Adopting eMortgage technology and eClosings at Mid America Mortgage was never in question, says Jeff Bode, president-owner of the Addison, Texas-based company. These advances have added efficiencies and savings, and made the company leaner and more competitive, he says.
Which is why it’s so surprising to Bode that many others in the mortgage industry seem content to sit on the sidelines.
Mid America began exploring eClosings when the mortgage industry was preparing to implement the TILA/RESPA Integrated Disclosure rule (TRID). The rule took effect in October 2015.
"We thought if we’re able to manage digits instead of images we’d be way ahead of the game,” he explains.
“We started moving toward a fully digital platform just as fast as we could. Our retail and the bulk of our TPO [third-party originator] business has been on it since November 2016 and we’re very happy we made the switch,” says Bode.
The importance of quality control (QC) is paramount. Title companies sometimes make mistakes with a traditional closing: documents may arrive from different sources or may get lost. And if that happens, homebuyers are asked to return to the closing table to re-sign the paperwork, which is a headache for buyers and leaves a bad impression.
With an eClose, all documents are electronic and are kept in one secure location. Borrowers can’t miss documents during signing because they are stopped from moving on to the next one; thus providing an automatic QC process.
“It’s the most crucial part of the mortgage transaction for our borrowers and removes a lot of the complexity,” Bode says.
Mid America is still working on digitizing other portions of the mortgage process. For example, the company is migrating to eNotarizations and enhancing its consumer interface. A “Click n’ Close” process allows the borrower to give Mid America a few elements of data, populating the application. With Fannie Mae’s data validation service, which digitally authenticates portions of the application data, the application and verification can be completed within eight minutes.
The eClosing process has made closings faster, Bode says. How fast the funding goes through depends on factors such as the day of the month and how many fundings are in the queue, but Bode estimates that the funding process used to take about 1.5 hours per loan. An eClosing funding takes about five minutes.
Mid America said it recouped the cost it spent to implement a digital closing process in just three months. “Our adverse quality control findings have declined significantly because our closers focus on fewer things that can go wrong,” says Bode. “There is no risk of missed signatures on documents as all of the documents are in the signing room together.”
eClosings have also reduced the number of conditions on loans sold to aggregators, resulting in faster sales. Typically, those conditions came from something at a traditional closing such as a missed document, Bode says.
With efficiencies gained, the company was able to reallocate employees to new roles to focus on technology and enhance the overall customer experience.
One of the challenges Mid America faced when implementing an eClosing process was the execution analysis of where to sell the electronic loans. The analysis looks at which investor will provide the best price when Mid America sells the loan into the secondary market. Historically, Mid America had undertaken best execution analysis after the loan had closed, but decided that with this new process, the best execution analysis could actually occur 10 days prior to closing.
The mortgage lender also had to look into who would accept an eClosing on the secondary market. Some investors would not take them.
And only Fannie Mae and Freddie Mac accept eNotes. Mid America has retained the servicing on the bulk of its conventional loans closed with eNotes because of past challenges in the market: servicing aggregators were discounting their value. But that is now changing. “Recently, we had a discussion with a servicing broker and they indicated that more servicing aggregators are the market to buy e-note servicing with no discount to value,” Bode says.
Bode is optimistic that a big national aggregator will make the move to a fully digital process so that more investors will join the eMortgage trend and is hopeful to see that happen in 2018.
If you are going to go digital, Bode urges, go all the way. “We found that having a paper process and an electronic process was confusing. Migrating to an entirely electronic process is the way to go.”
Kerry Curry is a freelance writer for several Texas and national publications and is the former executive and magazine editor of HousingWire.