Before this year, digital real estate closings (eClosings) felt far-off. Only a handful of states had passed remote online notarization (RON) laws to make fully-digital closings possible, and many county recording offices couldn’t support digital file keeping.
In the past year, the technology and legislation necessary for eClosings advanced rapidly. In 2019, more than a dozen states passed RON legislation (bringing the total number of states to 22) and more mortgage lenders invested in technology to compete with incumbent digital mortgage lenders such as Quicken Loans and Rocket Mortgage.
These changes are driving significant momentum toward eClosing implementation (and consideration) among title & escrow businesses. A recent ALTA survey shows that over 80% of title professionals are interested in or have already conducted some form of eClosing. (This includes hybrid, in-person digital or online notary eClosings— for a full breakdown of the different eClosing types, click here).
Here’s how lender and consumer preferences may push the needle further toward digital adoption in the year to come.
Rapid changes in mortgage lending are driving eClosing timelines forward
2019 brought explosive growth for fully-digital mortgages. In the first quarter of 2019—led by companies like Quicken Loans and Wells Fargo— electronic promissory notes (eNote) usage grew by 5,000% compared to 2018.
Erica Meyer, owner and publisher of October Research, discussed the significant growth of eNotes and eClosings at the Future of Real Estate Summit held in Austin Texas last week. “In October 2019, there were more eNotes registered than all of 2018.”
As more lenders move toward fully-digital or partially-digital mortgages, some lenders are also requesting digital tools from their title & escrow partners. ALTA’s survey indicates that only one-third of title companies have received direct requests from outside partners to adopt digital tools; however, of those businesses who have received requests, lender requests rank as a top motivator for eClosing adoption.
Consumer expectations are pushing title businesses to consider more digital touchpoints
Home buyers are also driving title & escrow businesses to consider eClosings. ALTA’s survey indicates that consumer requests were the next top-motivator for eClosing adoption among title & escrow companies.
While fully-digital closings (remote online notarization eClosings) are not necessarily in-demand among most homebuyers, many homebuyers desire some digital tools to reduce the volume of physical paperwork at the closing table. A recent Solidifi survey helps explain that balance. It found that most home buyers (80%) still want to meet with an agent in-person to close on their home; however, 70% of homebuyers want a more digital process at the closing table.
Solidify’s survey supports prior research from the National Association of Realtors (NAR) which found that most consumers are bewildered by the paperwork involved in the home closing experience. In 2017, a survey by NAR found that 40% of homebuyers cited “understanding the closing process” and “paperwork” as the top struggles of the home purchase process.
Digital tools can ease the avalanche of documents home buyers face at closing and offer up more touchpoints and helpful information before a consumer reaches the closing table. For example, some documents that do not require notarization can be sent to a homebuyer for electronic signature before the closing date. Additionally, electronic signing options at the closing table creates a more efficient in-person closing.
A fully-digital experience will likely not fully replace the in-person closing experience for some time; however, consumers now expect an multi-channel experience that integrates technology before and during the closing.
What’s ahead for eClosings in 2020
While RON legislation will make remote notary eClosings (fully-digital experiences) possible, title & escrow businesses that are considering eClosings are placing their sights on some variation of digital closing such as hybrid or in-person digital closings. ALTA’s pool of more than 800 title & escrow professional respondents shows that 18% completed hybrid eClosings and none had yet completed remote notary eClosings.
A fully-digital experience will likely not fully replace the in-person closing experience for some time (or ever); however, agents seeking to remain competitive are finding ways to integrate technology for more transparent and efficient client and consumer experiences.