No more signing on the dotted line
While many of us have grown accustomed to paying bills, income taxes and shopping online, the mortgage process, for the most part, has yet to fully step into the digital age. But the piles of paperwork and countless signatures could soon become old news as new technology allows for the majority of the mortgage process -- even the closing in some cases -- to be done in front of a computer screen.
"We recently launched new online capabilities that make applying for a mortgage, an experience that's notoriously painful, much easier," says Jerry Gross, chief information officer of Guaranteed Rate, a mortgage company in Chicago. "We're deploying document synchronization and sharing and electronic signatures to streamline the mortgage process."
The main benefit of online mortgage applications is convenience for the customer, says Gross. Guaranteed Rate's customers can submit an application, allow instant access to their financial information, put the data through an automated underwriting system and receive a home loan approval in as little as 15 minutes, he says.
"It's not just that we've gone paperless, but we can also obtain information digitally that automatically populates a lot of the application so people don't have to do that manually," says Gross.
David Zugheri, co-founder and executive vice president of Envoy Mortgage in Houston, says Envoy processed the first end-to-end paperless mortgage in 2007, but he says "we're still not where we want to be in terms of every loan being completely paperless. People still sometimes print PDFs, which I call the 'poor man's version' of paperless processing."
Zugheri says that technology has definitely increased efficiency for mortgage applicants.
"People used to bring papers to their lender's office and now they can upload documents directly," he says. "We can send password-protected documents back and forth between the consumer and the lender and underwriters."
New technology also lets some mortgage lenders verify deposits, but not all financial institutions allow this, says Gross.
"AccountChek is an automated system that allows lenders to verify deposits and assets at more than 15,000 financial institutions," says Brent Chandler, founder and CEO of FormFree Holdings Corp. in Athens, Ga., developers of the AccountChek software.
Prospective borrowers must give permission to verify their assets online and then a report can be sent to the lender within minutes, says Chandler.
"Our system goes beyond raw data," he says. "It's set up with algorithms that analyze the data just as a lender would, looking for direct deposits, low balance alerts and insufficient funds so we can provide the lender with a summary report. It's convenient for consumers and makes it easier for lenders who can look at a standardized report from us."
Stumbling blocks and security concerns
Zugheri says there is one major stumbling block preventing paperless home loans from expanding across the board. Real signatures rather than electronic signatures are still required in many places for documents that need to be recorded at the county courthouse; so many borrowers must sign their settlement papers in person, says Zugheri.
According to the latest Consumer Trends Survey by Fiserv.com, 79 percent of households use online banking, but not everyone is comfortable with providing financial information over the Internet. Chandler says consumers can opt-out of automated verification if they prefer to provide information directly to their lender, allowing borrowers to handle their loan application in person if they prefer.
Zugheri says sophisticated encryption systems and other technological improvements have made online transactions safer.
Future of paperless mortgages
"The ability to allow information to be accessed in real time is growing tremendously," says Gross.
The mortgage application experience will someday be paperless for almost everyone, he says, who believes that eventually consumers will handle the entire process with just one reusable password, similar to sites that allow you to sign in with your Facebook or LinkedIn information.
"I imagine someday there'll be a kiosk for mortgage loans that will make an instantaneous approval," says Zugheri. "You could authenticate your identity with a thumbprint and the scanner could tell you in a minute that you qualify for a $300,000 mortgage."
While futuristic kiosks aren't here yet, paperless mortgages are definitely on the immediate horizon for most borrowers.
Related articles :
More help from HSH.com
Advantages of a FHA mortgage in 2016FHA loans have become more affordable in 2015, thanks to a drop in the annual mortgage insurance premium that the Federal Housing Administration charges.
10 metros where a home costs about $1,000/monthHSH.com identifies 10 metro areas where you can afford the principal, interest, taxes and insurance payments on a median-priced home for only around $1,000 per month.
HSH.com on the latest move by the Federal ReserveThe Federal Reserve concluded a meeting today with no change to the federal funds rate and no changes to other monetary policy tools.
Mortgage Rates Radar 09/13/2016: Despite Fed concern, mortgage rates holding steadyHSH.com releases its latest Weekly Mortgage Rates Radar showing a slight increase in popular mortgage rates during the seven-day period ending September 13, as concerns that the Federal Reserve may make a move at next week's meeting have to buffeted the financial markets of late. The Weekly Mortgage Rates Radar reports the average rates and points offered by lenders for the two most popular types of mortgages, the conforming 30-year fixed-rate mortgage and the conforming 5/1 adjustable-rate mortgage (ARM).
Mortgage Rates Radar 09/06/2016: Modest jobs report leaves rates flatHSH.com releases its latest Weekly Mortgage Rates Radar showing almost no change again in popular mortgage rates during the seven-day period ending September 6, as a fair employment report for August failed to provide conclusive evidence that a move by the Federal Reserve is forthcoming. The Weekly Mortgage Rates Radar reports the average rates and points offered by lenders for the two most popular types of mortgages, the conforming 30-year fixed-rate mortgage and the conforming 5/1 adjustable-rate mortgage (ARM).