Welcome to Ask the eClosing Team, an ongoing series where DocMagic’s eClosing pros tackle real questions that we’re hearing from lenders. Today’s response is supplied by eClosing Team member Leah Sommerville.

What components do you need to produce a full eClosing, including an eNote?

More and more lenders are interested in offering eNotes, which are skyrocketing in popularity due to their many benefits — especially post-closing, when it comes to selling the note instantaneously.

"The process for paper notes includes many manual steps that add time, enhance risk, and add additional shipping costs,” Sommerville said. “eNotes, by comparison, can be delivered instantly to the secondary market, reducing time to funding and including full audit capabilities.”

Ask the eClosing Team: Why are eNotes better than paper? (and other burning questions)

Many lenders, however, still want clarity about what’s needed to deliver a full eClosing process. Sommerville boils it down to four necessary components:

1. e-Enabled Docs

To reach the finish line and provide completely electronic eClosings (the nirvana of every stakeholder’s experience), lenders must first be able to provide e-enabled documents for eClosing processes such as eSignature, eNotarization, eNote generation and eDelivery. Every eClosing process requires e-enabled documents. Fortunately, all of the documents in DocMagic’s eDocument library, which has more than 300,000 documents, are available in an e-enabled format.

The eNote specifically requires the SMART Doc file format determined by MISMO, the mortgage industry’s voluntary standards setting body. (Although SMART Docs have been around for about 20 years, the 1.02 SMART Doc version is the current requirement for eNotes, even as the industry also works towards a 3.0 verifiable version.) A SMART Doc locks together its data and visual presentation in a way that can guarantee the document’s integrity. It also includes a Tamper-Evident seal that is applied to the document to maintain its integrity as copies of the eNote are transferred from one MERS Member to another.

DocMagic’s Document Generation solution has the advantage of being able to produce e-enabled documents as well as generate a SMART Doc eNote.

For lenders currently unable to generate e-enabled documents, DocMagic’s proprietary AutoPrep Solution can instantly e-enable any document package for eClosing. In those cases, DocMagic’s robust digital lending platform can also generate the Category 1.02 SMARTDoc eNote to include in the AutoPrep eClose transaction.

2. eNotary technology

More lenders are using eNotary technology, and remote online notarization (RON) in particular, to conduct eClosings. A RON platform should have some specific elements, including:

• Ability to store the RON Notary’s digital notary seal. “You want your document signature platform to have the capability to track the time and date stamp with the user’s IP address as each electronic signature is applied, but also to digitally apply a notary stamp/seal to electronically notarized documents,” Sommerville said.
• The ability to maintain video recordings for a specific period of time, based on the various states’ laws as they pertain to document retention, along with the capability to produce a full audit trail.
• Identity validation tools such as credential analysis and knowledge-based authentication (KBA).
  
  

3. eVault technology

Once the eNote has been generated, lenders need an eVault in which to store it. DocMagic’s eVault — which was built using proprietary technology that allows our eVault to seamlessly connect to our full suite of solutions — can store not just electronic documents, but also audio files of RON recordings.

Additionally, all of the lender’s partners need their own eVault if they’re going to purchase, service or maintain the eNote. The eNote’s authoritative copy (the eNote equivalent of the original paper note) can be instantly transferred from one stakeholder to the next, as well as having a copy eDelivered along the mortgage chain to the next stakeholder’s eVault.

Sommerville noted that many prominent mortgage institutions and investors already use DocMagic’s eVault, with many more slated to be in production soon.

4. MERS eRegistry connectivity

Every eNote has to be registered with the MERS eRegistry utilizing a unique Mortgage Identification Number (MIN) from MERS. The MERS eRegistry was set up to track which digital copy of the eNote is the authoritative copy and who has permissions to conduct life-of-loan edits to the eNote’s status. Although the MERS eRegistry is the system of record for eNotes, MERS does not actually store eNotes, which is why a dependable eVault is vital to any completely electronic eClosing process.

DocMagic’s close working relationship with MERS is crucial here. Lenders can sometimes find the setup process overwhelming and may lose momentum for their eNote efforts if any roadblocks pop up.

"DocMagic's eClose Team works closely with lenders to guide them not only through the necessary technology adoption, but also through MERS eRegistry setup (as required for eNotes),” she said. “We also work through successful adoption for the lender's business partners to ensure the best experience possible for all stakeholders."

A single-source solution

DocMagic’s Total eClose solution — which facilitates both hybrid closings and full eClosings — is one of the few eClosing platforms that can provide all four of these components. Most tech vendors in the mortgage space only provide one of two of these components, forcing a lender to contract with multiple lenders to produce an eNote.

The eClosing Team can be reached at eClosingTeam@docmagic.com.

Related Content:

• Did You Know: A basic eSign hybrid is easier than you think? (9/15/2021)
• Did You Know: You can get all your eClosing needs met by one vendor? (6/16/2021)
• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)

Before the pandemic, one of the major roadblocks to implementing eClosings was a lack of serious commitment. Companies talked the talk when it came to eMortgages, but in many instances the commitment was surface level at best. That all changed after COVID-19.

In 2020, with much of the country on lockdown or under stay-at-home orders — and with business threatening to grind to a halt — many mortgage companies finally decided it was time to seriously consider eClosings.

However, this decision to offer eClosings collides with the challenges of implementing them. The pandemic may have spurred lenders to consider eClosings, but many are unprepared for the reality of the road ahead of them. To get past this hurdle, lenders need to adopt the mindset that they will pursue electronic closings — whatever it takes.

Did You Know: A basic hybrid eClosing is easier than you think?

“No one can sit in a boardroom now and say they won’t do eClosings. They’d get fired,” said Brian D. Pannell, DocMagic's Chief eServices Executive. But much more common are the lenders who are enthusiastic when they start the process and then balk when they encounter difficulties. “There are people who come to the table and say, ‘I'm ready to do this,’ and then two weeks later say, ‘I didn't realize I had to do this much. I'm not ready to do this now.’”

Here’s a sampling of the obstacles that may sidetrack lenders who’ve made the decision to go “e”: They have to invest, sometimes heavily, in new systems; there is confusion over states’ varied eNotarization laws, including the temporary emergency orders; they may encounter resistance from secondary partners and investors; they want to offer eNotes but are confused about how to become a MERS eRegistry member, etc.

“When we talk to someone in the very beginning, we have to get them oriented toward the thought process that this has to be a commitment,” said Daniel McGrew, president and CEO of Elite Digital Advisors and the leader of DocMagic's eClosing team. He added that when he holds a best practices call with lenders who’ve decided to move forward, he informs them, “If your attitude today is, ‘we'll dip our toe in the water’ or ‘we'll just give this a try,’ you're setting yourself up for serious trouble. If the commitment's not there, this thing is going to fail.”

Additionally, this committed mindset needs to come from the top. “Regardless of who initiated the change, at the end of the day you must have executive sponsorship,” Pannell said. “Otherwise, organizations may reach the end of the implementation process only to find that even the pandemic couldn’t accelerate adoption and their company is only eClosing one or two loans a month. Then the executives will ask, ‘Why did we do this?’ Companies need a sustained strategy.”

The commitment needs to be there especially if the initial eClosings don’t go well. McGrew recalls one credit union that began implementing eClosings in 2020. Their very first eClosing, undertaken to great fanfare with high-level executives participating, ended up lasting almost two hours because the notary was completely new to the process.

That could have been a “one-and-done” situation, McGrew noted. However, the credit union was undeterred, learned some lessons from the mishap, and pressed on with electronic closes. By the end of 2020, the lender ended up closing almost 90 eNotes — with a lot more planned for 2021.

Pannell worked with a Midwestern bank that took an aggressive approach, insisting forcefully that all their stakeholders and partners get on board. “It was an uncomfortable change for a lot of people, but the bank made them do it,” Pannell said. The result? “They’re killing it right now.”

Another key reason why lenders must be prepared to push past any obstacles: Borrowers today are demanding some form of eClosing. In the past, they were content to follow the lender’s lead when it came to closings. However, amid the pandemic, borrowers have a new risk tolerance — and in many cases, that tolerance doesn’t allow for a traditional closing that involves a large stack of papers and a drawn-out, in-person signing. They want the safety of a quick or remote closing.

Additionally, borrowers have gotten used to the convenience of an Amazon-type experience, where they order something and it arrives almost immediately.

As a result, lenders need to have more flexibility when it comes to borrowers who want an eClosing on their terms. Since the pandemic, Pannell has gotten calls from lenders requesting help in the evenings, sometimes as late at 10 p.m. — while they were in the middle of conducting a RON closing. When asked why the ceremony was happening so late, lenders would answer, “This is the window the borrowers have.”

“So now lenders have to make themselves and their support staff more available. It’s no longer a world of 8 a.m. to 6 p.m. office hours,” Pannell said. “Lenders are at the beck and call of the borrower now. You’re going to work some unique scenarios, and you have to be committed to that. You have to know that this is the new norm.”

To learn about four other key hurdles to eClosing implementation — and how to overcome them — download the full white paper here.

Related Content:

• Ask the eClosing Team: Why are eNotes better than paper? (and other burning questions) (8/18/2021)
• Did You Know: You can get all your eClosing needs met by one vendor? (6/16/2021)
• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)

For many lenders used to a paper-based mortgage process, an electronic closing may feel out of reach. Why? “The county recorder won’t accept it.” “My investors won’t purchase it.” “I can’t change my processes.”

And of course, “It’s too difficult to implement.”

Except it isn’t.

While eNotes and eNotarization do require more time and effort, a basic eSign hybrid — in which borrowers can electronically sign all of the closing documents, with the exception of the note and recordable documents — is very simple to set up. Lenders who are already using DocMagic’s doc gen solution, in fact, can be enabled for eSign hybrids (also known as Hybrid #1) in as little as 24 hours. 

“As soon as you say ‘eClose,’ a lot of clients say, ‘We can't do that. We can't do an eNote. We can't do eNotary,’” said Aimee Eyre, a sales executive at DocMagic. “But eSign hybrids don’t require a big implementation.”

This type of hybrid closing allows borrowers to preview all of their documents ahead of the closing; switches the majority of documents from paper to digital; and reduces a prolonged, drawn-out ceremony to a matter of minutes. Crucially, it’s also accepted by every investor and county recorder in the country. The more complicated pieces of the closing, the note and deed, are still wet-ink signed and can undergo traditional in-person notarization.

During the pandemic, eSign hybrids shot up in popularity as many lenders set up a drive-thru closing system to allow for shorter and mostly socially distanced closings from the safety of a car.

For DocMagic’s doc gen customers, adding on eSign hybrid capability is easy; it can be set up within 24 hours and clients can begin testing it out with their teams and settlement agents. “It’s just a matter of a couple of clicks,” said Darlyn Buthsombat, a DocMagic account executive. “We’ve already done the work on the backend; we already know which forms are e-enabled and what type of eClosing it is.”

Additionally, lenders have plenty of flexibility with such hybrids, which can be implemented for specific investors, states or loan programs.

For a new customer, the onboarding time frame is closer to 30 to 90 days, depending on the size of the company and if they have special requests, as new lenders first need to be set up for processing documents.

For most lenders, there’s one main roadblock to implementing an eSign hybrid: “It’s an operational change. When I speak with a customer, that's their only resistance — it's just a big change to how they do things,” Buthsombat said.

“But there shouldn't be anything that's stopping lenders from doing this type of hybrid because it's really easy,” she continued. “It's a win-win situation for all parties: the lender, the selling agent and the borrower.”

DocMagic’s Sales Team can be reached at sales@docmagic.com.

Related Content:

• Did You Know: You can cut out the middleman and draw your own docs? (6/30/2021)
• Did You Know: You can get all your eClosing needs met by one vendor? (6/16/2021)
• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)

The number of title and settlement companies that offer eClosings increased 228% in 2020, according to ALTA’s 2021 Digital Closing Survey of 300 title professionals.

The 2019 version of the survey showed that before the pandemic only 14% of companies offered digital closings. In 2020, amid the COVID-19 crisis and a raft of stay-at-home orders, that figure shot up to 46%.

“Since the onset of the pandemic, title and settlement professionals rapidly adapted their processes to meet the needs of their customers and to continue facilitating safe and secure closings,” said Diane Tomb, ALTA’s chief executive officer.

She added that one of the title industry’s most important tools has been remote online notarization (RON), adoption of which rose 547% in 2020, according to an earlier ALTA survey of vendors.

The 2021 Digital Closing Survey found that 35% of title and settlement companies offer RON technology, while more than 5% of transactions were closed using some version of RON.

“RON is a convenient alternative to traditional in-person notarization for all consumers, but it is especially beneficial to consumers who are unable to easily travel to access notarial services, serve in the military overseas or have time constraints,” Tomb said.

Additionally, 64% of survey respondents expect RON closings to increase in 2021. The factors most likely to affect a company’s timeline to implement RON technology are lender and consumer requests, access to RON providers, and changes to state laws.

At least 36 states have permanent laws on the books to allow some form of remote notarization, and 34 of those states permit RON (the other two states, Alabama and South Dakota, only allow remote ink-signed notarization, RIN, a lower-tech form of virtual notarization that doesn’t use electronic signatures).

Additionally, the federal Securing and Enabling Commerce Using Remote and Electronic (SECURE) Notarization Act has been introduced in both the U.S. Senate and House. It would allow “immediate nationwide use” of RON nationwide.

While RON adoption has increased significantly, paper still comprises the bulk of the mortgage business. Only about 5% of ALTA survey respondents reported that their closings were fully digital, while 85% said all their closings were paper-based.

Additionally, getting set up for RON can be expensive. The average cost of implementing RON, including software, equipment and training, was almost $30,000 per office, according to the survey.

Those who implemented RON, however, reaped some key benefits: 52% of respondents said closing times were lower due to the number of documents that could be signed ahead of time, and 43% reported cost savings.

RON was used most often in transactions involving sellers only (40%), followed by cash deals (23%), refinances (17%) and purchases (14%).

Related Content:

• Senators reintroduce bill to allow remote online notarizations nationwide (5/18/21)
• Should longtime RON-holdout California allow it? Secretary of State considers it (5/6/21)
• RON update: First new remote online notarization law of 2021 passes (2/12/2021)

Lenders are finding there are a host of upsides to eClosings — and their post-closing departments are reaping some of the main benefits.  

In a series of recent webinars, DocMagic clients reveal three key reasons that their post-closing departments prefer digital closings, and especially eNotes (electronic promissory notes):

1. No more time wasted hunting down missing signatures or initials.

This is actually a benefit with any eClosing, including basic eSign Hybrids that produce paper promissory notes.

“The post-closing department, previous to eClosings, had to scrub every document for accurate signatures. For some reason, borrowers just simply could not find the exact same name on every document,” said Chrissy Brown, COO at Atlantic Bay Mortgage Group, which has branches in nine states. “Did they miss a date? Do we have to go back and get something re-dated? Anytime you replace that human element with an electronic or technological advancement, you definitely increase your accuracy.”

Watch the webinar: True Stories: Hybrid, eNote and RON implementation

Beth Eller, the vice president of mortgage services at North Carolina-based Truliant Federal Credit Union, agrees. “The efficacy of it from an operational standpoint is tremendous. There is no missed signature. There is no missed initial. You can't move forward in an electronic closing without hitting every single one,” she said. “So that post-closing follow-up becomes really a non-event as far as the closing package itself goes.”

2. Speed and simplicity: It’s faster and easier to deliver eNotes where they need to go.

A common refrain among the clients was how quick and simple it is after the closing to transfer the eNote. With the click of a few buttons, the eNote is immediately registered with the MERS eRegistry and then sent via instantaneous eDelivery to the eVaults of various participants (whether the lender’s own or downstream to investors and servicers).

Once the eNote is signed, said Stephanie Zinsmeister, senior vice president of operations at AnnieMac Home Mortgage, “Boom, it's in MERS and it's ready to be sold instantaneously without having to transfer it [among] five or six different hands and risk losing that note.”

Jeff Reeves, co-founder and CTO of Canopy Mortgage, which operates in more than half the states, agrees: “It’s this simple: literally when that package is signed and you have an eNote, I go to DocMagic’s console, I hit the button to transfer Control and Location to the warehouse bank, and then they go into their system and they hit the button to send it to Fannie or to PennyMac or to whoever’s going to buy that loan from us.”

Watch the webinar: Managing a successful eClosing initiative

Truliant’s Eller noted that the immediate delivery of the eNote easily shaves six to eight days off the servicing and backend process. Loans can be sold immediately. “It is a better delivery method than paper, any way you cut it,” she said.

Additionally, there’s less of the traditional back-and-forth that happens with a paper note.

“You have one place that you go to grab that package,” Zinsmeister said. “You don't have to wait for paper to come in. You don't have to wait for a title company to email it to you. Post-close, I can just go in there and grab that closed loan package.”

This speed and ease of delivery is why Atlantic Bay’s Brown wasn’t too concerned when in August 2020, Fannie Mae and Freddie Mac suddenly instituted a new Adverse Market Refinance Fee that added 50 basis points to most mortgage refinances.

“Luckily, that [fee] got extended, but in that moment, it was amazing to have that eNote capability … we were able to deliver a lot longer into the process than some of our competitors that didn’t have that [eNote] process, because we’re able to sell instantaneously,” she said.

3. Paper notes can be lost, while eNotes are impossible to lose or destroy.

Let’s be honest: Sometimes FedEx or UPS mess up.

As the lenders noted, with just a few clicks, eNotes are instantly sent where they need to go. With paper notes, however, lenders have to rely on a shipping company such as FedEx or UPS to deliver the note to the correct custodian. But this leaves room for human error, and many, many lenders know what it’s like to have the delivery service lose a note.

In April, UPS lost one of Canopy Mortgage’s paper notes. Usually in such a scenario, the borrower is willing to re-sign the note. Not in this case.

“This person was a real estate attorney and made a huge stink about the fact that he didn’t want to sign another note because it’d be a duplicate, and somehow, we were going to shaft him because we have two notes. ‘What if we found the other one?’ and on and on,” Reeves said. The borrower forced Canopy to draw up an indemnity document with their attorneys.

Despite that, the borrower still refused to re-sign the note. “So here I have this $400,000 note that, really, I can’t do anything with, because UPS lost it,” Reeves said. “If that shouldn’t scare you into wanting to do eNotes, then I don’t know what will.”

Related Content:

• Atlantic Bay surpasses 10,000 eClosings using DocMagic's Total eClose (5/25/2021)
• DocMagic client Truliant transfers FHLBank Atlanta's first eNote (4/15/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)

Some lenders think the only path to an eClosing is by employing a wide variety of vendors; for example, one vendor for document generation, another for compliance, another for electronic signatures, and so on.

But that’s a misconception. Not only is it possible to have a single-source vendor for all eClosing needs — it’s optimal.

“The lenders I speak to are really interested in using a doc provider that's foundational, that can provide everything,” said Darlyn Buthsombat, an account executive at DocMagic. “They want to use a doc provider that can also do eSign, that can also run all of the necessary compliance checks and have everything that’s needed for an eClose solution.”

An end-to-end technology vendor like DocMagic can provide what lenders need for every step of the eClosing process — something not even all DocMagic customers may realize. Lenders who are using DocMagic for document generation and eSignature are also in position to use the Total eClose platform to conduct any hybrid closing they want, or even a fully paperless eClosing, complete with eNotes, eVault and eNotarization options. 

“Sometimes I will run into a customer that was using another e-signature vendor because they didn’t know that we have eSign available for the disclosures,” Buthsombat said. “And then once they see our solution, they switch because it just makes more sense.”

Lenders who use multiple vendors can run into a variety of issues, including:

• Inefficiencies and errors: Having multiple vendors adds more steps to the process, which also becomes noticeably slower as every step requires a wait for each disparate system to complete its job. Additionally, if a problem should crop up, it may take longer to resolve because of the uncertainty over which vendor may have caused it, forcing lenders to deal with multiple customer service teams. While DocMagic has an open application programming interface (API) to easily integrate with alternate technology solutions, other tech vendors may not have an open API, potentially disrupting the process flow between multiple vendors and resulting in duplicated efforts for the lender. By using a single vendor, lenders get a seamless experience, with the entire doc gen or eClosing process taking place in one environment.
• Compliance: While most vendors run their own compliance, it might only apply to their specific specialty, which could complicate the process. “When the system is using different vendors and they run compliance, it doesn’t know which interpretation to believe,” Buthsombat said. “For example, one vendor may run the compliance audit but not the high-cost test, so that vendor might have a question on their audits or different information relating to the high-cost test. It can create some inconsistency there.”
• Vendor management: It is simply more of a hassle managing multiple vendors versus having one. Multiple vendors lead to multiple logins and passwords, multiple accounts and billing cycles to manage, and multiple onboarding processes and training sessions. There’s also continued education and communication for updates, which can seem repetitive when received from several different providers. Lenders also have to do their due diligence and ensure that every individual vendor is adhering to all compliance and security standards.

Lenders could avoid all these issues by using an effective single-source provider with years of experience and a record of success.

A few weeks ago, DocMagic signed a new client who had been using five separate vendors: one each for document generation, compliance, eNotarization, eVault and ad hoc signing.

However, the client will now get all those services provided by DocMagic.

“They switched to DocMagic because they were looking for a single-source provider,” Buthsombat said. “They wanted to eliminate the additional steps and inefficiency caused by using multiple vendors. Now their eClosing process is more seamless and efficient.”

DocMagic’s Sales Team can be reached at sales@docmagic.com.

Related Content:

• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)
• Magazine survey shows overwhelming demand for eClosings (2/24/2021)

Welcome to Ask the eClosing Team, a new series where DocMagic’s eClosing pros tackle real questions that we’re hearing from lenders. Today’s response is supplied by eClosing Team member Leah Sommerville, Senior Account Executive at DocMagic.

What steps should Ienders take to get set up for eClosing?

Lenders embarking on a digital lending journey have several steps they should take to successfully prepare for eClosing.

Regardless of which eClosing opportunities lenders pursue — from hybrid eClosings to a completely digital eClosing — here are the components that are key to a successful eClosing initiative: 

1. Identify an internal eClosing project leader.

Lenders must select an internal stakeholder to lead the transition to eClosing. “Someone needs to champion the eClosing initiative and take ownership of it,” Sommerville said.

Lenders occasionally (and mistakenly) assign someone from their IT team as the project leader, under the assumption that implementing eClosing is primarily a tech project. “eClosing is an operational improvement to increase the entire organization's closing efficiency,” Sommerville said. “The most successful project leader is often an operational manager familiar with the organization’s existing workflow. This insight is important as teams transition to a digital closing workflow.”

Ask the eClosing Team: What do lenders need to get set up for eNotes?

The project leader does not have to be a C-suite level executive, but they should still have the support of and be in constant communication with the executive sponsor. The project leader should also be in a position of leadership, as they will be responsible for setting the organization’s rollout deadlines and adoption milestones and holding the all-important kickoff meeting to ensure the team understands the goals.

Sommerville has seen some organizations fail to successfully scale eClosing adoption when the project leader attempts to implement the eClosing process alone, believing they should have a few solo successes first before convincing others to get on board. “This isn’t a project for one person. The entire team must get behind eClosings as the default option,” she said.

2. Confirm executive commitment for your eClosing initiative.

An eClosing strategy may not always require executive approval to implement, but it always requires executive commitment to succeed. An executive sponsor at the C-suite level must show that they strongly support eClosing — not just with words, but actions.

One large lender that Sommerville worked with had hundreds of branches, all of which were treated as independent entities. While the lender’s executive sponsor supported eClosing, this CEO allowed each branch to decide how and when to implement eClosings. The attitude was, “eClosing is a great option, but it’s up to you.”

“Unfortunately, results were dismal. LO’s didn’t take the initiative,” Sommerville said. “The CEO knew eClosing provides benefits to the company and borrowers, but because she didn’t say, ‘This is how we should be doing it,’ the people on the ground didn’t feel the need to improve how they conducted closings.”

3. Determine your eClosing roadmap.

One of the most important steps for lenders is creating a detailed eClosing roadmap, which should lay out which versions of eClosing they will introduce; planned eClosing options for the future; and realistic rollout deadlines and adoption goals.

Sommerville warns strongly against implementing eClosing without a strategic roadmap. “It’s like being a boat at sea with no rudder. You can’t reach your end goal if you don’t know how you’re going to get there,” she said.

It’s easiest to implement an eClosing workflow with basic eSign Hybrids (which DocMagic refers to as a Hybrid 1); this type of hybrid allows the borrower to preview all documents in advance of the closing and eSign almost 90% of the closing package, papering out only the traditional promissory note and any documents which require notarization. Hybrid 1 eClosings can be implemented in as little as 24 hours and have no barriers to 100% full-scale adoption.

eSign Hybrids can be introduced as a first step for lenders as they prepare to also provide eNotes and/or eNotarization. “A staged rollout allows lenders to crawl, walk and then run for the most successful long-term adoption of this eClosing,” Sommerville said.

While considering their roadmap lenders should set specific target goals, such as the number (and versions) of eClosings they plan to provide monthly and then quarterly compared to their overall loan volume, for example.

Unfortunately, lenders who don’t conduct enough eClosings early during the adoption process are likely to lose momentum. “The largest factor that causes these initiatives to fall off track is when lenders don’t gain enough experience initially,” Sommerville said.

4. Select the right eClosing technology partner.

When selecting an eClosing technology partner, lenders should seek one that offers an end-to-end solution that supports all eClosing workflows. Even if lenders start with a basic eSign Hybrid, they should assume that at some point they may want to also offer eNotes or eNotarization options.

“Lenders want to select a technology partner capable of supporting their immediate and future eClosing strategies, so they have room for growth,” Sommerville said. “Additionally, a robust eClosing platform should include proprietary technology for a seamless experience. By selecting an end-to-end technology platform, lenders are empowered for all eClosing processes and assistance by a single source in the future.”

The right technology provider should also be compatible with the lender’s existing technology partners, such as their loan origination system (LOS), point of sale (POS) or document storage systems. DocMagic, for example, has an open application programming interface (API), meaning that existing integrations are already abundant.

Additionally, eClosing providers should ensure internal users are trained and knowledgeable. Lenders are encouraged to test their new eClosing processes. “We want lenders to be as familiar as possible with the eClosing process before they provide this experience to borrowers,” Sommerville said, noting that DocMagic clients can run as many tests and samples as they need, at no additional charge.

5. Confirm that your external business partners can support eClosing.

Lenders need to confirm if their settlement agents are familiar with eSigning and/or eClosing. Often, lenders are pleasantly surprised to learn that their settlement partners already include some form of eSigning or even eNotarization in their business processes.

While many lenders assume that they’re responsible for training settlement agents themselves, a technology vendor like DocMagic actually handles the agent training and onboarding on the lender’s behalf.

Additionally, most of the settlement agents that Sommerville works with leverage Simplifile for eRecording services. Fortunately, DocMagic has an integration with Simplifile, so settlement agents who use their service don’t even have to leave the Simplifile platform.

Finally, if lenders plan to facilitate eNotes, they must communicate their plans to sell these eNotes to warehouse partners and investors, as well as activate their MERS eRegistry membership as required for eNote registration.

The eClosing Team can be reached at eClosingTeam@docmagic.com.

Related Content:

• DocMagic client Truliant transfers FHLBank Atlanta's first eNote (4/15/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)
• Magazine survey shows overwhelming demand for eClosings (2/24/2021)

The number of title agents who said they conducted eClosings in 2020 more than doubled from the year before, according to a new survey.

The 11^th annual Voice of the Title Agent report, produced by The Title Report, found that 2020 was a profitable year for title agents, in spite of the pandemic. Nine out of 10 said their business improved in 2020, up from 80% who reported that the previous year.

During the pandemic, technology — in particular eClosings — became more essential for title agents to perform their job duties. The percentage who said they are already conducting eClosings went up by more than 114% from last year, while those who said they completed more eClosings in 2020 than in the year prior rose 150%.

One survey respondent said the pandemic will result in a permanent change to the title industry: “There will be a ‘real estate pre-COVID’ and a ‘real estate post-COVID.’ I doubt that the old way of doing business with bricks and mortar will come back. ... Remote online closings are becoming much more common.”

About 20% of respondents said they don’t expect to use eClosings at all — down from 25% who said the same last year. Here’s a sample of their reasons as to why eClosings are a no-go for them:

• Potential fraud: “I do not intend to do eClosings. I feel that they just open the door to liability and claims of fraud.”
• Technology: “I’m set up, but the software is so awful that I stopped.”
• Resistance to change: “I like ink, and I will not lie, and neither does ink! Sorry, been at this for 39 years. I will quit before I do eSigning, especially loan docs, and I will not remote online notary.”

Meanwhile, other agents said that while they’re ready for eClosing, their partners are not. “We are ready and capable, but lenders are not,” one agent said. Another said, “We just need lenders to get there.”

Interestingly, many lenders looking to start the eClosing process have found that a common roadblock is getting their business partners — including title agents — on board.

Leah Sommerville, a senior account executive at DocMagic, said that as she helps lenders get onboarded with eClosings, she’s finding that more and more settlement agents are already familiar with the eSigning process. Some are even including eSigning or eNotarization in their internal processes.

“It’s such a relief for lenders when settlement agents are already comfortable with the eSigning process,” she said. “As lenders consider their successful eClosing adoption, this eliminates a large concern for them.”

DocMagic’s eClosing solution includes a settlement agent portal where agents can conduct a variety of functions as part of the closing event, including adding additional participants (e.g. sellers and witnesses); adding and e-enabling title documents; reviewing closing documents to ensure all acknowledgeable annotations are present prior to eClosing; and selecting the preferred eNotary provider and eNotarization method (“in person” or “remote online”).

Additionally, lenders often think they have to train and onboard settlement agents themselves, but Sommerville notes that for clients, DocMagic will handle the settlement agent onboarding process on lenders’ behalf.

Despite some pockets of resistance, the survey and responses show that most title agents realize that eClosings are where the mortgage industry is heading.

“Digital closings represent a small percentage of our business today,” one said. “However, I expect them to trend up and that they’ll become a consumer expectation over time, not unlike what we’ve seen in other lines of insurance.”

Related Content:

• DocMagic teams up with Simplifile to facilitate eClosing adoption (7/27/2020)
• 3 reasons why underwriters haven't jumped on the RON bandwagon (6/24/2020)
• New support for power of attorney (POA) transactions amid COVID-19 (5/7/2020)

By a large margin, PROGRESS in Lending magazine’s 90,000+ readers say that eClosing technology is in high demand. 

The magazine ran a reader survey asking whether, in their experience, demand for eClosing technology was poor, average, or huge. The response: 75% said demand was huge, 25% said it was average, and 0% said poor.

“Whereas in previous years eClosings were a ‘nice to have,’ the events of 2020 made them a ‘need to have,’” Michael Chaney, DocMagic’s National Sales Director, told PROGRESS in Lending. 

“Although most lenders were aware of the benefits that borrowers could gain from automating and removing paper from the closing process, it simply wasn’t enough of a driver to create widespread adoption. However, the need for social distancing, stay-at-home requirements, and safety as a result of the pandemic ended up catapulting eClosing technology to the top of lenders’ must-have technologies pretty much overnight.”

There is increasing evidence of the industry’s growing embrace of eClosings. In January, Ginnie Mae — which announced last year that it would start accepting eNotes as digital collateral — issued its first mortgage-backed security (MBS) backed by digital pools consisting entirely of eNotes, with a total value of approximately $24 million. Ginnie Mae says it expects to see even more growth in the volume of eNotes securitized under its MBS Program in 2021.

“The issuance of securities backed by digital pools validates the viability of the securitization model outlined in our Digital Collateral Program and sets the foundation for broader and more rapid adoption of digital mortgages,” said Angel Hernandez, Ginnie Mae’s Director of Policy and Program Development, in a statement. “This event is the culmination of efforts by numerous internal and external stakeholders in our digital initiatives, including issuers, document custodians, warehouse lenders, technology providers, and other industry partners.”

Vendors have responded to growing demand by enhancing their offerings.

“Whether a lender takes a phased approach to implementing eClosing technologies with various hybrid models or they elect to establish a 100% paperless eClosing workflow complete with RON technology, eNotes, and eVaults, it is nonetheless refreshing to see the industry as a whole working to create a better mortgage experience for borrowers,” Chaney said.

Related Content:

• Survey: Homebuyers adapt to eSignings, remote closings during pandemic (10/29/2020)
• DocMagic's CEO honored with Lending Luminary Award (10/27/2020)
• Ginnie Mae, 3 FHLBanks start accepting eNotes (8/5/2020)

Brian D. Pannell, DocMagic’s Chief eServices Executive, examines some of the key changes the mortgage industry has seen over the last year.

What a difference a year makes. A year ago, many lenders in the mortgage industry were still inching their way toward an electronic closing. Now, after facing an unexpected pandemic, most lenders realize that paper-intensive processes are outdated and they are clamoring for some form of digital transformation.

Looking back to an industry-wide survey of lenders that DocMagic conducted near the end of 2019, the contrasts to today are stark. Lenders’ pre-COVID attitudes toward digital readiness have shifted dramatically compared with what we know now, after 10 months of a deeply shifted post-pandemic mindset.

Here are some paradigm shifts I witnessed in the mortgage industry from last year to now:

#1: Lenders had been hesitant to overhaul their existing systems, preferring to cobble together a solution that fit into their current infrastructure. They no longer have that mindset.

In 2019: The reason you saw lenders using so many disparate software applications was because they’d been leery of upsetting their existing workflow. The mentality was, “I’d rather stick with what works than worry about trying to improve it.” So instead of upending legacy systems—loan origination systems, in particular—to create a more streamlined process with a single software provider, many lenders simply cobbled together solutions that fit into their existing infrastructure, despite the fact that multiple integrations like this are far costlier than using a single-source provider.

Today: A company’s long-term product strategy may have been developed over years of experience—but can it be expanded in months? Some of the ways that lenders have been operating are now being challenged. So, how quickly can you pivot to something else? Because if lenders can’t pivot, they may find themselves left behind.

Analysis: In 2019 we asked lenders to name their biggest challenge to adopting a digital mortgage strategy; survey respondents’ top answer was system integration (48%). When it came to updating their mortgage processes, many lenders had been content to move slowly, believing they could take their time to modernize their systems. However, as borrowers’ pandemic-driven preferences have shifted toward demanding more options for remote closings and notarizations, and as more lenders recognize the benefits of going digital—among them increased accuracy and speed, enhanced compliance, and a higher return on investment—lenders are realizing that they need paperless processes sooner rather than later.

#2: For many lenders, investor interest in fully digital mortgages was still low enough that it wasn’t worth the cost to install new systems. That’s no longer the case.

In 2019: The upfront cost of upgrading systems didn’t make sense if you didn’t have the volume. Organizations interested in implementing a digital mortgage process would raise a lot of questions with regards to, how do I get paid, how do I get funded, who am I going to sell my loans to? There was often a concern about generating the savings per loan to pay for the cost to install these systems.

Today: We've heard for a long time that Ginnie Mae and the 11-member Federal Home Loan Banks were on the cusp of accepting eNotes; they both began doing so in 2020. The fact that both are now accepting eNotes is crucial because it introduced a whole new level of participants to the eNote world. Between the FHL Banks and Ginnie Mae, there are a lot of advancements in the ability to make those eNotes saleable. 2020 was the year of the eNote.

Analysis: The foundation of a 100% paperless mortgage is the electronic promissory note (eNote). While eNote registrations were steadily on the rise before the pandemic, in 2020 they reached their tipping point, boasting almost 463,000 registrations—a 264% increase over the previous year. One key reason for this jump is the fact that, after years of planning, Ginnie Mae and the FHL Banks system finally joined Fannie Mae and Freddie Mac and began accepting eNotes as collateral. The impact on the mortgage industry can’t be overstated: With these two major players on board, the pool of investors willing to buy digitized mortgages has vastly increased.

Additionally, along with this greater acceptance of eNotes, there has been a corresponding increase in eWarehouse lenders—which has also been critical to increased adoption of digital mortgages.

#3: Prior to COVID-19, many lenders’ primary focus, as it related to digital mortgage decisions, was to improve the customer experience. Now, lenders are focused on meeting borrowers’ vastly changed risk tolerance.

In 2019: As far as what moves lenders to go digital, of the organizations we surveyed, the prime motivator was to improve the customer experience, with 86% of respondents citing this as a reason for adopting new software. This was followed closely by the desire to reduce errors (85%) and improve security (83%).

Today: As we continue to find ourselves within a pandemic-operating environment, borrowers’ risk tolerance must increasingly be taken into consideration. The borrower has a new risk tolerance for in-person contact nowadays, and lenders need to be able to execute on that from borrower to borrower. A lot of people have a very low tolerance, especially folks who are high-risk. They’re not going to tolerate putting themselves and their families in a situation where they need to leave the house and go to another location to execute an in-person closing. As an industry, we need to reduce the amount of in-person contact that’s occurring.

Analysis: Before the pandemic, lenders’ primary reason for offering eClosings was to improve the customer experience. That’s still true, but whereas before COVID-19 lenders provided electronic mortgages as an optional convenience, now they have become a necessity. Borrowers want more eClosing options, whether hybrid or 100% paperless, both for their safety and because pandemic restrictions have made people less mobile. If an eClosing is the only process borrowers will accept, lenders don’t have any choice but to give borrowers the experience they demand.

#4: Some states were still on the fence about remote notarization a year ago, but the overwhelming majority are now allowing it—in some form.

In 2019: When I went to North Carolina and spoke to closing attorneys, they told me there would never be remote online notarization (RON) in N.C. The reason? They wouldn’t know who the notary was at that point and they wanted to have the notary there. It also made sense because they didn’t want their business to come from outside the state.

Today: As the pandemic hit and as jurisdictions were making adjustments to allow for and minimize in-person contact, they had to come up with new ideas for notarization. In response, concepts like remote ink-signed notarization (RIN), or online in-person eNotarization (IPEN) were introduced. The advent and the necessity of coming up with unique ways to execute on any notarization came into play because there simply wasn't enough time to push through all of the regulatory concerns and considerations associated with RON and to make it more mainstream. Some states were able to accomplish it, but others had to make accommodations in order to support it. Looking ahead, if 2020 was the year of the eNote, 2021 could very well be the year of RON.

Analysis: Due to the pandemic and social distancing guidelines, states have welcomed all forms of remote notarization, including RON. Almost every state now allows some form of remote notarization, mostly via temporary emergency orders passed in response to COVID-19. These methods include RON or lower-tech alternatives such as RIN, online IPEN, or PRON (paper remote online notarization).

In addition to the spate of temporary orders, permanent RON laws also saw an increase in 2020, with an additional seven states jumping on board to bring the nationwide total to 29 by year's end. North Carolina also made remote notarization legal—albeit via a temporary law that’s set to expire on March 1, 2021. Still, it’s a once-unthinkable turnaround for a state where closing attorneys swore only a year ago that RON would never be allowed.

Leading up to this point a lot of lenders had been trying to convince themselves to make the switch to eMortgages, but there was no definitive tipping point. Now you have a pandemic. There's your tipping point.

Related Content:

• Relive some key mortgage industry milestones in 2020 (12/29/2020)
• The current state of eClosings: A Q&A with DocMagic's compliance chief (12/17/2020)
• Brian D. Pannell honored with HousingWire's 2020 Tech Trendsetters Award (12/4/2020)