TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/409279
16 | Th e M Rep o RT Feature new set of disclosure reforms and expressed satisfaction with being able to compare and prepare at heightened levels. This informa- tion indicates a better under- standing of the financial terms of the loan and an overall better borrower experience. The CFPB also disclosed that borrowers are now enabled to make meaningful decisions when it comes to the loan review process, and their studies indicate the new forms improve borrower understanding of a loan by 29 percent. As the conventional way of closing will go away with the new rules, establishing an efficient way to accommodate borrowers is necessary to remain competitive in the industry. Providing timely disclosure docu- ments within the three-day allot- ted time frame is non-negotiable, and many lenders are leveraging e-disclosures to take advantage of the electronic paper trail and lower material costs. Easing the Change with Electronic Disclosures F or most lenders, the key to implementing electronic disclosures is understanding the benefits they provide. Many loan officers think of e-disclosures as simply scanning in the existing paper mortgage and emailing it to a borrower. However, in a truly paperless office, the documents never exist in paper form. The most important benefit from a compliance standpoint is data integrity. Since an e-disclo- sure is accessible to all service providers in the mortgage chain, changes made in the system of record are automatically ap- plied to the documents. There are never differences between the data in the system and the information on the documents. This eliminates redundant data entry and data errors, which is especially important in light of today's regulatory environment. Paperless disclosures also enable lenders to eliminate a large percentage of the manual effort of handling, processing, and checking paper documents. By reducing the time spent on each loan disclosure package, the bank can focus their time on improving customer service and increasing loan volume. Electronic files also provide a level of security not available to paper documents. They can be encrypted for secure transmission and storage, preventing unauthor- ized access to the data. An elec- tronic "seal" can also determine if any tampering has happened with the electronic documents, protect- ing the integrity of the information. Last, but not least, e-disclosures cost lenders less money. Integrating all the documents into one digital platform will reduce the need for the expensive transportation, filing, and storage services needed by paper disclosures. Decreased time in the process means less money spent on each loan. Moving to the Next Step with E-Closings L enders that implement e- disclosures in response to the RESPA and TILA reform should also consider expanding their electronic process to imple- ment full e-closings. Though e-closing software is currently available on the market, the overall adoption rate is still very low. However, as more fi- nancial transactions are conducted in a purely digital environment, e-closings could begin to show themselves as the bread and but- ter of the mortgage space, and lenders need to consider this the standard method of loan closing within the next few years. The benefits of closing mortgages digitally are similar to an electronic disclosure process, but the cost savings and increased compliance capabilities increase exponentially as paper is eliminated from the entire mortgage workflow. Implementing Electronic Documents W hen making the decision on how to implement pieces of the paperless mortgage, there are a few considerations to keep in mind. The most impor- tant is compliance. All mortgage document systems—paper-based and electronic—must comply with federal, state, agency, and inves- tor requirements. In the case of digital mortgages, lenders should make sure that the proper forms will be delivered in the correct format at the right time. Compliance is not a place to take shortcuts. A compliance failure can result in lawsuits, trouble with regulators, and loss of time and money. Having a trusted document compliance provider can remove the burden of keeping up with compliance updates and let banks focus on their customers. A good service will also have reporting features that enable lenders to track every stage of the mortgage process to guarantee each and every step is completed on time and in accordance with all regulations. The reporting function could also be tied to a mailing service that would send paper copies of the documents to borrowers automatically when the electronic communication is not completed in time. Ready or not, disclosure reform is approaching and the industry must be prepared. Now is the time for lenders to begin upgrad- ing systems and offering electronic solutions to accommodate bor- rowers before the reform that goes into effect on August 1, 2015—it will be here faster than expected. Taking the essential steps to offer e-document solutions will position lenders well for significant growth and will also generate new business in the market. Offering e-disclosures or e-closing services as an option will give lenders the ability to produce and close loans quicker, more securely, and less expensively, which creates new opportunity and distinguishes a business's capabilities in the eyes of consumers. Scott K. StucKy is chief strategy officer of Idaho Falls, Idaho-based DocuTech Corp. Since 1991, DocuTech has provided compliance services and documentation technology for the mortgage industry. DocuTech's software interfaces with leading loan origination systems (LOS) and enables mortgage professionals to generate documents locally. DocuTech manages and secures all information needed for a loan, guaranteeing accuracy, security, and compliance. "Compliance is not a place to take shortcuts. A compliance failure can result in lawsuits, trouble with regulators, and loss of time and money." 3MReport.indd