There’s been a lot of conversation in our industry recently about how fully digital mortgage shouldn’t be watered down or somehow devalued by hybrid technologies. The fact is, with the right hybrid solution a lender can indeed have the best of both worlds—improving costs and consumer experience without foregoing the business of investors or warehouse lenders who do not yet accept e-notes.
More importantly, the right hybrid solution is a facilitator, rather than an inhibitor, for future digitalization and improvement. In other words, a good hybrid solution is future-proof—a gateway to the eventually fully digital mortgage.
Let’s take a step back and look at where it all began.
In early 2000, as we were trying to gain the industry’s acceptance of the e-closing process, any momentum we had earned was derailed by the focus on one document—the e-note. By being e-note-centric, and asking lenders to forego business until their investors caught up with them, e-closing adoption limped along for the next 15 years.
It wasn’t until the Consumer Financial Protection Bureau’s e-closing pilot that the entire e-closing process was given a facelift and bolstered by entities that carried clout in the industry. The government-sponsored enterprises added e-closings to their scorecards and began talking about the process which, not by accident, included the hybrid process. Now, lenders were listening again even if only skeptically.
Hybrid e-Closing Defined
Hybrid e-closings are those closings in which most of the documents are digitally signed, and a few are wet signed. The reality of state law in many places is that some documents still need to be “wet signed” or notarized traditionally.
So, the hybrid closing provides its users the efficiency of digital closing, with a few wet-signed documents included to accommodate the law. Or perhaps the property isn’t in an area that allows for e-recording. Also, the note may need to be wet signed because the lender may not have e-note functionality or an e-vault as part of their process.
In all these instances, where a digital closing would remain impossible, the hybrid allows the lender and the consumer to enjoy the same value and benefits of the digital experience. Somehow, the hybrid closing was deemed counter-productive or believed that it doesn’t provide the same benefits and value as the “all or nothing” approach. It’s just not true.
Hybrids: Value and Benefits
Let’s address the confusion centering around hybrid e-closings and their value and benefits. Some of this confusion could be from vendors that have a complete end-to-end solution or vendors that can only handle the e-note. The misconceptions, wherever they are stemming from are adding confusion to the lenders as they explore a digital process. An e-note can be a barrier to the e-closing process.
Positioning for the Future
When lenders adopt an e-closing process, it requires a cultural change to their environment. It involves getting their internal staff onboard as well as their vertical partners. It is not a massive IT lift but rather an attitude change and is not something most lenders take lightly. It is essential that we look at the lenders’ current process and fit this technology into that process, allowing them to embrace and balance this change within their operations. Hybrid closings allow for entry into the digital process and position organizations for the future. It’s not an all or nothing approach.
We need to treat the process with a holistic approach and work with lenders to balance existing corporate objectives but still move forward and embrace what can be done today, and that’s hybrid e-closings.
If an e-note fits within that process, well great! But that’s just one document in a stack of others.Consumers don’t care about an e-note. What they care about are convenience and transparency. They want to understand what’s being signed and want a simplified process. Most already realize they will have a promissory note, but an e-note is not on their radar. It’s just one document. The advantages of an e-note apply to the lender only, and until these “advantages” are passed on to consumers, they don’t care about that one document.
The mortgage industry desperately needs adoption on the entire e-closing process. To get that momentum, we need to quit treating hybrid e-closings as a wrong word and gain approval around the entire e-closing process. Lenders need to understand the benefits of the hybrid closing to get them started today. They need to see the benefit to their borrowers.
If we focus only on one document and not the entire process, we will continue to derail e-closings. Nobody wins with that approach, especially not the borrowing consumer. Now is not the time for the theoretical but it’s time for the practical—what do mortgage lenders want and need for a digital mortgage to serve them and their clients?