Fred Gooch: Key Considerations When Deploying Electronic Locking Technology


PERSON OF THE WEEK: The pandemic has accelerated the adoption by mortgage lenders of digital electronic fence solutions. In addition to the need to deal with borrowers remotely, lenders have also become more dependent on electronic fence technology to handle the recent massive increase in origination volume resulting from record rates.

But as lenders develop their digital closing processes, they need to consider the element of the settlement services equation. Additionally, they should include electronic notes in their roadmap and have a plan to switch to electronic notes at some point in the future.

To learn more about these and other key considerations when creating digital electronic fence processes, Mortgage Orb recently interviewed Fred Gooch, operations consultant and senior vice president of compliance for First American Docutech.

Q: Why is it critical for the mortgage industry to embrace digital lending processes now and in the future?

Gooch: Before the pandemic, the industry was already moving towards electronic closures. However, the effects of the pandemic, combined with the changing attitudes of generations towards technology, have changed that outlook. Lenders and settlement companies have had to speed up their digital conversion timelines in order to maintain market share and meet borrower expectations.

Lenders leverage data to personalize each borrower’s experience and seamlessly offer personalized product and pricing options. Presenting more information to borrowers helps them feel in control of their mortgage experience. They want to apply for loans on their own schedule and are ready to receive, view and sign documents online.

The combination of COVID-19 and record interest rates has strained the ability of lenders. The best way to speed up the loan speed from demand to close is to automate the process as much as possible to maximize production.

In addition to maximizing capacity and production, digital lending processes also improve the quality of the loan file and lower the costs associated with correcting costly errors. Automating the creation and execution of loan documents electronically enables lenders to implement workflow processes that ensure documents are generated and executed correctly. This can significantly reduce the costs of correcting document errors after closing.

Q: In light of COVID-19 accelerating the adoption of electronic closing solutions, what is the next step in the evolution of electronic mortgage?

Gooch: The next step is to bridge the gap between online loan applications and the closing table by speeding up the digitization of all phases of the mortgage workflow. Most of the innovations to date have focused on the front end. The mortgage industry is now working to close the gaps in closing, settlement, post-closing and secondary.

For example, one of the most complex steps in speeding up digital closings is planning for the impact of digital mortgage initiatives on the settlement agent. Even though the momentum for electronic closing adoption is on the rise, many settlement agents have limited experience in conducting electronic closing with a borrower.

Lenders should have a clearly defined strategy to support not only settlement agents but also underwriting, post-close and secondary with built-in digital lending tools.

Q: How can lenders implement electronic closing? Does it require an all or nothing approach?

Gooch: The transition to electronic closing doesn’t have to happen all at once, but lenders should make technology, process and investor approval a top priority. Those who haven’t started now will quickly find themselves behind the curve.

Most lenders start with a hybrid approach, and this is the perfect way to start. A hybrid electronic closing process helps lenders improve loan quality, data accuracy, and compliance, while speeding up the overall loan process. Not only does this promote greater operational efficiency by eliminating the need for outdated processes, but it also delivers significant savings and a better borrower experience.

Even a seemingly small step in the digital direction can have a significant impact.

Q: What does a more digital settlement workflow look like?

Gooch: A digital settlement workflow begins with the borrower accessing and signing numerous loan documents before closing. Early access to documents allows the borrower to take their time to carefully review the closing documents before the closing ceremony and to avoid feeling rushed. They can also sign many documents in advance, so the closing ceremony can be reserved for signing a few critical documents, including those requiring legalization. When the borrower only has to sign a few documents at closing, the time spent at a closing ceremony is dramatically reduced, making borrowers, settlement agents, and lenders happier with the closing.

Digital settlement processes can be accelerated with the wider adoption of remote online notarization (RON). A RON involves a fully digital process in which electronic documents are electronically signed and electronically notarized once the identity has been verified with the remote notary via webcam. Several state governors have signed decrees authorizing forms of RON and continued efforts will be made to accelerate RON nationwide.

RON is gaining popularity because it reduces document errors when signing a loan document. Sometimes an error or missed signature on paper loan documents can go unnoticed until after signing. With remote online notarization, if the required information is accidentally left blank or entered incorrectly, the system will not allow notarization to be completed until the errors are corrected.

Lenders can also increase their efficiency by deploying an electronic closing system that is easy to understand and use for agents. The number one complaint resolution officer is that there are too many systems to learn and too many connections to remember. Streamlining engagement also means defining the physical and digital workflows for the agent. Electronic fence technology is expected to guide the agent through the next steps, while highlighting new digital workflows and efficiencies.

Communication is another important factor in successfully integrating electronic closing between lenders and settlement agents. Lenders and settlement agents should ensure that they communicate clearly about how the electronic closing process works and how they will notify each party that the loan is ready for action. For example, lenders will need to notify an agent that a loan eligible for electronic closure is pending and when the borrower has signed the disclosure or other documents. From there, notarization agreements can be put in place or other settlement needs finalized in a digital environment.

Q: What else is needed to speed up digitization after closing?

Gooch: The three main areas needed to digitize post-close digitization are electronic registration, electronic safe and LOS pushback. In a fully digital mortgage transaction, the security instrument is executed, notarized and registered electronically. There is no need to print, scan, mail or handle other logistics of physical documents. This connectivity speeds up the speed of document movement and establishes a high degree of transparency.

Electronic safes serve to reduce cycle times and optimize process efficiency through improved document management and security, as well as the ability to transfer, store and control electronic promissory notes and documents. associated loan documents. Electronic vaults also make it possible to share documents both internally and externally with warehouse lenders and document custodians.

With the increased use of electronic safes, it is more and more necessary to synchronize the LOS with the electronic safe. Innovative mortgage software facilitates this two-way LOS data exchange. There are three main types of data that must move between the LOS and the document management software system during the normal loan creation process: loan data used to create the documents, the loan documents themselves, and the events – viewing and signing – that occur with these documents.

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