Goodbye, paper. Hello, ‘e-closings’

November 22, 2011 | Comments Off on Goodbye, paper. Hello, ‘e-closings’

Electronic processes are poised to make homebuying easier on the wallet — and on trees.

By Leah L. Culler of MSN Real Estate

When Charles Schaffner of West Haven, Utah, closed on a home recently, he didn’t leave with a giant stack of paperwork. Instead, he left with a CD containing electronic versions of all closing documents.

The closing took less than 20 minutes, and yet Schaffner knew exactly what he was signing; he’d reviewed all of the documents at home the night before.

Schaffner got his loan through Mountain America Credit Union, which is one of the first banks in the country to roll out an electronic-closing option. Encompassing home contracts, closings and loans, electronic processes are saving time and money. 

Schaffner says his experience with electronic closing was a far cry from previous closings.

“In the five closings that I’ve been involved in in the past, people are just telling you the short version of what (the documents) are, you sign off, and you go on to the next one and you don’t have any knowledge or recollection of what it was about,” Schaffner says.

This time, Schaffner didn’t sign a single piece of paper. He signed his name once on a signature pad, then applied that signature electronically in every place it was needed. No hand cramping or shoddy, hurried signatures.

“This was a very pleasant change,” he says. “It was interesting using new technology.”

MACU’s e-closing product is called QuickClose, and it uses eClosingRoom technology from PropertyInfo, a division of Stewart Title Co. Stewart’s business-development director, Nancy Pratt, says e-closing is being embraced by consumers, who are already comfortable with signing a signature pad when they make purchases at stores.

She also says older buyers aren’t intimidated by the technology. In fact, they appreciate being able to sign once and be done.

“So many people say they are uncomfortable with the way their signature looks after signing it 80 times,” she says.

Benefits of e-closings
Of course, a good-looking signature isn’t the only perk of an e-closing. The process saves time, money — and reams of paper. According to data from Stewart, 460 pieces of paper are used in the typical pen-and-ink closing.

Lenders save money because they save time. In the paper world, an escrow company employee is responsible for shipping loan documents in a specific order to the lender and investor. The documents usually number between 70 and 100. The “shipper” may be busy, and the loan may sit for days before documents are sent. With e-closing, the file is shipped within minutes of closing.

The lender may eventually pass savings on to you. “Eventually you’ll see those lenders that do business this way have a little better pricing,” Pratt says.

Then there’s security.

Paul Anselmo, CEO of SigniaDocs, another provider of technology that allows for a paperless mortgage process, says the method ensures compliance with new mortgage regulations. An electronic, tamper-proof seal means there is never a question of who signed what when.

“The electronic version can track what was disclosed, use a date and time stamp and authenticate the IP address used,” he says. “It would eliminate the finger-pointing you have going on now. The paper files are such a mess.”

Pratt says it’s also easy to misplace a piece of paper, which could delay any step of the process. “Many times, a title company has to go back to a borrower and ask (the borrower) to re-execute a document after the fact,” she says. “That goes away in the electronic world.”

Slow to adopt?

This technology isn’t exactly new. The foundation for e-closings was created in 2000 by the Electronic Signatures in Global and National Commerce Act, or ESIGN. Most states have also adopted the Uniform Electronic Transactions Act. Those two acts ensure that contracts signed electronically are legally binding.

But few lenders have adopted e-closing, primarily because it’s such a large undertaking. Banks would have to create their own platform or use a vendor that already has one, like the one Stewart created. It also would require a change in the way they do business.

“With the big banks, it would be a giant step for them in changing technology with hundreds of branches across the country,” Pratt says.

For now, smaller community banks and credit unions are the most likely adopters. Some larger banks have adopted pieces of the process but haven’t moved to a completely electronic closing. Although not all loans can be delivered electronically, those that aren’t may simply need a traditional “wet signature” for the note itself.

Other paperless options
While wide adoption of e-closings may be a ways off, many parts of the homebuying process are already paperless.

Since 2007, Austin, Texas-based real-estate agent Garreth Wilcock has used DocuSign to sign contracts, amendments, offers and other disclosures electronically.

Each party of the transaction — purchaser, seller, broker, etc. — reads through a document on a computer, iPad or similar device, then applies a signature electronically in each required place. Because it’s all electronic, you can’t miss a page or skip over a spot where you need to sign; the document will prompt you every time you need to sign or initial.

“Basically, there’s far less do-over,” Wilcock says. “And there’s no driving to people’s houses to get a scribble.”

Santa Clarita, Calif., real-estate agent Brian Melville says he saves eight to 20 hours per transaction because of electronic contracts.

“My clients appreciate it even more so than me,” he says. “They’re able to have something in their inbox when they get home instead of having to load the kids in the car and come to my office to sign something. And you don’t have to keep giving the buyer and seller — who are probably already stressed out — huge piles of paperwork all the time.”

Wilcox says he saves a minimum of 34 sheets of paper per party in most purchase transactions.

“And no transaction is ever simple — negotiating, back and forth,” he says. “Now, I print nothing. I just get things signed electronically and carry them around on my iPad for reference.”

Melville says some agents do end up printing some of the documentation — to file with a local department of real estate, for example. He also says some banks aren’t yet on board. If he’s dealing with a short sale or a bank-owned property, he says, a lender or bank may still require a traditional signature.

But he says that e-documents are definitely catching on and that many real-estate agents now offer them. When all is said and done, a buyer or seller can get a digital version of the paperwork to store on a computer. And with many counties now recording sales electronically, a buyer could complete the entire process without signing a single piece of paper.

“Everything is so connected,” Pratt says. “Every entity is so dependent on the other entities to do their business in a timely manner to make it all work. In this environment, you cut out a lot of that guesswork.”



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