Realtors® know first-hand that real estate closings are a complex process that’s often slow and confusing for their clients. Consumers want simplicity and transparency, and Realtors® say electronic closings have the potential to deliver on that demand, but widespread acceptance of so-called “e-closings” has yet to take hold.
National Association of Realtors® 2017 President-Elect Elizabeth Mendenhall convened a meeting of tech and industry leaders in Washington, D.C. with the goal of identifying and addressing some of the challenges to widespread e-closing implementation.
Among them, concerns remain about the legal ramifications of accepting electronically submitted signatures, notarization, and other elements of the transaction. But concerns over e-closings extend well beyond the closing documents consumers see at the closing table.
In a typical closing, the documents must be properly recorded and payments disbursed to the entities involved. Oftentimes the loan originator will also receive funding for a mortgage from a loan “warehouse,” and those funds may be repaid when the loan is eventually sold or securitized on the secondary mortgage market.
The result is a wide range of actors are involved in each transaction, often with their own varying technology platforms, making the transition from paper closings to e-closings fairly complex from both a communication and business standpoint.
Those challenges haven’t stopped various entities from trying, of course. The Consumer Financial Protection Bureau launched an e-closing pilot program in 2015 and found that consumers “are generally better off on measures of understanding, efficiency, and feeling empowered” than those who moved forward with a tradition paper closing.
The idea of an e-closing isn’t new. The issue took one of its first major steps forward with passage of the “E-SIGN Act of 2000,” a federal law establishing the legal equivalency of electronic signatures in commerce. Since then, a range of federal agencies have moved to implement policies that utilize e-signatures, most notably the Federal Housing Administration in 2010.
Acceptance with e-closings within the industry however is inconsistent, and in many areas is entirely unavailable. NAR and the broader real estate industry recognize the need for this to make e-closings more available.
Mendenhall said she sees hope for e-closings on the horizon and highlighted the value e-closings offer to both consumers and agents.
“We’re already seeing e-closings take place, but we need to see more of it,” Mendenhall said. “This is a business imperative for our members.”
Additional commentary on the event is available in a video featuring Elizabeth Mendenhall, available here:
In addition, Margo Tank of Buckley Sandlin and John Kmiecik, chair of NAR’s Federal Technology Advisory Board, also weighed in with their expert opinion on the e-closings trend.