by Technology has changed our daily operations, making them easier, faster, better and more fun. Today, you can easily make an online purchase, from something as simple as shoes to an expensive asset, such as a car, with just a click of a button. Many sectors, including the mortgage industry, have embraced and adopted digitization. Implementing digital strategies in the mortgage process has taken on a new urgency. It has evolved from something that offered efficiency, convenience and cost savings to an essential requirement.
However, it is easy to doubt the idea’s practicality if you work in real estate since you know how much work goes in the background. Merging automation with the title insurance industry and legal requirements guiding the financial services and other professionals involved in a real estate transaction may sound so complex. However, there are various reasons why the dream is worth pursuing. An eClosing process involves many stakeholders and tools, so you want to strike the right balance between them before introducing something new to your closing process. Below is a breakdown of the eClosing Ecosystem.
Pre-closing
The first phase of an eClosing ecosystem is pre-closing. The stakeholders involved in this first step include sellers, buyers, real estate agents, mortgage loan officers and settlement agents. Real estate agents and buyers have become more comfortable using eSign or eSignature tools to review, sign and execute contracts. The pre-closing stage is an extension of a process that most consumers are familiar with.
Examples of the benefits of using eSignature tools in real estate deals include:
- Minimized error. eSignature tools contain built-in fail-safes that ensure no signatures or initials are missed. It also reduces the chances of losing documents before submitting them to be recorded.
- Cost-effective. Because eSignatures reduce errors, that eliminates the need for companies to rush deliveries of documents with missed signatures after closing.
- Convenient. Buyers have enough time to review and understand the documents before signing since they don’t require an ink signature or notary seal before closing.
- Mobility. eSignatures are enabled by browser-based software, meaning real estate and title professionals can easily download them into devices and take them anywhere.
eClosing
The eClosing process involves the seller, buyer, loan signing agent, settlement agent and mortgage lender. eNotarization or a digital closing room platform is the tool for this stage of eClosing. Many states have adopted remote online closing ever since the pandemic, but it is essential to know the difference between RON and RIN closings.
RIN stands for Remote Ink-signed Notarization – a term coined by Fannie Mae to set apart an actual RON closing from the temporary approval through execution orders of paper closings using audio-visual technology.
The main difference between these two closings is that a RIN has no eNotary component, which is crucial in executing an actual digital closing. Real estate transaction documents, including the mortgage, deed and deed of trust, require a notary seal. Therefore without eNotarization, only a hybrid closing is possible.
Post-closing
This part of the eClosing Ecosystem involves lenders, settlements agents, and county recorders. Although the remote online notarization component of eClosing has become more popular, the post-closing details are equally important to execute a digital closing. These components include:
- eRecording
This method delivers documents electronically from a submitter to the recorder. The ‘e’ creates the perception that the process is paper-free, but many settlement agents use a paper-out method to complete the eRecording.
An eRecording offers the same benefits, including cost and time efficiency, as other eClosing tools. Without an eRecording, it is not possible to have a paper-free and digital closing. For this reason, it is vital for real estate professionals and settlement agents to contact county recorders to ensure the deed, deed of trust, or mortgage is accepted for eRecording.
- eNote and eVault
The creation of the eNote and its storage within a digital vault is the final component of an eClosing ecosystem. An eNote is a digital form of a traditional promissory note and an essential aspect of the digital mortgage strategy. It helps lenders lower costs and improve the consumer experience.
An eNote does not require notarization and is enforceable in all 50 states; they serve as a transferable and authoritative promissory note. Once an eNote has been created, it is stored in a digital vault, much like a physical vault, but with added benefits like reduced costs, no lost notes, faster mortgage originations and secondary market transactions.
Knowing the above stages of an eClosing process is vital for any organization looking to digitize its mortgage process.
