Doing Digital Mortgages Right

This piece originally appeared in the September 2023 edition of MortgagePoint magazine.

Aaron King is Executive Chairman of Snapdocs, a digital closing platform that powers millions of closings each year. Snapdocs combines an open platform, patented AI technology, an extensive settlement network, and a team of industry experts to ensure digital closing success. A passionate advocate for digital closings, King began his career in the mortgage industry working at an IMB while he was still in high school.

At the age of 21, he founded NotaryLink, a nationwide notary signing service. King is a frequently sought speaker at industry events and has been featured in publications such as The Wall Street Journal and Forbes. This month, MortgagePoint had a chance to catch up with

King to get his insight on the future of the mortgage tech space.

Q: What companies out there have gotten digitization right?
KING: Many lenders are experiencing the benefits of digital closings. PRMI is a great example of a lender that has successfully digitized their closing process, and has seen improved business performance as a result. They implemented Snapdocs eClosing and eVault solutions in June 2022, and within one month, closed their first hybrid with eNote transaction. A year later, they have transacted more than 1,000 mortgage closings with eNotes and that’s consistently growing. Their dwell time to the secondary market was reduced by four days, and they have slashed more than $250 in cost-per-loan.

This and other examples are encouraging many other companies to think more deeply about their technology stack, as they learn from their peers and providers on how to maximize the value of digital closings.

Q: What is the benefit of increasing the share of digital closings?
KING: The biggest benefits come from operational and secondary market efficiencies. Lenders can reduce manual time spent on each loan, eliminate errors, and increase profitability per loan by decreasing costs like shipping and lost promissory notes.

Digital closings are also faster and more convenient for borrowers who are accustomed to the convenience of technology in every aspect of life. This makes the mortgage process less stressful and more enjoyable—and makes the borrower more likely to close and to refer the lender to friends and family. All of these benefits free up more time for organizations to focus on developing strong customer relationships and future business referrals.

Because of these benefits, digital closing technology adoption has doubled since 2019. eClose technology supported lenders during high volume growth in 2020-2021. Now, it’s helping lenders improve profitability and do more with less while transaction volumes are lower.

Q: But what about a totally start-to-finish paperless transaction?
KING: Totally paperless, end-to-end transactions are happening today, but still represent a small fraction of overall mortgage closings.

Remote Online Notary (RON) workflow and adoption advancements are the bottleneck to fully-digital transactions today, though the benefits of getting there are growing increasingly clear.

The more digital a transaction is, the more profitable a loan is for the lender. We have conducted research and identified that lenders can save more than $110 on a hybrid transaction, and nearly $300 on a hybrid transaction with eNote. But the savings opportunity increases to $400-plus per loan on hybrid transactions with eNote and RON.

RON transactions have struggled to scale because of their complexity, accounting for just 1% of all transactions today. This complexity ultimately leads to insufficient settlement, lender, GSE, and notary adoption.

Looking forward, we believe RON transactions will become the standard … it’s just a matter of when and how we’ll get there. To prepare for RON’s expansion, lenders need to think about their holistic eClose strategy. To get to RON at scale, lenders need to first drive adoption at scale of hybrid transactions, and then eNotes. Only once lenders have established this foundation of digital closing experience will they be capable of expanding to fully digital transactions.

Q: Who pays for the digitization costs?
KING: We have seen both lenders and title companies pay these fees. Some pass the fees onto the borrower, and some bundle them into closing costs. Every company works differently, and tends not to share advice on this topic. That being said, digital closings reduce the overall cost of a loan, so regardless of who pays, the overall manufacturing costs are lowered.

Q: The Snapdocs report indicated that $400 per loan could be saved from digitization. What were the specific costs that were saved?
KING: Our research analyzed the average savings across 25-plus lenders that use eClose technology. The report found that lenders saved more than $110 on a hybrid transaction, more than $290 on a hybrid transaction with eNote, and in excess of $400 on hybrid transactions that utilize eNote and RON. The more digital a transaction is, the more value and profitability a lender can realize.

Some of the cost savings are obvious, like printing and shipping costs. But the bigger categories tend to be operational efficiencies around automation and error reduction. When you have to redo paperwork because certain information was incorrect or mistyped, or a staff member has to track down a missing document, that adds time and money–and these situations occur quite often. Almost every lender I speak with has a nightmare tale about errors, incorrect information, or missing documents. Finally, savings was also found through secondary market efficiencies, which include cutting funding cycle times, reducing rate-lock extensions, and eliminating lost or damaged notes.

The bottom line is that any progress that lenders make toward digitizing their operations can help profitability, at least if the business uses the right technology that enables them to adopt at scale. If lenders hope to improve their margins and remain competitive, particularly in today’s tumultuous market, digitization is something every lender must adopt.