Editor’s note: We’ve come a long way in the race to slash paper from real estate deals, industry insiders say, but there’s still a long way to go. More big companies, trade groups and entrepreneurs are investing in technology platforms, back-end systems and software to automate the real estate transaction, but most consumers are still closing the old-fashioned way. In this three-part series, Inman News examines where we are in the paperless real estate initiative. (See Part 1 and Part 3.)
Bit by bit, piece by piece, the paperless real estate transaction is falling into place, with adoption continuing on a slow and steady basis, industry experts say.
“There’s only been a handful of complete e-mortgages done in limited trials,” said Brad Eaton, vice president of mortgage products at real estate technology company a la mode. “But there are more and more individual pieces being done.”
Go to www.paperlessnow.org to learn more about the Paperless NOW initiative.
“Hybrids,” or mortgages that incorporate some paperless and some electronic elements, are becoming more commonplace, Eaton said.
“This is going to be the path. Before we see a complete soup to nuts e-mortgage, we are going to see individual pieces,” the vice president said.
For example, a loan could start out electronically, but when the loan package is delivered to the lender, “they could do an electronic closing,” Eaton said.
Concurring with Eaton, Harry Gardner, senior director of industry technology for the Mortgage Bankers Association, said, “People are adopting it in pieces. The more pieces you can capture, the more streamlined you can make it, but if the application procedure was done by hand, for example, there’s nothing to stop you from entering it into a loan origination system and closing electronically.”
Fiserv Lending Solutions, a division of Fiserv, offers three loan origination systems, electronic signature technology and an electronic “vault” that keeps e-signed documents secure.
Kim Weaver, vice president of product management at Fiserv Lending Solutions, said, “People like to start with one component and then integrate another component. We’ll see a lender who wants to see the settlement service. Other lenders are very interested and want to start with the upfront disclosures and maybe get them online and have the client e-sign them.”
Adoption is proceeding slowly but surely, experts say. One visible sign of progress is that both Freddie Mac and Fannie Mae are now accepting delivery of e-mortgages.
After mortgages are made, the original lender often resells them, and government-sponsored enterprises Fannie Mae and Freddie Mac are the largest secondary buyers in the country. If lenders are confident they can sell electronic loans to these mortgage giants, they are far more likely to embrace the approach.
Speaking from the Campus MBA e-Mortgage Workshop in San Diego June 14, the MBA’s Gardner said, “Fannie Mae issued official guidelines to lenders as to what kinds of electronic mortgage were acceptable two or three years ago, and Freddie Mac issued guidelines in December 2005. A company at the workshop today said they had helped deliver 45 e-note to Fannie Mae just this month.”
These changes have not yet been enough to effect widespread adoption of paperless transactions, experts say, but progress is being made.
“I would not say we’re at the tipping point yet but I would definitely say more companies are entering the arena,” said Margo Tank at Buckley Kolar LLP in Washington, D.C. Tank and fellow Buckley Kolar partner Jerry Buckley played a big role in creating federal legislation that made electronic signatures legal in 2000.
As another sign of progress, Stewart Title, a title insurance company that has held a number of electronic closings, most recently teaming up June 6 and 7 with First Republic Mortgage Corp. and Trustcorp Mortgage Co. for three electronic closings using Stewart’s SureClose online transaction management system and eClosingRoom.
Another significant move, Gardner said, is the development of industry standards by MISMO, which stands for Mortgage Industry Standards Maintenance Organization. New milestones, including guidance on implementation and an expanded certification program, have been reached.
In the long run, attorney Tank feels the slow pace of adoption will result in a better, more efficient product. Or, as a la mode’s Eaton said, “You have to give people the time to get used to the technology,” said a la mode’s Eaton.
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