In a mortgage market that is unpredictable at best, lenders can tap technology to lower processing costs and provide better pricing and service to borrowers. Going paperless – with all critical documentation created, executed, transferred, and stored electronically – has another benefit: helping the mortgage industry go “green.”
Paperless mortgage transactions, including the electronically signed mortgage documents known as eMortgages, offer a fundamentally better way of doing business. We digitize data in countless other applications in our lives, even pay our bills online, so why not take advantage of similar efficiencies and savings in processing mortgages?
Data are entered only once, reducing processing time and ensuring better control of the closing process. Automation can also reduce manual processing errors such as missing pages and signing wrong drafts. Borrowers receive eMortgage documents immediately on their computers. Courier fees are eliminated. And loans can be sold to Fannie Mae the same day they close, boosting liquidity for the lender.
Providing security and creating competitive advantages
The data integrity of eMortgages is protected with the use of a tamper-proof digital seal. EMortgage technology is based on widely accepted industry standards. Many technology providers have readily available solutions built to those standards.
Paperless mortgage technology and processes can create powerful competitive advantages for credit unions. First and foremost, paperless mortgages provide better customer service with fewer errors, faster closings, and increased transparency to the borrower/member. Paperless mortgages can be executed faster (traditional mortgages can take three days to process versus minutes for electronic transactions) and more cost efficiently. With paperless processes in place, credit unions can adapt quickly to new market opportunities.
eMortgage Case Study: BECU
This October, the Boeing Employees’ Credit Union (BECU, 7.6 billion in Tukwila, WA) completed its first end-to-end paperless mortgage in a refinancing transaction that incorporated electronic signatures and imaging on closing documents. According to BECU vice president Joe Brancucci, paperless transactions save as much as $1,800 on a $300,000 loan, which helps lower the cost of homeownership for borrowers. He estimates that within three to four months, half of BECU’s mortgage refinancing loans will be done electronically.
With support from Fannie Mae, BECU relied on its technology providers to build its transaction-based eClosing solution at virtually no capital cost, ensuring that it is “Prime Alliance-ready” and usable by other members. Navy Fed FCU and American First FCU also have successful track records with paperless transactions.
The Path to Paperless
Admittedly, the paperless mortgage transaction was slow to take hold in the early days. Fannie Mae bought the first two eMortgage loans in 2000. Since then, the industry has moved from pilot efforts to full-scale production. Most mortgage lenders that we surveyed in 2006 told us they have either started or expect to start incorporating e-signing technologies in the near future.
Going paperless can have important environmental benefits by reducing the mortgage industry’s significant paper usage. Based on the assumption that each of the 14.5 million mortgages produced in 2005 required 100 pages of paper (about one pound) and was copied three to five times, those mortgages consumed the equivalent of 22,000 to 36,000 tons of paper in a single year. That translates into as many as 620,000 trees as well as some 340,000 barrels of oil used in paper production. With paperless eMortgage technology and processes, the industry takes an important step toward reducing its carbon footprint.
More information about eMortgages is available at https://www.efanniemae.com/sf/technology/commitloandel/emtg/aboutemtg.jsp#.