Digital Mortgage Adoption

By: Dan Green for Today's Lending Insights

A lender and I were talking the other day about fully paperless, completely electronic mortgage lending — what we now refer to as the digital mortgage. Digital mortgages live 100% in the virtual world. This is a big departure for our industry and from tradition: A mortgage is, or can be, a large collection of papers, often weighing three to five pounds, surrounded by a rather stiff cardboard carapace. Loans travel slowly and often chaotically through the mortgage manufacturing process with the help of any number of mortgage staffers. The goal is to go from application to closing as quickly as possible. Once closed, the loan is destined to spend eternity with other mortgage files in large, dark storage rooms where no one will ever pay attention to most of them again.

While many lenders are stuck sorting through paper, we’ve worked with one of the very first in the industry to make the move to digital lending. This lender’s willingness to trail blaze the digital mortgage process occurred for a host of practical reasons: efficiency, velocity, borrower communication, space.

None of this was easy. The transformation took about two years and was not without its difficulties. Not surprisingly, the hardest part of going digital is also the number one reason people don’t switch to e-readers: they do not want to abandon the paper experience.

If you’ve made the leap to an e-reader, this makes perfect sense. Books, like mortgage loans, are physical things. We interact with them in a particular way. How often, for example, do you flip back a few pages or a few chapters when reading a book to re-read a passage or an entire section? You know where in the book to look based on an approximate physical location in the book. Along the way you might stop and look at a few other things, too. This, at least in part, defines the paper experience.

So it is with mortgage loans. Files are constructed in certain ways. While a team member may have specific interest in the appraisal, he or she might take a look at the purchase agreement or the title report along the way, all to provide deeper context for the appraisal and the review. This is easy, because all of these items are in roughly the same place in every mortgage file.

The experience is different with a digital file, but only at first. Instead of flipping through pages, you click a few times, and you’re there. While this represents a change in the way people interact with the file, ultimately the experience proves to be more efficient.

Given the real and perceived complexities of transitioning your people from a paper-heavy process to a digital format, the question becomes, why go digital? As it turns out, borrowers like it. Loans can close more quickly than ever before, and borrowers appreciate getting their copy of the closing package electronically. Loan delivery takes place more quickly, too.

Then there’s the storage issue. No more paper means no more warehouses full of lonely, dusty mortgage files.

By the way, digital lending is nothing new for my lender friend. Her organization closed its first fully paperless, all-electronic mortgage in late 2008. Any lender with the right technology has the tools to make the switch to digital. The hardest part is giving up our love of paper. Once organizations go digital, however, they enjoy the benefits of a paperless environment. No one ever says, “Let’s go back to the way it used to be.”