Untangling the Complexities of eClosings

untangling-eclosings

Nearly every week, industry publications and the broader media report on new eClosing platforms or announce the success of an online notary or digital signature vendor facilitating a “record number” of eClosings. 

Amidst all the buzz surrounding eClosings, title professionals are left to navigate a confusing maze of legislation, local practices, technology partners, and questions surrounding the value of eClosings to meet homebuyer expectations. 

At the NS3 Conference held last month in Phoenix, Jim O’Donnell, President of Equity National Title, and Shane Hartzler, Director eMortgage Strategy and Operations at Fannie Mae unpacked the state of eClosings and offered helpful tools for evaluating eClosing options at a local-level. We caught up with O’Donnell after the conference to learn more about his experiences with eClosings and insights on best practices for navigating the digital landscape.

Unpacking eClosings: What’s Possible in My State and County? 

The path toward eClosings feels more like an “obstacle course” than a straight track forward as O’Donnell put it. Local laws, practices, and availability of technology partners differ across the country, making the eClosing landscape a bit rocky.

To understand the variance,  it’s helpful to look at the 4 different types of closings.

Copy of Closing Types

Even with such tidy descriptions of each closing type, understanding what’s possible in a particular region is not so simple. For starters, the acceptance of digital documents and eRecording varies on a county level. This means that in a particular metropolitan region, say Dallas/Fort Worth, for example, one county office may accept eRecorded documents while another county office in the same metro may reject eRecorded documents. 

Further, the accessibility of fully-digital eClosings (online notary eClosings) depends on state requirements. To complete online notary closings, RON must be written into law at a state-level. As of the publication date of this post, 7 states have passed some form of RON legislation in 2019, bringing the total number of states that have authorized RON to 22. Timelines for when these laws go into effect vary. Title companies must also examine the requirements of their underwriters (not all underwriters insure e-notarization even where it’s legal) and the acceptability of eClosings among their lenders. 

At the NS3 conference, O’Donnell shared a helpful tool his company created to help title companies understand the viability of eClosings in their area. The website, eWays, allows title companies to enter in their zip code to view closing options available in their area.

Do Consumers Actually Want eClosings? 

While eClosings are gaining attention and momentum, the question remains: are fully-digital closings the best route to achieve optimal customer experience? 

As we’ve discussed in previous posts, transparency and education are key tenets in the closing experience for homebuyers. In other words, most homebuyers still crave the reassurance of a human interaction and some level of consultation to help them navigate the complexities of closing documents. O’Donnell pinpointed three scenarios that often result in some form of hesitation from a homebuyer (borrower) when it comes to eClosings and where his team often steps in to offer guidance. 

  1. Older generations can often become overwhelmed when technology is introduced at closing. If the borrower is not prepared for an electronic closing experience further up in the process (e.g. at loan origination), they are often bewildered by the eClosing process.
  2. Borrowers who O’Donnell calls “highly-technical” such as computer engineers are sometimes wary of eClosings due to privacy concerns. These borrowers are hyper-aware of cyber attacks and want to know the ins-and-outs of the eClosing technology before submitting sensitive information. 
  3. Clunky digital experiences can lead to borrowers opting out of eClosings. O’Donnell notes that his lender partners use 3 different eClosing portals. “One of these is clunkier than the rest,” he said, “so my team takes the extra time to be skilled and knowledgeable with the technology to help the borrower during the eClosing.” 

Homebuyers are looking for guidance and a consistent experience from start to finish. With that in mind, it’s evident that creating a best-in-class eClosing experience requires more than just digital signing and eNotary capabilities. Title & escrow companies should coordinate with lenders to establish what the eClosing experience will look like further upstream during the mortgage documentation process and carry that vision through the closing. 

The Benefits of eClosings 

Regardless of whether the closing is fully-digital or a hybrid process, research indicates several benefits of all levels of eClosings. 

  • Shorter closing times: With hybrid eClosings, homebuyers can e-sign documents ahead of the closing appointment. This means that the buyer is typically wet-signing around 10 documents instead of the 40+ documents in a traditional closing. This can significantly reduce the time agents are spending at the closing table from an hour to less than 20 minutes.
  • Reduced errors: Missed signatures on closing documents can prolong the closing process. Digital signature vendors instantly ensure every signature block is signed.
  • Security: With secure digital information exchange, title companies can control access to private information and ensure highly-sensitive information is not floating around on paper documents. Additionally, eSignature platforms apply a “tamper-evident seal” to electronic documents so that closing documents cannot be altered. 

Putting the Pieces Together. How Do We Move Forward? 

In such a complicated environment, it may be enticing to opt out of eClosings all together. O’Donnell believes that title & escrow companies who dip their toes in eClosings now will come out ahead in the future. He offers 3 tips to help title & escrow companies get started with eClosings. 

Master the details.

O’Donnell notes that lenders utilize a variety of digital platforms for mortgage-side documentation. He recommends that title agents “master the details” and become very familiar with each lender’s eClosing portal. Knowing the ins-and-outs of each platform will ensure a smoother process at closing. “Right now, our lenders use three different portals; however, in the future, we could be dealing with a half-a-dozen to a dozen different technology platforms,” O’Donnell said. “This means that we as title agents need to be nimble and quick in identifying the nuances of each platform. We need to become the experts to guide the borrower at closing.” 

Talk with your lenders.

O’Donnell notes that oftentimes, homebuyers are caught off guard when technology is introduced at closing. “This is often because the lender’s process of interacting with the borrower before the closing did not come through an electronic portal, so the homebuyer was not prepared for the electronic process at closing.” O’Donnell recommends that title companies work closely with their lender partners and collaborate to ensure the borrower is prepared for eClosings early in the process. 

Jump in and get started with hybrid closings. 

O’Donnell believes that demand for fully-digital (online notary eClosings) will eventually happen as legislation begins to break down the barriers of fully-digital closings. In the meantime, he recommends that title & escrow companies “wade in” and get started with hybrid closings before taking the “full splash” with online notary eClosings. Unlike online notary eClosings, hybrid eClosings are accepted everywhere. This consistency makes getting started simpler. 

The eClosing landscape remains uncertain in the present; however, the future points to digital. As the real estate industry evolves to meet the needs of an empowered, digital homebuyer, title & escrow companies that prioritize transparency, convenience, and security in the closing process will come out ahead.  With that in mind, title & escrow companies who adopt hybrid eClosings now will lay a solid foundation for what’s next.