The biggest barrier to increased automation in the mortgage process isn’t technology, but it’s people — specifically, convincing them that digital signatures are acceptable.

Currently, only 5% of mortgage signatures are fully digitalized, said Jonathan Kearns, vice president of technology for the mortgage data standards group MIMSO.

“There’s still only 5% of them being done full e-close,” Kearns said during a panel presentation on digital closings last week. “There’s a lot more hybrid, but we really need to get that full e-close up to 50% and it’s really us in the process that is stopping that because it’s different. There are no technical challenges.”

Kearns added that e-signatures are the key to both automation and reducing manual processes. He and other industry experts on the panel agreed that people, rather than technology, present the biggest hurdle to the adoption of full e-signatures. The event was sponsored by Snapdocs, a San Francisco, Calif.-based digital mortgage closing solution for e-closings, and featured representatives from that company along with Kearns, Terry Pansing, vice president of corporate closing at the Louisville, Ky.-based Fairway Independent Mortgage Corporation, and Terry Chung, vice president of business solutions at the Brecksville, Ohio-based Cross Country Mortgage.

A continuum of options

Most e-signatures in the mortgage process fall across a continuum, said Camillia Martin, head of industry and regulatory affairs at Snapdocs. She has worked with others in the lending business to create e-signature programs.

She said e-signature options exist on a continuum. A process might have some digital components between the borrower, notary settlement or other parties involved that help automate workflows or facilitate communication, but at the end of the day, all the documents are printed, signed with a pen and notarized in the traditional way. Most closings fall in the middle, where at least some of the closing documents are e-signed, and others are paper-based, Martin said. “Digital Nirvana” would be complete digital closings with no paper at all, she added.

E-eligibility factors

This continuum exists because of five e-eligibility factors, Martin said.

1. Counterparty requirements. Counterparties include anyone that needs to accept delivery of loan collateral from a lender who could affect the lender’s ability to digitally close a loan. This could include investors, servicers, lenders and even custodians of records.

2. County recording. This includes any closing document that needs to be recorded in the public county land records, e.g., a deed or mortgage. The “good news” is that more than 2200 counties now allow for some form of e-reporting today, which represents approximately 90% of the U.S. population, Martin said.

3. Title underwriter restrictions. Typically, restrictions relate to e-notarization. Problems arise when the title underwriters have requirements that are more restrictive than those of the state or an investor, Martin added.

4. E-notarization regulations. This is whether the state allows the use of e-notarization. There are two primary forms of e-notarization: remote online notarization (RON) and in-person, electronic notarization (IPEN). The key difference between the two is the former does not require the signer and the notary to be co-located, whereas the latter does. Thirty-five states have passed legislation to permit RON, and all but a few permit the use of IPEN.

5. Settlement agent readiness. Settlement partners typically follow the lender’s instructions on how to close the loan, as long as they’re not breaking any laws or title underwriter requirements. The issue is whether the settlement partner is enabled to facilitate the lender’s digital closings, Martin said.

Obtaining automated data

“What lenders really need is eligibility data that is accessible, that’s accurate, and that’s automated,” Martin added. “They need to be able to submit loan criteria, and clearly and confidently determine what’s the best digital mortgage closing type for that loan, the same way they can with credit underwriting decisions and other decisions that they’re able to automate today.”

Cross Country Mortgage’s Chung agreed more education and even lobbying will be necessary to move to full e-signatures.

“I’ve had title agents say ‘no’ and I reached out and educated them,” Chung said. “Treat it like another product development initiative: Do your research, document, train, arm your army with power. Learn and take notes and improve your communication.”