The mortgage industry continues to progress slowly toward the Holy Grail of a completely paperless process. As different technology providers enter the eMortgage space, a variety of partnership arrangements have evolved in order to piece together the various components needed for a fully electronic mortgage solution. Let’s explore those components, the different ways they can be assembled, and the possible advantages and downsides.
First, you need the documents themselves, of course. Mortgage disclosure and closing documents are typically generated either by the Loan Origination System (LOS) software, or by a third-party doc provider like Docutech. LOS-generated documents typically don’t cost extra for the lender, but may involve tradeoffs in terms of compliance quality, custom doc management, and responsiveness – and the LOS vendor may not rep and warrant their legal compliance the way a doc provider would.
You also need an eSignature solution to capture the borrower’s consent and apply the electronic signatures plus an eVault capable of securely storing the loan documents. The eVault must also be able to perform specialized transactions with the MERS® eRegistry to secure, register, and subsequently transfer the SMART Doc® eNote to an investor.
Finally, to complete the eClosing process you need to be able to perform eNotarization during the closing ceremony, and to be able to eRecord the recordable documents with the county land records
It’s important for lender customers to fully understand how many different partners are connected together to form the eMortgage solution they are considering. There are three basic structures for eMortgage solutions today:
Loan Origination Systems with integrated eSignature capability
Most LOS providers can produce their own in-house documents while still offering the option for their lender clients to opt for a third-party doc provider if they so choose. LOS-produced docs may be priced into the LOS pricing and so are usually the cheapest option for the lender, where third-party doc providers typically offer faster custom doc capability, better responsiveness, better compliance, and a full rep and warrant on all their documents. For customers who use the LOS captive docs, though, it makes sense for the eSignature capability to be embedded so that everything is tightly integrated and seamless.
Independent eSignature Providers
Independent eSignature providers don’t bring their own document libraries, but instead focus on providing a universal eSigning engine that can address multiple vertical markets, not just mortgage. The disclosure and closing docs, whether from the LOS or from an independent doc provider, must either be pre-tagged properly so that the eSignature provider knows where to apply the signatures on each document, or the signature points must be manually tagged on each document for each loan, opening the door for human error and skipped signatures. Independent eSignature providers, since they don’t specialize in mortgage, usually don’t have their own eVault, and so may also have partnered with an eVault software provider. The resulting eClosing solution thus requires three, and sometimes four integrations – documents, LOS, eSignature provider, and eVault provider.
Document providers with their own in-house eSignature technology
It makes the most sense for the eSignature technology to be tightly integrated with the document engine. This architecture ensures that the docs are always tagged correctly for eSigning, even the lender’s custom docs. We’re proud to be solidly centered in this role. Docutech specializes in managing our own legally compliant mortgage document library, and we’ve built our own highly-scalable eSignature engine, with the eClosing components soon to come, to give lenders full control over document delivery and presentation. We also create and maintain custom documents for our lender clients, with fast update responses.
So, when choosing an eMortgage provider, be sure you know how many pieces are bolted together to form the full solution. Each component is a potential point of failure or may restrict the scalability of the overall solution.