While many mortgage lenders are focused on updating the front end of the borrower experience with online self-service tools and digital enhancements, other lenders are turning their attention to improving the back end of the process with electronic closing capabilities.
North State Bank Mortgage began offering borrowers a completely paperless closing process earlier this year. Its first e-closing took place in May for a refinance loan and in August, the company completed its first purchase mortgage e-closing.
While there are more than 11,000 electronic promissory notes with North Carolina property addresses registered in the MERS eRegistry, the North State Bank loans appear to be the first in the state to also include an electronically signed security instrument, according to a Merscorp Holdings spokesperson.
The purchase loan, which was sold to Dallas-based Mid America Mortgage, was executed with "fully end-to-end electronic signatures on all documents with the closing conducted via video conferencing with the attorney," according to North State Bank Mortgage President Ken Sykes.
The documents were electronically notarized with a notary physically present, as per North Carolina law. The process, from signing to recording the deed of trust, took 46 minutes.
Likewise, Troy, Mich.-based United Wholesale Mortgage completed what it says is the industry's first virtual closing on a loan in Chicago on July 28.
The e-closing fulfilled by UWM at the end of July was significant in that it e-closed with a remote notary. Video United Wholesale Mortgage virtual e-closing United Wholesale Mortgage completed its first remote e-closing on a loan in Chicago.
"The e-closing in North Carolina was just a regular e-closing, which is great, but there are a lot of those," said Mat Ishbia, president and CEO of UWM.
"Ours was a virtual e-closing, where no notary had to be physically present in the room. It is an on-demand closing where the borrower can click a button on a mobile app or pull up the webcam on their computer. It is done entirely online so borrowers can do it whenever they’re ready and from the comfort of their own home," explained Ishbia.
UWM uses Notarize, a Virginia-based digital platform, to legally notarize documents online, and offers its e-closing technology to brokers in four states that do not require the physical presence of a notary — Illinois, Montana, Virginia and Washington.
Sykes noted that in addition to convenience, e-closings allow for a smoother process with less room for error and delay.
"We have come to learn that a by-product of the e-closing process is that the attorney and the borrowers are much better prepared for the actual closing date because all the documents are delivered days in advance and reviewed and discussed to ensure there are no questions or issues at the time of closing," Sykes explained.
"We are learning via our federal regulators and the GSEs that e-closings are absolutely much more dependable when delivering and storing all loan documents to the appropriate parties for recordation and safe keeping," he said.
Both Sykes and Ishbia agreed that e-closings are the future of the industry.
"We expect that 70% of closings throughout the country will be done as virtual e-closings by 2020. One day, we’ll be laughing about the way loans are closed today, where someone shows up at your house and borrowers have to pass a pen back and forth to sign a huge stack of papers," said Ishbia.
MERS stands for Mortgage Electronic Registration Systems. The MERS eRegistry is the legal system of record for identifying the holder and location of a registered e-note. To date, there have been more than 342,000 e-notes registered on the MERS eRegistry, with approximately 115,000 that are currently active. E-notes have been registered in all 50 states, the District of Colombia, Puerto Rico and the Virgin Islands.
Separately, Merscorp Holdings also maintains the MERS System, a private loan registry that tracks ownership changes of promissory notes and servicing rights among its members.
