September 9, 2016
What Life Could Be Like in a Paperless Mortgage World
This article was written by a guest author from Lendesk, makers of mortgage software for Brokers and lenders.
To the untrained eye, it looks like any other coffee meeting between friends. But look closer, and you’ll see that it’s a very important transaction taking place: A young couple (first time home buyers) are meeting with their mortgage broker for the first time.
The broker asks a number of questions, and excuses themselves while they type the responses into their iPad. Moments later, a mortgage application has been originated—without a printer in sight, and not a drop of ink spilled.
We’ve Waited Long Enough for “The Future”
Everything described above should be possible today, but in reality, the average loan origination still requires more paperwork. But why? Giving a broker permission to do a credit check, verifying one’s income, providing other banking details— these are not things that require paper in today’s modern society.
To younger home buyers, the idea of paper even seems archaic; an old-fashioned way to formalize the rather significant commitment of property ownership. But before long, that tolerance for old ways will go by the wayside.
We have already entered the era of the digital native. The borrowers of today have lived in a world where technology is the norm: personal computing is a given, and mobile phone technology has been a part of their entire adult lives. Why then, are we still filing reams of paper in warehouses just to complete a mortgage agreement in 2016? Because change is slow, and the policy makers are from a different era.
The Filing Cabinet or The Cloud?
If the mortgage process is to become completely digital, then it stands to reason that it must be secure. It’s hard for the old school to understand how cloud storage of documents could be more secure than files upon files, stored in rented warehouse space. Explaining the technology (redundancies, virtual machines, distribution) will get you nowhere either. Maybe the easiest thing to do is to ask a question: If the Internet is secure enough for online banking, why then should it not also be secure enough for all mortgage transactions?
You Can Keep the Pen
E-signature technology is already seeing more widespread use in the mortgage world, and two recent court decisions in the US seem to suggest that the technology is worth more than the paper it’s not printed on. In other words, E-signatures are here to stay, and will become the tipping point for the sea change in the amount of paper used to process a mortgage.
The mortgage document itself is the last bastion of paper’s stronghold over the industry. And there’s no denying that there’s a certain amount of pageantry and appropriate formality to signing one’s name dozens of times in the presence of a notary in order to “close the deal” on a mortgage.
But is it all really necessary? Couldn’t we live without that photo opportunity, in favour of efficiency? Certainly Mortgage Brokers would prefer the process to be a little smoother than the current reliance on the physical artifact of the document itself. Children of future generations will chuckle at the idea of a couriering paper to a notary’s office, only to mark them with pen as proof of acknowledgement of a loan. In fact, some of us are laughing already.
The Demand for a Paperless Mortgage
The fact is, the technology (and the demand for it) already exists. All that’s left is for policy makers to recognize the validity of new technologies, before the paperless mortgage becomes the norm, rather than the exception. There are strong opinions on both sides of the issue, but change is gonna come, there’s no doubt about that.