Another year has passed and like previous years, we saw tremendous energy and effort dedicated to encouraging widespread adoption of electronic real estate transactions. In fact, there continues to be a steady stream of news in the mortgage industry with press releases published nearly every day announcing a variety of new offerings and technology partnerships designed to support some aspect of the digital real estate transaction and an eClosing process. And yet, we’re still not there.
Yes, the number of completed eClosings continues to climb, yet the industry volume remains relatively small. Despite significant investments, lenders and other real estate transaction participants continue to experience roadblocks – partially because eClosings don’t always work well for investors, county recorder jurisdictions or settlement partners. There are more than 1,734 county recorders that can eRecord – but most can only eRecord one document and are working to support eRecording for the remaining documents. Meanwhile, the settlement community continues to face a difficult, non-standardized technology environment as agents interact with real estate and lending organizations, while navigating a tremendous range of local government rules and regulations that impact how they close a real estate transaction.
That’s why tapping into the growth opportunity of digital mortgages and non-mortgage real estate purchases can only be accomplished by leveraging robust, proven technology to help operationalize digital real estate transactions. For large numbers of eClose transactions to become scalable and industry-wide, it must work for everyone across the end-to-end fulfillment process without the friction that currently exists when a real estate transaction moves from the realtor or broker, through due diligence and approvals, to the settlement phase, the sale of the loan and to servicing.
Smoothing out the Process
To help ensure a smooth transition to a normalized digital environment, everyone involved in the real estate transaction must be able to operate in the most efficient way without being required to make significant changes to the way they currently do business. Instead, the goal should be to smooth out the process by delivering the data and artifacts that each participant needs to efficiently and consistently move eClosings across the finish line. In fact, the eClose process can be dramatically simplified by using well-vetted platforms to simplify the processing of a real estate transaction and by making sure that those who need information only get what they need, when they need it to minimize potential complications for an eClosing.
This outcome would certainly remove many of today’s time-consuming barriers for both lenders and other real estate professionals like settlement partners. Instead each participants can be provided with a user-centric view of the transaction, allowing everyone – realtors, lenders and settlement agents – as well as the consumer – to efficiently perform the activities their specific roles require to complete the transaction.
This approach makes a great deal of sense. Realtors, lenders and settlement professionals who are essential to the process should not have to wade through information and functionality they either don’t need or that won’t work for them. Instead, by accessing only the data and documents that are required to perform their assigned tasks for each transaction, it is possible to help move the industry closer to normalizing the end-to-end digital real estate process – including the eClosing.
Driving Down Complexity
The best way to accomplish this end-state is to embed business rules into the foundational technology that is deployed across the transaction. This approach is smart and workable. It would certainly enable the industry to produce a seamless end-to-end digital real estate transaction at volume. In addition, since business rules would also be extended out to each participant, transaction requirements would be seamlessly accommodated on time, every time.
Driving down complexity is not just about the final delivery of a salable mortgage. Rather, it is about streamlining the entire process as data and documents are securely transmitted between all the counterparties, driven by business rules to ensure that transaction integrity is maintained throughout.
What makes this approach so logical is that it would allow function-specific control. For example, real estate agents would still oversee their part of the transaction, but their jobs would be far less complex since everything they need would be automatically delivered to them. The lender also controls its part of the transaction, as do document providers, data and analytics providers, escrow officers and settlement agents. Regardless of the role they play, all participants in the transaction would interact with one centralized industry utility to access their specific, user-centric views of the data and documents they need to move their part of the process forward.
Change is Inevitable
The evolution from expensive paper processes and complicated transactions to streamlined, end-to-end digital real estate transactions is inevitable, and will be a welcome change for the industry. However, the mortgage industry cannot afford to sacrifice safety and security for novelty along the way. Today, there are a plethora of point solutions and technology ‘mash-ups’ that may deliver useful functionality and even some impressive bells and whistles here and there – but one-off solutions will never produce the end-to-end efficiency of a robust industry utility. Remember – digital mortgages have been around for a decade or more, but progress remains inconsistent at best.
As an industry, we must consider the important advantages that are likely to come with significantly greater digital real estate transaction volumes. If properly managed and supported with standardized processes, the industry’s collective bottom lines are likely to soar, as are new business opportunities driven by well-satisfied customers and we finally achieve full visibility into the mortgage transaction. This makes it vital that organizations select well-vetted, banking-grade platforms that incorporate robust business rules across the real estate ecosystem to ensure these advantages are achieved.
In addition to the benefits to lenders and other real estate and settlement professionals, welcome conveniences for borrowers can also be expected. Transactions will be handled much more efficiently because role-specific business rules will provide user-centric visibility for all parties to the transaction, including buyers. This applies to both cash real estate purchases as well as transactions that include mortgage loans. It also means that consumers will be assigned a unique log-in and password when they first engage with their real estate broker or lender to obtain a real estate property. Throughout the transaction, they can use these credentials to interact with whomever they need to, whenever they need to.
The movement of non-GSE investors into purchasing eNote mortgages is a need for many lenders. Freddie and Fannie have been working to support the entry of other Investors in this space by establishing processes and requirements for permitting eMortgage deliveries from aggregators that purchase loans from correspondent lenders, as well as education and information sharing on eMortgage requirements with other agencies, such as Federal Housing Authority, Ginnie Mae and Federal Home Loan Bank financial institutions.
By leveraging the real estate and mortgage industry’s impressive technology advances and proven platforms - and taking advantage of the powerful functionality that is available through secure, role-based access to relevant data, documents and functionality - the industry has perhaps its best shot at normalizing the digital real estate transaction from start to eClose. It is also fair to expect that the efficiencies that will likely be generated across the real estate and mortgage industries will help deliver the additional bandwidth industry professionals need to enjoy the much-anticipated growth trajectory of digital real estate transactions and a true digital mortgage.