Who Will Drive the Adoption of eClosing Technology?

Digitization has been transforming the mortgage industry in recent years, enabling lenders to streamline processes, improve efficiency, and enhance the customer experience. Electronic closing or eClosing is a process that enables borrowers to complete the closing process for their mortgage digitally, without the need for a physical meeting.

The eClosing platform involves the use of digital tools and platforms to enable borrowers to review and sign documents electronically. By implementing eClosing, lenders can significantly reduce the time and cost associated with the traditional paper-based closing process. Additionally, eClosing can improve accuracy and reduce errors by eliminating manual data entry.

If the lending industry does not automate, it risks falling behind competitors that have already implemented automated processes. Manual processes are time-consuming, error-prone, and expensive, leading to slower processing times, higher costs, and a less satisfying customer experience.

Additionally, without automation, lenders may struggle to keep up with changing compliance requirements and may face greater risks of fraud or other security breaches. Ultimately, the failure to automate could result in decreased profitability and a loss of market share to more technologically advanced lenders.

Why is eClosing important in a loan origination cycle?

eClosing is an important part of the loan origination cycle, as it enables the digital completion of the final stage of the mortgage process. While many parts of the mortgage process are now digitized, including application and underwriting, the closing process has traditionally been paper-based, with borrowers required to attend a physical meeting to sign the necessary documents.

The eClosing process typically involves the following steps:

Electronic document preparation

The lender or closing agent prepares the closing documents electronically, using specialized software that ensures the accuracy of the information.

Remote document review

The borrower receives the closing documents electronically and reviews them remotely, using a secure digital platform. The borrower can ask questions and seek clarification via the same platform. Using optical character recognition, the automated software can recognize the information and extracts it from records to match with application forms.

Electronic signature

Once the borrower is satisfied with the closing documents, they can sign them electronically, using a digital signature. With secure verification in place, more customers will trust the process and agree to conduct their lending in the new age way.

Remote notarization

In some cases, electronic notarization may be used to notarize the documents remotely, using a webcam and specialized software. RON has numerous advantages considering that a bank makes maximum profit from small and mid-size businesses and these owners cannot leave their business unattended for long during the normal course of a working day.

Funding and disbursement

Once the closing is complete, the funds are disbursed electronically, and the mortgage is recorded electronically. The future requirements of observing the loans and sending timely reminders to pay in time are also automated. If there is any red flag, it is alerted immediately which aids in securing the loan with additional covenants to make it good.

By implementing eClosing, lenders can significantly reduce the time and cost associated with the traditional paper-based closing process. Additionally, eClosing can improve accuracy and reduce errors by eliminating manual data entry. However, it is important to note that while the eClosing process can be fully digitized, the entire end-to-end cycle is not automated, and human intervention is still required for some tasks, such as title searches and property inspections.

Advantages of Digital LOS

A LOS (Loan Origination System) with eClosing capability offers numerous advantages for mortgage lenders, borrowers, and other stakeholders. By automating many aspects of the mortgage origination process and leveraging digital platforms, a LOS with eClosing can significantly improve the efficiency, accuracy, and security of the entire process. Here are some examples of how this automation will benefit the overall mortgage process:

• Faster processing times -The use of a LOS can significantly reduce the time it takes to process mortgage applications. Automation of tasks such as data entry, document preparation, and underwriting can significantly speed up the process. One of the most significant advantages of digital loans is their ability to analyze large amounts of data with greater speed and accuracy than humans. By leveraging machine learning algorithms, AI systems can identify patterns and anomalies in data that humans may miss, which can lead to more accurate predictions and decisions.
• Improved accuracy - A LOS can help ensure that all data and documents are accurate and up-to-date, reducing the risk of errors and compliance violations. With eClosing, the automated process further minimizes the risk of errors and ensures that all documents are properly signed, notarized, and recorded. As against manual processes by automating repetitive and time-consuming tasks, analyzing data faster and with greater accuracy, and providing insights that can lead to better decision-making. This can save time and resources, reduce errors, and improve overall productivity.
• Enhanced customer experience - A LOS with eClosing offers a more convenient and flexible mortgage process for borrowers. They can apply for a mortgage online, upload the required documents, and complete the entire process from the comfort of their homes. The elimination of in-person meetings and the availability of online support services provide borrowers with more choices and greater control over the process, leading to a more positive experience.
• Increased cost-effectiveness - By automating many tasks involved in the mortgage origination process, a LOS can significantly reduce the costs associated with manual processes. The use of eClosing can further reduce costs by eliminating the need for physical meetings, postage, and printing costs. Automated loans reduce errors and the need for human intervention, and provide insights that can lead to more efficient resource allocation. Additionally, AI-powered systems can be more scalable and flexible, allowing organizations to adapt to changing business needs more easily.
• Improved security - A LOS with eClosing provides a more secure platform for processing mortgage applications. It reduces the risk of fraudulent activities such as identity theft, forgery, and unauthorized access to sensitive data. LOS software reduces risks by identifying potential issues and threats in real time, enabling proactive responses, and providing greater accuracy and consistency in decision-making. Additionally, AI can help organizations stay compliant with regulations and industry standards, reducing the risk of non-compliance and associated penalties. eClosing also helps to secure loan documents, making them accessible only to authorized parties.
• Increased transparency - The use of a LOS with eClosing can provide transparency in the mortgage origination process by enabling stakeholders to track the progress of the loan application, see the status of required documents, and receive updates on the loan process. The use of digital platforms also provides a more secure and efficient way to store and manage loan documents.

Conclusion:

Mortgage and business loans are essential to steer the growth of the banks and it is evident that organic growth alone is not going to scale through the competition. To stay as a preferred banking and lending partner, banks have to understand the need for implementing an end-to-end digital LOS at the earliest if not done so far. Against popular belief, AI and technology will not take jobs. Automation may change job roles and responsibilities, but it can also create new job opportunities with elevated demands that can be fulfilled only through human interactions. It is time to look at the bigger picture and implement digital tools.