TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1242918
36 | M R EP O RT FEATURE By Laura Baucus F or some consumers, purchasing a home can be a daunting task. House- hunting fiascos and heroics aside, the mortgage-closing process itself can be a drawn- out and overwhelming journey through mountains of paperwork. In 2014, the Consumer Financial Protection Bureau (CFPB) issued a report identifying key issues in the mortgage-closing process and positing electronic mortgage closings as a solution. The CFPB went on to conduct a four-month eClosing pilot program to test its theory. Looking back now, it is unsurprising that the study found that "eClosing borrowers in our pilot scored higher than paper borrowers on our mea- sures of empowerment at closing, perceived understanding, and efficiency." There are many efficiencies re- sulting from an eClosing process, such as easier access to docu- ments prior to closing, reduced number of days between approval and closing, and the ease of prov- ing compliance with the numer- ous regulatory requirements, just to name a few. So, how do we escape paper closing and evolve to eClosing platforms? The quick answer is: federal and state legislation and the mortgage industry's response. First, cue existing statutes which make eClosings possible. In fact, the legal basis for establishing the equivalence of electronic records and signatures to traditional paper records and wet-ink signatures, was already available: the federal Electronic Signatures in Global and National Commerce Act (ESIGN) and the various state adaptions of the model Uniform Electronic Transactions Act (UETA). These statutes pro- vide that records and signatures relating to transactions cannot be denied legal effect, validity, or enforceability solely because they are in an electronic form or because an electronic signature or electronic record is used in their formation. Once the "eNote" has been electronically created and signed by the borrower at the eClosing in compliance with ESIGN and UETA, it is tamper- sealed, deposited into a secure electronic vault (called the eVault). That eNote is then referred to as the "Authoritative Copy." Second, to make eClosings Escaping Paper and Going Digital 1 Electronic Signature in Global And National Commerce Act, Public Law 106-229, June 30, 2000, 114 STAT. 464 (codified at 15 U.S.C. §§7001-31). Subject to certain exceptions, the substantive provisions of E-SIGN became effective on October 1, 2000. 2 15 U.S.C. § 7021 (2000). UETA§ 16 (1999). 3 15 U.S.C. § 7021(a) (2000). UETA§ 16(a) (1999). 4 15 U.S.C. § 7021(c) (2000). UETA§ 16(c) (1999). 5 15 U.S.C. § 7021(d) (2000). UETA§ 16(d) (1999). 6 Additional information on the MERS® eRegistry can be found at: https://www.mersinc.org/products-services/mers-esuite/eregistry Here's a quick overview of statutes and mortgage industry efforts to help support the implementation of eClosings.