Automation & Technology
Five steps to a meaningful eClose strategy
By: Camelia Martin, Managing Director, Digital Mortgage Advisory, Falcon Capital Advisors
Earlier this year, I was honored to work with the team at ICE Mortgage Technology to develop a new eBook, titled The Modern Lender’s Guide to eClose. In this eBook, we outlined the current state of eClose in the mortgage industry, and discussed some common hurdles. In this blog, I’d like to break down the key elements of a successful eClose strategy, including planning, compliance and deployment considerations.
The planning stage
A properly executed eClose strategy begins with due diligence in these five key areas:
1. The readiness of your trading partners
Take inventory of all trading partners, including warehouse lenders, servicers, and investors. Review the percentage of loans that have historically gone to each trading partner and obtain their current eClose policies. These policies may change frequently, so stay on top of them.
2. Geographical regulatory restrictions
Identify and understand the various laws and policies surrounding eNotarization and eRecording in the states and/or counties you do business. You may find conflicting policies, and will have to account for those differences. For example, a state’s laws may permit Remote Online Notarization (RON), but individual counties may not yet have policies for such.
3. Existing technology providers’ capabilities
Assess your existing technology providers’ (loan origination system (LOS), document provider, etc.) capabilities to ensure that you understand how they currently support your operations and their capabilities to support eClosings either directly or through relationships with other technology providers.
4. Operational maturity and timing
Evaluate the state of your existing operations and determine the optimal timing and approach for your eClose implementation. Ask yourself: Are existing policies and procedures well-documented? Are you implementing other significant changes that will impact your operations? If so, how will the timing of those changes enable or hinder your implementation of eClosings?
5. The readiness of your vendors
Take stock of your subservicers, settlement agents, custodians, quality assurance providers, or other outsourcing partners – essentially, any entity that touches your loan processes, but doesn’t have an interest in the loan itself. Ask yourself: will they still be able to perform their key functions when some or all of the closing documents are electronically signed? If so, how will handoffs or other processes with these providers be affected?
While compliance is always a consideration for nearly every phase of the digital mortgage process, the COVID-19 pandemic has added additional challenges. For instance, COVID has thrust the remote notary aspect of eClosing to the forefront, with almost every state issuing emergency orders around remote online or remote in-person notary. It is important to stay aware of and take advantage of emergency orders in the short term, but recognize that these solutions may be temporary.
Also, while eClosings certainly lead to less errors, be sure to take the time to understand how your compliance and quality assurance programs need to adjust for requirements that are unique to eClosings.
Implementation and communication
The eClose implementation process begins with technology, but it ultimately includes much more.
Consider these phases:
- Technology vetting and selection
Identify, vet and select technology providers that will best support the types of eClosings your organization will offer. Choose providers that have strong eClose experience, and will be able to partner with you during the implementation process.
- Policy and process review
You will need to re-engineer your workflows, and identify which departments in your organization will be impacted. Be sure to document all process and policy changes. And, take a pragmatic approach. While you may be poised to scale quickly, taking a conservative route, at least in the beginning, can make the implementation more manageable.
- Change management and employee training
An effective eClose initiative is highly reliant upon internal adoption. Sharing your strategy and educating your employees are the keys to success. Employees that have this insight will feel more confident about the supporting the changes.
- Partner coordination
In addition to internal adoption, communicate your eClose strategy and processes with your settlement agents and other external partners, so they can best support you. Also, be sure to secure any approvals that might by required by your warehouse lenders, investors, or GSEs.
- Process monitoring
As with any new initiative, you’ll want to set up mechanisms for feedback, process improvements, and success measurement. These steps will allow you to quickly identify and address any issues that may arise.
Thanks for taking the time to read this post. There’s much more to learn, so download the full eBook to gain insights on how to plan and implement the best eClose strategy. The eBook also includes a handy checklist to help you get started.