along with North State Bank and the help of other key parties, executed a 100% electronic mortgage closing. Investors Title Insurance Company of Chapel Hill insured the electronic, notarized mortgage, while DocMagic and World Wide Notary were the electronic solution providers that were used.
Unlike UWM, which is currently offering eClosing technology to brokers in four states: Illinois, Montana, Virginia and Washington, this specific one with North State Bank was executed in North Carolina, which is important to note given state laws around eClosings vary a lot.
For North Carolina specifically, N.C. Secretary of State Elaine Marshall commented on eNotarization, saying, “The eNotary is essential to moving legal filings into the digital age. People and institutions still want to know that a notary was there in the room confirming the signer’s identity even if the filing is moving through cyberspace instead of being a pile of paper.”
“For eClosings we require the physical presence of that notary plus the access to legal expertise—there is zero drop in standards for an eClosing—it is just faster, far more convenient and in my opinion more secure,” said Marshall.
The other option for an eClosing is a hybrid closing, which is explained further in a blog here: “Everything you need to know about eMortgages.”
A hybrid closing is the route Nevada took when it partnered with mortgage technology provider Pavaso to help three stated residents in their closings.
The hybrid eClosing due to an investor requirement that makes a small number of documents have to be “wet signed,” causing the borrower to have to physically affix a signature to the documents.
Nancy Pratt, Pavaso vice president of Partner Relations & Government Affairs, added, “Nevada supports the vision of a paperless, fully digital closing, by allowing eRecording. A program for eNotarization is underway, but a hybrid closing is necessary since many investors still require a physical, rather than digital signature for certain closing documents.”
Since every state has unique rules, Ishbia said, “No one is concerned about doing eClosings in states that have said they’re fine with remote notarization.”
“Everyone is ready and excited to do eClosings in other states, but they want to make sure that all the state laws are aligned,” he added. “But if a state doesn’t explicitly say that remote notarization on mortgages is acceptable, then you have to infer based on other things.”
Overall, Ishbia, said that it’s about making sure the title insurance can provide first lien to Fannie Mae and Freddie Mac, and the title insurers are making sure they feel confident that remote notarization is acceptable with their state laws.
Since a lot of other states are okay with remote notarization on non-mortgage-related things, Ishbia said they feel that many more states will come on very soon.