A special thanks to Snapdocs and Taylor Morrison for their informative webinar, “The Road to eClose Adoption” you can watch it here.
What are eClosings and how is a notary involved? As a notary you may choose to also become a loan signing agent. The difference between them is that a loan signing agent closes loans for banks. Typically closing a loan consists of meeting with a notary at the bank or your home and having some of your loan documents notarized.
Before COVID, instances arose that required documents to be signed electronically by the borrower and still required a notary present for certain documents that could not be signed electronically.
COVID has exponentially increased the amount of eClosings due to social distancing and forced the mortgage industry to adopt eClosing practices.
What is an eClosing?
An eClosing is simply the same act of closing a home loan but it is done electronically. Some, if not all of the documents are signed by all parties via an electronic device.
Are there different types of Closings?
Yes! There are several. There are wet closings, hybrid closings and full eClosings. Also known as signings.
A wet closing is where you have all parties in attendance and the documents are signed and stamped with ink. Hence the name “wet”.
A hybrid closing is a combination of both wet and electronic methods. Borrowers can sign documents electronically via their leisure or with a notary and then sign and have necessary documents notarized in person.
A full eClose is done completely electronically, including notarization. The notarization can be done using RON or a notary in person using an electronic device. You can read more about RON and digital certificates here.
The image above illustrates how each closing associates with parts of the eClosing process.
Is the demand for eClosings increasing?
Based on the research so kindly provided by Snapdocs and Taylor Morrison, sourced by MERSCORP Holdings Inc., you can see that between the years of 2015-2018 there was a slight increase in eClosings. eClosings dramatically increased when COVID first hit in 2019 and has only gained momentum since.
You can also see that in 2021 the number of closings that took place went up by 129,925 registered eclosings in just one year! Holy cow! This is clearly a huge indicator that growth and acceptance of eClosings are being fully embraced.
According to statistics it's shown that lenders are even reporting tangible benefits across the board. These benefits include better business outcomes, increased staff efficiency, improved staff morale and job satisfaction. Lenders also noted that eClosings have allowed them to see a reduction in closing costs.
Hooray for borrowers! Not only have they seen a lower cost in closing but they also are having a better experience due to a reduction in the percentage of document errors.
Why would lenders choose eClosings over the traditional closing process?
40 percent of lenders surveyed said that they were starting their process towards adopting eClosings this year. Taylor Morrison was ahead of the curve and has implemented eClosing into their processes for a few years now.
Taylor Morrison explained that these results do not include RON or eNotes. Their motivation to revamp the closing process was to improve the borrower experience and take hold of the opportunity. The biggest motivators were; allowing borrowers to review their documents ahead of time, reduce time at the signing table, and allowed for social distancing. Obviously when COVID hit the luxury of an eClosing became a necessity, which allowed for eNotes and RON to be kickstarted to their eClose processes. Allowing a variety of eClose options provides borrowers a chance to choose what best suits their needs.
According to Taylor Morrison “If you are a lender and you are not using these tools. You are far behind in the industry.”
What do lenders look for in a closing solution?
A closing solution is the process at which a closing is finalized. In this day and age it typically involves software or service(s) like Snapdocs.
For Taylor Morrison it was several things that they looked for in a closing solution. They needed a solution that fit their documentation preparation needs, a way to close once the documents were completed by all parties and borrowers needed choices to close their loans along with a great background support team.
Snapdocs was that solution for Taylor Morrison. Snapdocs covered all their needs and then some. With their advanced AI technology, Snapdocs was able to split and tag last minute signings. Their processes allowed Taylor Morrison’s eClosings to close with ease. Snapdocs goal is to have a platform that is easy for all parties to use.
What does the implementation process look like for lenders?
Before investing in a particular software or company, lenders research their options. Often taking a significant amount of time to see what is best for them. Taylor Morrison noted that eNotes took longer to set up than RON and advised other lenders to account for differences inside their LOS system.
“ How much volume will you send through the eClosing process?”
It's important to be aware that eNote and RON have very different types of volume.
Next it will be crucial to learn the steps involved in MERS for lenders on the eRegistry. Be prepared for a lot of pre-work.
After, choose trusted partners and vendors to execute your eClosings. Snapdocs is one of those partners and provides fluid processes for all parties.
Before executing an initial eClosing, test. Test the system and iron out kinks before sending out an actual closing. Depending on the vendor chosen most of the heavy lifting will be done for the lender and all documentation will be set up on the platform.
Where does Taylor Morrison and Snapdocs predict the industry is going?
We may not have a definitive picture on where the industry is going. But companies like Snapdocs and Taylor Morrison can accurately predict the industry's projection.
According to Snapdocs: “It's an exciting time with lots of changes. Lots of growth with enotes. Tech is reshaping buyers expectations and demands. Lenders need to adapt to meet their buyers. We're seeing that eNotes are gaining more and more traction.”
Taylor morrison: “In a few more years this will be the new norm. Hybrids specifically. eNotes will eventually be the norm. (100 percent of closings) Ron will be more of a buyers and lenders choice, depending on the situation.”
Snapdocs: “More and more of our clients are using eNotes. It's not necessarily the norm right now to use but we predict an increase as time progresses”
How does eClosing adoption impact notaries?
With eClosings taking traction in the industry, notaries, also referred to as settlement agents, are forced to adapt to the changes. The changes can be both negative and positive. The adoption of eClosings for notaries will require acquiring an electronic notary license and learning the process of eNotes and RON. Notaries may be adverse to these changes initially as it could mean a decrease in signing fees.
Does this mean that lenders have experienced issues with settlement adoption (notary acceptance)? Or slow downs in moving forward with eClosings?
Both Snapdocs and Taylor Morrison hardly experienced any resistance towards implementing eClosings. It seems to be a widely accepted change, especially with COVID. In 2018 when RON and eNotes were fairly new resistance was very high and now its a natural adoption for the industry. Notaries will need to remain current and be included in closing processes. The entire process is a team and industry initiative that will need to be supported by all involved; Lenders, notaries, partners like Snapdocs, etc.
Luckily for notaries, Snapdocs, has made the process fairly easy and had already placed the ability to scan cover pages in for the notary to instantaneously see if a borrower has completed their electronic documents before proceeding to signing additional documents. It's imperative to keep everyone on the same page for every eClosing. The entire process, if done correctly, can be a smooth and customizable transaction.
eClosings can seem intimidating. It has rapidly taken hold and forced many out of their comfort zones. Whilst that discomfort may pull some into digging in their heels, all parties involved are confronting the changes head on. A partnership has taken hold and efforts to make the closing process seamless for everyone is paramount. Eventually we may see a complete shift from wet and hybrid signings to exclusively eClosings.