Compliance Newsletter - November 2020
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Survey: Homebuyers adapt to eSignings, remote closings during pandemic
Homeowners have adapted well to eSignings and remote closings and are very satisfied with their overall closing experience, according to a new national survey of people who bought and refinanced homes during the COVID-19 pandemic.
“As we’ve seen throughout 2020, this crisis is accelerating adoption and acceptance of e-transactions, and when things return to normal, eSigning and eClosings will be the new normal,” said Bob Jennings, CEO of ClosingCorp, a residential real estate closing cost data and technology firm, which sponsored the survey.
The survey comprised phone interviews with 691 borrowers nationwide who had conducted a mortgage transaction between March 15 and Aug. 31. Among the respondents, 15% were homebuyers, 79% were refinance customers, and 6% were both. About 35% were first-time homebuyers.
The findings included:
- 95% of borrowers said their closings were efficient and 90% said they were satisfied with their closings. Most of the transactions involved eSigning and remote closings.
- 89% of homebuyers and 84% of refinance customers eSigned either their disclosure, closing documents, or both.
- 55% of the surveyed borrowers said their closings were conducted remotely and not in traditional locations, such as a title company or lender’s office.
The borrowers who were less comfortable with remote closings were older (age 55 and up).
The results bode well for the mortgage industry’s trend toward digitization. More than two-thirds of survey participants say that for future transactions they’d prefer remote closings to in-person closings, and 82% reported that they prefer eSigning documents prior to closing.
DocMagic's Director of Enterprise Solutions Chris Lewis said the survey results are a positive sign for the industry: “It’s unfortunate that it took a pandemic to move the adoption curve in the right direction, but ultimately, it’s going to serve the mortgage industry well by further automating the paper-based processes of yesteryear that were hampering business-to-business as well as business-to-consumer efficiency."
DocMagic provides a full suite of digital mortgage solutions, including eSignatures and Total eClose, a comprehensive solution that enables a 100% paperless eClosing process from start to finish.
The study was jointly designed by STRATMOR Group.
“Despite the disruption caused by the pandemic and the workarounds that the lending and title companies have had to quickly put in place, borrowers continue to be satisfied with the mortgage closing process,” said Jim Cameron, Senior Partner at STRATMOR Group. “It suggests that the more electronic—or ‘e’—each step in the process becomes, the higher the satisfaction.”
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DocMagic’s CEO honored with Lending Luminary Award
DocMagic CEO and President Dominic Iannitti was named a Lending Luminary award winner by the PROGRESS in Lending Association. The honor, now in its 2nd annual year, was awarded to just 25 people across the mortgage industry, including bankers, lenders, servicers, technology executives, consultants, and more.
“Right now the market is filled with uncertainty, but these true Lending Luminaries are better handling and navigating the constantly fluctuating market conditions,” PROGRESS in Lending stated in announcing the award. “These executives deserve to be recognized for their industry vision and leadership.”
I
annitti was selected thanks to several key accomplishments over the last year that led DocMagic to success. One of the main accomplishments was the April launch of AutoPrep, a new technology that leverages AI, OCR, and machine learning technologies to fully e-enable a document for paperless eClosings. This means any loan document from virtually any provider can be used with DocMagic’s comprehensive, single-source Total eClose platform.
AutoPrep was a significant R&D investment and technology strategy to help more lenders perform eClosings.
”I’m a firm believer that these innovations work to establish much-needed interoperability between disparate systems and critical entities within the digital mortgage ecosystem,” Iannitti told PROGRESS in Lending. “Our goal is for our industry-leading eClosing platform to be completely open, handling documents from all vendors and sources without any manual effort or additional labor required.”
Iannitti was also recognized for helping DocMagic clients adapt to the pandemic environment, including social distancing measures and work-from-home (WFH) orders. Numerous lenders used Total eClose to execute mortgage closings electronically. Additionally, as more states passed emergency remote online notarization (RON) laws, Iannitti ensured that DocMagic was ready to quickly and effectively respond to clients’ urgent need for RON within the Total eClose platform.
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CFPB’s 5-year TRID assessment produces mixed results
Earlier this month the Consumer Financial Protection Bureau (CFPB) released a five-year lookback assessment of the TRID rule—and its findings contain mixed results.
On the one hand, TRID—which is meant to help borrowers better understand the terms of their mortgage loans—has benefitted consumers, who are less confused about the mortgage process and find it easier to compare terms and costs.However, the assessment also found that lenders and closing companies have paid significant costs for compliance.
The 316-page report, released Oct. 1, was mandated by the Dodd-Frank Act. The CFPB conducted three industry surveys (of lenders, loan officers, and closing companies) for the assessment and began soliciting public comment last November.
Here are some of its key findings:
- TRID created “sizable implementation costs” for lenders and closing companies. According to industry surveys, the typical cost for a lender to implement TRID was $146 per mortgage originated in 2015 (about 2% of the average cost of originating a mortgage), while the typical cost for a closing company to implement TRID was $39 per closing in 2015 (about 10% of the average cost of closing).
- Respondents to the lender survey reported their largest implementation costs were due to new information technology systems, policies, and training.
- TRID appears to have initially decreased mortgage originations and increased closing times, but both returned to pre-TRID levels in a relatively short period of time.
- On the consumer side, TRID “improved consumers’ ability to locate key information, compare terms and costs between initial disclosures and final disclosures, and compare terms and costs across mortgage offers.”
The CFPB also released a Data Point that examined data for approximately 50,000 mortgages. Here are some of its key findings:
- Almost 90% of mortgage loans involved at least one revision, 62% received at least one revised Loan Estimate (LE), and 49% received at least one corrected Closing Disclosure (CD).
- The prevalence of changes between the first LE and the last CD varied greatly: APR changes occurred in more than 40% of mortgages; loan amount and the loan to value ratio changed for almost 25% of mortgages, and the interest rate changed for 8% of mortgages.
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Remote online notarization (RON) has several benefits beyond safety
Remote online notarization (RON) eClosings have been on the rise during the age of COVID-19, as they’re seen as the safest closing option during a time when social distancing is paramount.
“It’s the nirvana of every stakeholder’s closing experience because the borrower can join the eClosing from the comfort and, more importantly, the safety of their home,” said DocMagic Senior Account Executive Leah Sommerville.
However, RON eClosings include several other benefits which make them an increasingly popular choice in the mortgage industry, regardless of whether there’s a pandemic taking place.
1. It’s easier for borrowers to review closing documents.
With RON and other forms of eClosings, borrowers typically receive all documents before the closing, giving them plenty of time to review the entire closing document package and raise any issues.
“If you’re a first-time homebuyer, it can be intimidating to show up and be expected to sign a stack of documents that you’ve never seen before,” Sommerville said. “Even seasoned borrowers can be intimidated by the in-person closing session. eClosing provides borrowers the opportunity to review all of their closing documents in advance and contact their lender, settlement agent, attorney, or even parents if they have any questions."
2. Lenders can spot mistakes sooner.
In the paper world, lenders often email their loan documents to their business partners (e.g. the title agency, settlement agent, or attorney for review) and then wait for the closing package to be mailed back with title documents added—which the lender unfortunately won’t see until they get the closing documents back with all the signatures.
“Often, lenders receive returned closing packages with signatures or documents missing,” Sommerville said. “No one wants to send a mobile notary to revisit the borrower because the original notary’s signature is missing or the notary stamp is smudged. These issues are eliminated with any version of eNotarization and eClosing.”
Such mistakes also compound the negative effects, Sommerville noted, with more fees incurred as the lender continues to hold the note, unable to sell it to the secondary market until these issues can be resolved.
3. Settlement agents stay involved.
A common misconception about RON is that it takes control of the closing out of the settlement agent’s hands. With RON, the settlement agent can still be involved in the eClosing and signing session.
Some RON providers will allow the settlement agent to join the session as an observer. Additionally, both the settlement agent and the lender, who aren’t required to be present for the closing, can log into the eNotary platform and see when the closing is scheduled, which increases transparency for all stakeholders.
4. There’s built-in protection and compliance.
RON laws have a variety of requirements to protect stakeholders. For example, the eNotary must have a record of the ID validation (most commonly knowledge-based authentication and credential analysis), which confirms that the borrowers’ identity is valid and not fraudulent. DocMagic and our electronic notary partners can conduct these ID validation requirements with the borrower on behalf of the lender.
Most states also require that video of the RON closing session is stored, usually for 10 years. Florida even requires the video to be stored in two locations.
Additionally, the documents must contain tamper-evident seals. DocMagic’s eSignature platform applies a time- and date-stamp as soon as the borrower eSigns, with a tamper-evident seal on each document. If a document is modified post-closing then the signatures are voided, according to Sommerville.
“RON is the greatly needed improvement to the current in-person, paper notary closing process because of the enhanced borrower experience, reduction of errors, increased transparency, and confirmation of compliance,” Sommerville said.
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California enacts consumer financial protection law
The California legislature recently enacted a new consumer protection law, called the Consumer Financial Protection Law (CFPL).
The law was enacted under Assembly Bill 1864, which was passed Aug. 31. Gov. Gavin Newsom signed the new law on Sept. 25. Among other things, the law will change the name of one of the two main mortgage industry regulators from the Department of Business Oversight (DBO) to the Department of Financial Protection and Innovation (DFPI).
DocMagic published an article in January 2020, here, about plans included in the California governor’s budget proposal to create a new “mini-CFPB.” The Consumer Financial Protection Law is the result of those plans being enacted by the legislature. However, the new law differs significantly from the original proposal.
One of the main differences is that this law leaves intact existing regulatory structures for mortgage lenders, banks, credit unions, etc. The CFPL will create new registration and oversight schemes that are applicable to debt collectors, credit reporting agencies, and any other person offering consumer financial products not otherwise currently regulated in California.
The DFPI, while administering new oversight authority over broadened areas of consumer finance within the state, will also inherit the existing responsibilities and duties of the DBO, including oversight of existing licenses under the California Financing Law or the Residential Mortgage Lending Act and their requirements.
The powers granted to the DFPI expand the powers previously held by the DBO and include some of those granted to the Consumer Financial Protection Bureau under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. For example, the DFPI will be charged with performing market research and consumer outreach. The DFPI will also have new authority to find violations of Unfair, Deceptive or Abusive Acts or Practices (UDAAP) under the Consumer Financial Protection Law.
While there is no immediate change to the existing regulations relative to mortgage lending in California, there are some minor changes that DocMagic will implement ahead of the effective date, such as updating the name of the Department of Business Oversight to the Department of Financial Protection and Innovation on certain California disclosures. Please stay tuned to our form update notifications for those updates. The new law is effective Jan. 1, 2021.
Should you have any questions about the content of this article, please contact DocMagic’s Compliance Department.
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Compliance Newsletter - October 2020
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