Discover Home Equity Loans (Discover) is among the most innovative companies in the mortgage industry, and the six-year old mortgage arm of Discover Financial Services (NYSE: DFS) has outpaced home equity loan growth at other banks and credit unions, becoming the largest provider of closed-end second mortgages and growing to more than $1 billion in home equity loan balance in 2019.
When Discover found that more than 80% of its applicants apply online, they wanted to bring that digital experience to the closing process and saw an opportunity to eliminate some of the causes of rework and delay that can occur in the traditional closing process. Some of the key benefits they anticipated by adopting eClosing for home equity loans included:
- Ability for borrowers to pre-read documents before closing;
- Reducing the costly and time-consuming process of shipping original documents; and
- Decreasing the time it takes for counties to record paper mortgages.
“We knew the variations in requirements for each state and county were complex so we were looking for expert partners to guide us through all of the requirements and find the best way to make eClosings work within our process,” said PK Parekh, senior vice president of Discover Home Equity Loans.
After Discover’s document provider Docutech made an introduction to its strategic partner Simplifile, the two companies were able to demonstrate to Discover how it could pick and choose the digital execution components that it was most comfortable with and that created the most value. From that point on, Discover was fully convinced to move forward with eClosings.
The integration of Docutech’s Solex™ eClosing platform and Simplifile’s suite of services, which include loan collaboration, eRecording and post-closing services, created a seamless eClosing process for Discover’s agents, lenders and borrowers that allows each transaction to be as ‘e’ as it can while maintaining a standardized process.
The combined solution enabled borrowers to preview the closing package and (optionally) eSign documents that did not require notarization. The platform also includes full eNotarization capabilities so that on the day of closing, the entire transaction can be completed as digitally as possible.
Once the closing is complete, closing agents can electronically submit documents to counties for recording and automatically return all recorded documents and data, along with other trailing documents, to the lender.
Discover opted for a phased approach to rolling out its eClosing strategy, focusing initially on a select group of counties where eRecording was already well established. This allowed Discover to understand what operational processes it might need to change to implement eClosings on a broader scale with minimal disruption or inconvenience to customers and/or partners.
Once Discover was in production with eClosings in its test markets, it quickly saw benefits, including:
- 46% reduction in notary errors;
- 80% reduction in turn time from closing to recording; and
- Higher operational productivity due to the reduction in required support for each closing.
While acknowledging that Discover’s per-unit cost for eClosings/eRecording was slightly higher than its cost for manual closings/recording, Parekh says these incremental transaction costs are more than offset by time savings Discover achieved as a result of reduced error rates, faster document reviews and more efficient tracking of trailing recorded documents.
“The amount of reduction in cycle time was very surprising and encouraging,” he explained. “Our customers like the ability to review closing documents beforehand and feel better prepared for the closing session, and they appreciate that those closing ceremonies tend to take less time. What’s more, our settlement agents also like having a smooth digital process where files move forward more quickly.”
Once Discover began seeing consistent results in its test markets over a set timeframe, it moved on to the second phase of its eClosing rollout by expanding to additional counties and states. To date, Discover has roughly 25% of its loans going through a hybrid eClosing process, which includes eSignatures and eRecording, with an end goal of executing 100% of its production volume via a hybrid eClosing process in all states and counties that support it.
To learn more about how Docutech and Simplifile collaborated to help Discover build the foundation for digital mortgage, download the case study below.