The intersection between people and technology is relatively new in the real estate industry compared to other sectors. Regulations, security concerns, and regional requirements have historically created challenges for real estate professionals to work in a digital ecosystem. The barriers toward digital adoption however are quickly dissolving during the pandemic. The industry now recognizes the urgent need for digital systems to connect stakeholders and enable safe closings.
The digital topic of the moment is remote online notarization (RON). While RON acceptance is growing faster than ever, adoption is not universal. This creates challenges for the entire real estate ecosystem. If one party is ready to deploy RON and another is not, the broken link collapses the possibility of a digital transaction.
At the Digital eClosing Bootcamp hosted by MBA and ALTA, a roundtable discussed how to balance RON with other hybrid eClosing solutions. Qualia’s Director of Business Development, Max Lamb, led the virtual discussion. Throughout the session, a variety of title and mortgage lending professionals jumped in to offer their perspectives.
Barriers to RON are breaking down, yet some still remain
Over the past few months, RON acceptance has accelerated. Many underwriters, lenders, county recording offices, and investors on the secondary mortgage market have publicly issued RON acceptance. Still, widespread adoption and acceptance of RON is not yet a reality. Lamb discussed a few of these remaining barriers with participants who joined the roundtable discussion.
Legislation is not yet consistent
RON legislation varies from state-to-state. Some states have issued permanent legislation while others have issued temporary RON orders. Throughout the pandemic, legislation passed quickly and seemingly minor changes were made immediately before passage. Industry advocates were sometimes unable to review revised legislation before it passed, and oftentimes the resulting RON laws were not usable for some companies.
For example, one of the roundtable participants felt that their local RON legislation put too much liability on their notaries. “In Florida, we had some statute changes that would make RON more usable. We were on track to deploy RON,” she noted. “We hit the brakes when the statute came out. We feel it puts a high liability on the individual notary that is doing the transaction.”
The Florida liability example highlights the importance of industry advocacy among title professionals. During the recent ALTA advocacy webinar, “Increase Your Advocacy IQ,” experts discussed the value of advocacy to ensure legislation is usable and empowers better consumer experiences. (You can read more about how you can advocate for the title industry by clicking here.)
Some lenders are not ready to use RON
There is undoubtedly a growing acceptance of eNotes among GSEs and others on the secondary mortgage market. Even with growing eNote acceptance, not all mortgage lenders are ready to invest in RON.
A few of the roundtable participants noted that overhauling systems can be a major undertaking for larger lenders. “It sounds so simple [to deploy eNotes] to all of us, but they have a lot to figure out,” one title professional noted. “I’m hearing a lot about overall production costs for the larger lenders of the world. It’s quite an expensive thing for them to overhaul their systems,” she said.
Other participants noted that their lender partners are dealing with a great deal of inconsistency with their investor partners. This leads many lenders to forgo RON for a sure bet with paper documents. “I know some lenders aren’t sure if they will sell to Fannie or Freddie or someone else. They don’t want to have their hands tied,” one title professional noted.
Despite these challenges, roundtable participants agreed that conversations with lenders are beginning to shift. Additionally, data points to a groundswell of support and acceptance of RON among lenders and their investors. (You can read more about the uptick in RON acceptance here.)
Security: a double-edged sword
RON transactions are often considered to be more secure than paper transactions. This is especially true when it comes to identity verification and tamper sealing documents. While RON provides added security, there are still some variables that open up businesses to security threats. “All the parties [involved in a transaction] may or may not be doing what they should be doing with security protocols in mind,” one roundtable participant noted.
Working on a single system can help mitigate digital security risks. For example, with Qualia RON, all participants can communicate securely with Qualia Connect (to avoid the pitfalls of email communication). They can also stay within a single system from the start of the closing through the final signing and notarization without needing to jump from platform to platform.
Hybrid eClosing solutions to fill the gap
The industry’s acceptance of RON over the past five months is a clear indicator that RON and other eClosing solutions will be a universal offering for consumers in the near future. Title & escrow companies and mortgage lenders must start the process toward implementing RON now in order to remain competitive.
The barriers to RON eClosings still persist in many instances; however, title companies can still deliver digital experiences with hybrid eClosings. Hybrid eClosings provide e-signing and digital document review for transaction participants all the way up until the final closing when documents must be notarized. These digital options are increasingly important for homebuyers.
A 2015 CFPB study found that eClosings (including hybrid eClosings) were associated with:
- Better homebuyer comprehension: the CFPB study found a 7% positive difference in perceived understanding for homebuyers using eClosing compared to those using traditional paper documents.
- More efficient processes: the study asked participants how efficient they felt the closing process was. This included perceptions about delays and document errors. The study found a 17% positive difference in consumer’s perceptions of efficiency for eClosings compared to those who participated in traditional paper processes.
- Empowered homebuyers: the study asked participants how empowered they felt after the home closing process. The study found a 15% positive difference in scores for those who used eClosings compared to those using paper documents.
Since the release of the CFPB study five years ago, eClosing technology has improved to enable better user experiences. It’s likely that consumers would report an even greater positive user experience with eClosing technology in 2020.
Tackle the learning curve with hybrid eClosings
Many of the roundtable participants noted that deploying hybrid and RON eClosings isn’t as simple as turning on a switch. “Learning new technology can be a challenge,” one participant said. Along with training teams internally, title agents must be proficient in helping homebuyers navigate the digital platform. “You don’t want to fumble around with technology [during a closing] and risk the service component,” she noted.
Hybrid eClosings are often a great first step for title & escrow companies looking to dip their toe into digital closings. Hybrid eClosings use the same e-signing technology and paperless processes as a RON eClosing all the way up until the final closing date. Getting started with hybrid eClosings is a great foundational step toward RON implementation.
For more information on Qualia’s hybrid eClosing features and RON product, click below to schedule a time to speak with one of our eClosing specialists.