Digital signatures have been an integral part of the e-commerce industry as electronic payment and online interactions become more ubiquitous. But mortgage industry has been lagging behind in adopting digital signatures even as technology becomes more prevalent in loan origination, mortgage servicing, customer interaction and closing. But e-sign would be the next big step towards a completely automated mortgage system.
Digital signature is not a new phenomenon. The US congress passed the Electronic signatures in Global and National Commerce (ESIGN) Act way back in 2000. This act confirmed that electronic signatures would have the same legal affirmation as that of the pen and paper signatures. Fifteen years hence, mortgage industry is still grappling with its adoption. Experts have always vouched for the safety and utility of electronic signatures. It has been pointed out that the mortgage industry which needs multiple layers of compliance need digital signatures to reduce costs, paper work and enable quicker loans.
e-sign adoption numbers have not been very high as closing documents still need wet signatures. Any one document needing a pen and paper document defeats the entire option of e-sign. But with Consumer Financial Protection Bureau’s e-closing program on the anvil, e-sign option would be a viable option for borrowers. Thus loan origination technology would help in delivering a complete e-mortgage which the borrowers can review and sign leisurely within the comforts of their homes.
Borrowers may be ambivalent about going in to closing without a human touch. The e-sign process would be a step by step process which would have clarifications and notes on the electronic document which the lender can peruse carefully. Experts point out that the education of the lender about the loan origination and mortgage process would be more effective. In many cases the e-closing process would take place with an agent either in remote connection or in presence to ensure a person-to-person interaction.
Another major concern about e-sign is the security of data. Technology has progressed to encrpt electronic data effectively, making it difficult to intercept. One of the potent examples are the electronic bank transactions which have been accepted as the norm today and has more sensitive data l;iek the social security numbers, personal information etc.
E-sign would be a competitive differentiator for the mortgage industry which is reeling under the high cost of compliance driven loan origination. Technology would reduce the paper work to zero and ensure faster and quicker loans. But many lenders are adopting a lackluster attitude towards adopting e-sign. There is a general lack of awareness about the FHA e-sign initiative and it is important for the lenders to piece together the compliance requirements. There are loan origination solutions like the doc-prep providers who can effectively guide the e-sign process implementation.
The cost of implementation of e-sign also would be insignificant. The doc prep providers would be an add-on and with cloud based loan origination solutions the cost would be minimal. But the savings can be immense with printing, photocopying and storing of paper documents becoming redundant. Lenders today cannot discount e-sign as it is becoming a pivotal aspect of the mortgage process. They need to act upon implementing e-sign technology and promote it to the borrowers. Analysts feel that the misconception in the market about e-sign has been just malicious gossip which needs to be discounted. Lenders who are facing high loan origination costs cannot afford to sit-out e-sign implementation which offers immense savings. This is an “adopt or perish” situation.
Preethi vagadia is a business architect worked in Mortgage and Finance software department with top notch companies and has over 8 years of experience in Mortgage technology ,Mortgage Loan Servicing software solutions,mortgage management software etc. She has also worked in several process improvement projects involving multi-national teams for global customers in warranty management and mortgage.