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4 | Th e M Rep o RT M // Mass adoption of e-signing has been an elusive goal for many years now. How close is the mortgage industry to tipping to more acceptance and implementation of e-signing mortgage loans? STUCKY // A very small percentage of mortgage produc- tion is signed electronically. Right now, Fannie and Freddie and the FHA will accept e-notes, but it is something that we are still seeing exceptionally small acceptance of. I think that is going to change as it's already much better than it was a year ago. With the TILA-RESPA integrated disclosure require- ments coming into play, electronic transactions are going to have a significant advantage, both for the borrower and the lender. I think TILA-RESPA will be the impetus to it gaining more mainstream ac- ceptance. Up until now there has been a lot of fear and disillusion- ment on the topic. The technology is expensive to deploy, people worry about issues of enforceabili- ty (i.e. what if you have to go back and try to foreclose?), but I think most of that is now behind us. M // What factors are holding the industry back from fully accepting e-mortgages? STUCKY // Notarization and elec- tronic recording are the two biggest variables impeding electronic mort- gage adoption. For e-recording, it is a patchwork. From state to state and within states, availability var- ies. In my home state of Colorado, e-recording is 100 percent available, but many of the smaller, rural counties have trouble justifying the cost. The legislature is facing that issue and proposing a cost-sharing distribution scheme across counties. Notarization is a critical issue. As I see it, technology provides us with the ability to face it. M // E-signing is now playing a large part in automating the loan origination process. How can e-documents and e-signings reduce loan defects? STUCKY // Electronic mort- gages are memorialized on what are referred to as Smart- Docs. These are a visual image of the forms we're used to seeing and the data embedded in the file. So it's impossible with an electronic transaction to have the data from the loan file not match the data on the loan document. That is critical because that is the number one source for loan defects. From a legal perspec- tive, the electronic process offers much more protection for the lender than the paper process does. As the borrower reviews every page of the document, the system keeps a record of how long each page is viewed. After which point, they go back and take 5 Simplifying the Mortgage Process—On Both Sides of the Dotted Line sign them. In any event there's a repudiation claim, the electronic transaction does a really good job of protecting the lender. M // What will be the impact of the regulatory environment on e-mortgage adoption? STUCKY // The TILA-RESPA integrated disclosures rule is going to force a big push towards mak- ing things electronic, particularly because of the timing requirements involved. You have to allow be- tween six to eight days if you use paper documents in advance of the closing to get that out. Right now, if you go to close your loan, you'll be lucky to get your documents the day before. You might even get them the morning of. If the transaction happens electronically, it cuts three days off of that lead-time. Plus, delivery is instantaneous, so there's value to the borrower as well because they have time to review and ask questions. Many lenders adopted electron- ic signature technology already, but they do it for the initial disclosures. It compresses the origination cycle, it cuts lead time and days off, it provides better audit trails to demonstrate deliv- ery from the lender's perspective so when they get audited by their regulators, they can very clearly demonstrate what went out when and when the borrower got it. M // How should lenders prepare for the new TILA-RESPA rules? STUCKY // Aside from testing your technology now and working with providers and understanding how the documents are going to flow, I think the big thing people are not keeping their eye on is the process exchange. Lenders are going to have to have a way to col- laborate with title agents, Realtors, borrowers, and brokers to get the fees right on that closing disclosure before it goes out. The lead-time on it is going to be six to seven days before closing. So that means seven to eight days before closing, all of those parties are going to have to get all of those figures all lined up. The timing has to work. The way we've been doing things simply won't work after August 1. Today's tech-oriented culture has officially come to the mortgage realm, ushering in new products and processes to help make the e-mortgage a seamless endeavor for both the consumer and the lender. Scott K. Stucky, Chief Strategy officer at DocuTech, sat down with MReport to discuss the latest regulations affecting e-mortgages (TILA-ReSpA anyone?) and what we can expect as e-mortgages become more commonplace in the market. "From a legal perspective, the electronic process offers much more protection for the lender than the paper process does."

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