E-Mortgages Will Speed Closings, Cut Costs
An electronic mortgage process could cut 30 days off the average 52 days it takes to close a loan, according to a team developed by Fannie Mae to study e-mortgages. What’s more, going paperless could save the mortgage industry an average of about $1,100 per mortgage—or about $1 billion a year.
Still, the industry has been slow to adopt electronic mortgage processes, facing several hurdles in transitioning to an all-electronic system. However, the process is expected to get a boost from the Consumer Financial Protection Bureau's new mortgage disclosure forms that will be disseminated electronically.
“This will allow stakeholders much earlier in the origination chain to derive value from going electronic,” says Nancy Alley, vice president of strategic planning at Simplifile, a company that helps record mortgages electronically. “That should help adoption. Plus, an electronic process should drive a better consumer experience.”
The industry has been gradually progressing toward digital mortgage processes. About 25,000 mortgages had electronic promissory notes in 2013—but that only represents about 1 percent of all U.S. mortgages originated last year, according to Michael Cafferky, product development manager at Fannie Mae.
Fannie Mae created a team called “Advancing eMortgage” that is charged with improving the electronic mortgage process. The team has focused on the following three key elements:
- Borrower financial passports: online employment and financial profiles that borrowers can share with lenders.
- Loan file service: electronic storage vaults for documents and data from loan files.
- National mortgage registry and clearinghouse: enhancements to a decade-old system that keeps digital records on electronic promissory notes for real property.
Source: “Advanced eMortgage: Why Are We Still Using Paper?” Fannie Mae’s Housing Industry Forum (May 6, 2014)