September 13th, 2017 7:00 AM by Jackie A. Graves, President
Electronic closing of a mortgage loan has been around for years –
in a manner of speaking. Generally, some element of the transaction still
requires traditional methods such as the physical presence of a notary public
or signing of original documents in ink. Most, if not all, of the parties
involved are still in the same room.
may be the preview for future mortgage closings, the Wall Street Journal
reported on a remote electronic mortgage closing that took place in July. All
documents were signed and notarized electronically, with participants
spread throughout the country. The new homeowner was located in Illinois, the
lender was participating from Michigan, and the notary services were performed
by Notarize, an online notary service based in Virginia.
online notary service is key. Currently, five states have authorized remote
notarization (Virginia, Nevada, Montana, Texas, and Ohio). However, according
to Notarize, documents that are remotely notarized through their service in
Virginia are accepted throughout the US. In case questions arise, Notarize
provides a handy reference by state to the relevant state laws regarding
acceptance of out-of-state notarization.
participant logging into the notarization service begins by answering
authentication questions as the first level of identification security. Next,
participants hold up their driver’s licenses to their webcams as the second
security level. The licenses are scanned front and back for verification and
storage. Finally, a sample signature for each participant is captured via
webcam, digitized, and used to produce the necessary signatures on all
The closing process in the Wall Street Journal example took
approximately 30 minutes – similar to a traditional closing process, but
without the burden of getting all participants in the same room. Theoretically,
this process may encourage homeowners to widen their search for mortgage
lenders and a suitable deal, improving the efficiency of the marketplace. For
the moment, too few lenders accept remote electronic closings to have a
tangible effect on the market.
of remote electronic closing are not limited to the homeowner. With a fully
electronic closing and notarized signatures, loans may be quickly transferred
to the secondary market, freeing up a lender’s capital to be used for more
efficiency will also decrease a lender’s costs. According to the Mortgage
Bankers Association (MBA), mortgage production costs to lenders averaged $8,887
in the first quarter of 2017. Given that costs to lenders have more than
doubled in the past eight years, lenders are likely to accept remote electronic
ready for a remote electronic closing process? Efficiency can come at a price
if you are not prepared. Make sure that you have received the necessary
documents beforehand, including the Closing Disclosure that lists all the final
terms. Review them thoroughly, and make sure that you ask questions to clarify
anything that you do not understand. Whether electronic or in ink, remotely or
in-person, don’t sign anything until you are fully comfortable with the terms.
Make sure you’re aware of all the ins and outs of closing your home loan.
lenders and homebuyers become comfortable with a fully electronic and remote
process, we could see remote mortgage closings become the timesaving norm. Even
so, one step may remain old school – that satisfying moment when your real
estate agent hands you the keys to your new home.
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