TheMReport — News and strategies for the evolving mortgage marketplace.
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Th e M Rep o RT | 25 Feature Feature By Tim Anderson, Director of eServices, DocMagic W hen federal regulators change the rules governing the requirements for originating a mortgage loan, it can mean pain for both the industry and the consumers it serves. But this time, the move to an integrated disclosure may surprise you and translate into an unexpected side benefit to all parties—that benefit is the eMortgage. For almost a decade and a half, proponents of all-electronic lending have urged lenders to take the paper out of the process in favor of fully electronic mortgage origination. Despite its signifi- cant benefits, eMortgage adoption gave way to the critical mass of lenders un- willing to abandon their legacy systems and paper-intensive processes. Meanwhile, behind the scenes, lend- ers' partners have been implementing systems that allow them to complete more of their loan origination workflow without stopping to paper out. The real- ity is that a fair amount of lenders have, in fact, been operating fundamentally without paper up until the loan closing, when they print all of the forms for their borrowers' signatures. We all know regulation drives change, and the new integrated disclosures lend- ers will begin using next year provide all the incentive needed to let go of the paper once and for all. Here's why. Complying with New Disclosure Rules I t's not just the documents that are changing next year; it's also how the lender is expected to interact with borrowers. There are essentially four elements of consideration: • the new MISMO 3.3 data format and reconciliation of the data feed between the initial loan estimate and final closing disclosure; • delivery notification requirements; • electronic audit trail as "proof" of delivery and compliance; • storage retention requirements to maintain this proof. For most lenders, their document preparation partners will ensure the right data is mapped to the right fields in the proper format. They can also assist with making sure the initial and final disclosures are accurate and within acceptable tolerance thresholds. Most lenders will see little change in their op- erations for this reason, at least initially. Speeding up Closings with Electronic Delivery I t's the delivery requirements and the resulting benefits of using electronic delivery that will direct lenders to make changes to their current operating processes. The initial loan estimate must be delivered or placed in the mail within three days of application, which should sound familiar to lenders. In addition, the loan cannot close sooner than seven days after the loan estimate is delivered or mailed. These rules are similar, but not identical to current requirements outlined by the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). If the loan estimate isn't delivered in person, it is considered "received" by the consumer three days after it is placed in the mail. However, the new rule has an interpretation that is specific to electronic delivery. It provides that the creditor may, alternatively, rely on evidence that the consumer received the loan estimate disclosure sooner by means of an electronic delivery method. This concession is significant. The lender could send the forms to the post office and then wait the three days stipulated in the rule. But that means the lender cannot begin charging fees until that three-day period is over. The rules are specific and state that a credi- tor may not impose a fee, other than a credit report fee, before the consumer