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.
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Michele Lerner, author of "HOMEBUYING: Tough Times, First Time, Any Time", has been writing about personal finance and real estate for more than two decades for a variety of publications and websites including The Washington Post, The Motley Fool, Investopedia, Insurance.com, HSH.com, SavingsAccount.com, National Real Estate Investor magazine, The Washington Times, Urban Land magazine, NAREIT's REIT magazine and numerous Realtor associations.