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ComplianceFinanceJanuary 13, 2023

Lenders apprehensive about implementing tech for closings

(As published in National Mortgage News)

National Mortgage News Article examines ongoing digital mortgage adoption

Some mortgage lenders are still lukewarm about embracing fully digital solutions for closing a loan, even after all of the gains made during the pandemic.

A survey of 100 lenders in December found that only about half (47%) of the participants closed a loan package using a piece of technology, such as eSignatures and remote online notarization.

About 30% of the lenders surveyed by Wolters Kluwer reported not finding the right vendor for the job, or noted budgetary constraints as the reason for not implementing digital solutions.

17% of participants reported not being sure "what value [digital solutions] bring."

According to Kevin Wilzbach, director of product management at Wolters Kluwer, adoption of technology in the mortgage industry has been slow going, but it is not completely the fault of lenders, but rather the overall complexity of closing a loan.

"We as an industry have been talking about the market moving quickly into digital lending for about 10 years now," Wilzbach said.

Innovation in the mortgage closing process is oftentimes complicated by the fact that "there are a number of participants including the lender, the settlement agent, the borrower, so documents are coming from multiple sources.

"I don't think it's just about technology, it is really the delivery of solutions and the acknowledgment of the complexity of mortgage," Wilzbach said.

Per the survey, a little over 60% of participants stated that they believe that using technology will expedite the loan process. Still, close to 40% reported either being unsure whether digital solutions result in faster originations, or disagreeing entirely.

A mere 13% of those surveyed use technology throughout the entire origination process, while close to 70% said that their company was not using digital solutions, or employing them for less than a quarter or half of the time when manufacturing a mortgage.

It is possible that the 18.12% of participants who stated that their employer doesn't use digital solutions at all might still use some but only minimally, and that may have swayed their answers, according to Wilzbach.

"You can have a fully digital, which means the entire loan package is closed electronically, including the note and there's also hybrid, which is where I think the greatest amount of disparity arises [in our survey]," he said. "In all cases hybrid means you can have as little as one digital component and the rest is paper, but that is still considered hybrid."

Out of the digital solutions implemented by lenders, 46.38% of respondents said that they use eSignatures, close to 40% answered that they use remote notary, 27% use eVault, and 21.09% replied that they don't use any technology.

Reasons for not implementing technology included not finding the right solution for the company's needs (24.64%), not finding the right vendor for the job (22.46%), and budgetary constraints (15.94%).

As the market continues to dovetail, lenders have slashed expenditures planned for 2023, one of which is implementing new technologies such as digital solutions for closing a loan.

Wilzbach calls this a "typical reaction to a market slowdown.

"We recognize that it's the reality of a market correction, but we [still believe] that now is the time to make those investments because you are scaling back on costs and slashing personnel, and so the value of solutions built on technology should play to what they want to accomplish right now, but it is an expenditure that [lenders] are scared to make sometimes," Wilzbach said.

Meanwhile, 39.96% of respondents reported that closing a loan package fully using a paper process results in having errors either half of the time (23.19%), three quarters of the time (9.42%), or all of the time (4.35%).

"The industry as a whole needs to be more evangelical about explaining the benefits of digital closings," said Wilzbach. "We also need to do a better job in terms of articulating the value of digital lending by defining it in terms of the overall consumer experience.

"I think there's a lack of understanding of the value of mortgage technology and the value that comes from updating the processing," he added.

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