The New Digital Real Estate Mortgage, eNotary, and eClosing Technologies
Technology marches ever onward, and the next advance for real estate is likely to be the realization of an efficient digital real estate mortgage process. In particular, eClosings have made huge strides over the last year. Today, we take a look at some of the recent developments in eMortgage technology and how it could affect your future home purchase transactions.
Just under a year ago last September, Pavaso, a mortgage software firm, and Residential Mortgage Corp., a North Carolina lender, celebrated the first end-to-end digital mortgage in the Tar Heel state. The process was a “hybrid” eClosing, with the homebuyer required to “wet sign” a small handful of documents, including the mortgage note and deed of trust.
However, the rest of the process, from application to signing other closing documents, was handled electronically. The Fayetteville Observer noted it was over for the homebuyer in only 15 minutes — she’d been able to view all the documents beforehand and ask her questions then.
First Non-Hybrid eMortgage
It was a big step forward for real estate technology, but not the last. In May, HousingWire reported North Carolina had pushed forward and executed the first 100-percent eClosing, with no wet signing at all. The lender, North State Bank, executed the closing, while a Chapel Hill-based title company office insured the digital mortgage.
Technology from DocMagic and World Wide Notary were used to complete the process. However, North Carolina law still required the physical presence of a notary and access to legal counsel for the homebuyer.
Regulations governing notarization of eMortgage loans is also quickly evolving. By August of this year, a new solution allowed some borrowers to complete their eClosing without a notary in the same room. United Wholesale Mortgage (UWM) announced last month that a refinancing homeowner signed all his documents electronically, while an approved eNotary was involved via Facetime or Skype.
Unlike the previous North Carolina eClosings, which required a live notary sharing a tablet to electronically sign forms, the homebuyer was able to complete his refinance from home, including eSigning the promissory note and mortgage.
UWM partnered with the firm Notarize for the first-of-its-kind process; however other firms are exploring the technology. Besides Pavaso, PeirsonPatterson, and SigniaDocs, NotaryCam and its eClose 360 product joined the ranks of platforms approved by Freddie Mac for eMortgage and eNotary origination in June. All such products allow homebuyers to conduct eNote, eClose, and eVault portions of their mortgage transaction online, according to Fannie Mae.
Nonetheless, challenges remain for the full implementation of eMortgages and eClosings. A recent HousingWire industry survey revealed that many key stakeholders in the real estate industry still think there’s a long way to go to reach full adoption of digital mortgages.
Mortgage firms polled last month indicated that current challenges include a limited number of investors accepting eMortgages, limited warehouse availability, implementation complexity, a so-far limited return on technology investment due to low volume, lack of uniform processes and adoption, and issues with policy alignment from Fannie Mae and Freddie Mac.
In other words, this is still a new frontier for mortgage lenders, settlement and title companies, and mortgage borrowers. There are plenty of kinks yet to be worked out, industry standards to be settled on, and limited availability of electronic services, based on location.
Where eMortgages Are Available and What to Expect
Thus, for homebuyers and mortgage refinancers, two questions likely remain: Can I get an eMortgage in my area, and what would it be like if I did?
To the first question, availability of an end-to-end digital mortgage is still limited, though availability is expanding. For refinance originations, such as those conducted by UWM, availability is limited to Illinois, Montana, Virginia, and Washington. That’s because lenders must comply with state laws as well as federal regulations, and most states haven’t yet put forward legislation to modernize their mortgage lending process.
There are also other limits. UWM’s eClosings are limited to one- and two-borrower mortgages, and only for refinance transactions at this time. North Carolina’s eClosing transactions are significant because the state has strict notary requirements and is an “attorney state” when it comes to real estate transactions. While progress is being made, eClosings aren’t nationwide just yet.
What Borrowers Should Expect
As for what borrowers can expect with an eClosing, many borrowers could have an experience similar to North Carolina’s homebuyer mentioned earlier. You may be able to review the documents you will be signing ahead of time from the comfort of home, and ask questions before you have to sign.
Unless your state allows an eNotary, you’ll likely meet a live notary in an office and work through the eClosing in their presence. You may sign all of your documentation electronically, or wet sign certain documents, according to your state’s regulations. If your state allows eNotaries, you may be able to complete your eClosing from the comfort of home, using Facetime, Skype, or another approved live webcam service to interact with a remote eNotary.
After the completion of your closing, official copies of your electronically signed documentation may be kept in an eVault storage, for reference or use by your lender, your local government records office, or the secondary mortgage market. However, post closing, your home purchase or home refinance will work just like any other traditional home purchase or refinance.
Despite the challenges ahead for a full, nationwide rollout of a digital mortgage, eNotary, and eClosing procedures, one thing remains certain: the mortgage process is on its way to going digital. As Mat Ishbia, president and CEO of UWM noted last month, “The days of being bombarded with reams of paper at the closing table are over.”