The pandemic has forced a lot of change in a short amount of time in the mortgage industry. DocMagic's Director of Enterprise Solutions, Chris Lewis, shares his insight about eClosings in the age of COVID-19. (Note: This interview has been adapted from in the August edition of The MORTGAGE BANKER magazine.)

Things are moving so fast with the uptick in lender rush to perform eClosings that we’ve never been busier here at DocMagic. Whereas over the years eClosings were slowly but surely moving toward greater marketplace adoption, the rapid onslaught of COVID-19 absolutely sped things up virtually overnight. Add unprecedentedly low rates into the equation—sparking a refi boom—and things have hit a level of adoption that is on turbo with eClosing and dynamic document generation usage.

2. During the pandemic, has DocMagic had to make any adjustments to the way it handles eClosings and remote online notarization (RON)?

DocMagic has been doing eClosings for years—long before the term became a catchy buzzword. Furthermore, before the term “digital mortgage” caught on, we were busy automating eMortgage processes, which was the same thing. With respect to where we were at during the pandemic, the main adjustment we made didn’t have anything to do with the technology; we mastered the solution long ago. We just had to start implementing and training lenders on our Total eClose platform remotely, as the country was and still largely is under work-from-home orders depending on the state the lenders operate in.

Chris Lewis: Don't rush to implement RON; take these 3 steps instead

We worked diligently to arrive at a remote onboarding model that effectively supports distance-based implementations involving multiple teams and parties—all performed remotely. We quickly perfected implementing, training, and fully onboarding new clients remotely, to the point that once implemented, the lenders were off to the races and performing eClosings with ease and efficiency.

It’s tough enough for companies to turn on a dime and establish a work-from-home infrastructure due to a rapidly spreading pandemic. From an operations management perspective, our client services team did an amazing job transitioning to functioning virtually while simultaneously coordinating an influx of new client implementations—also done virtually.

3. What are the less-obvious advantages to using eSignatures and RON to close a mortgage loan?

The use of eSigning gives both lenders and borrowers greater transparency and control of the overall process. Borrowers can easily access and sign documents within a secure digital environment. It’s fast, easy, and completely trackable. The detailed traceability of eSignings enables lenders to more effectively manage the workflow from anywhere and store signed documents securely with an encrypted, tamper-proof seal. This helps in two key areas, as paper-based wet signatures are much tougher to track and access, especially as loans exchange hands on the secondary market and are then serviced.

First, it helps tremendously with ensuring compliance and that the data on every single document is accurate and consistent; it’s also easy to demonstrate proof of compliance in the event of an audit. Second, it helps prevent instances of fraud, especially when the loan file, data, and documents are all stored in a GSE-certified eVault.

When it comes to remote online notarizations, the convenience and enhanced speed gained in signing documents requiring notarizations are immeasurable. What’s more, use of RON technology fills the final void in establishing a 100% paperless closing process. The hybrid model has almost become mainstream. Borrowers are now expecting that option. Moving forward, lenders should always be focused on offering a fully paperless option for borrowers to take advantage of in the states that permit it.

4. In the pandemic environment, is compliance tougher or the same where eSignatures and RON are concerned?

A lot of states have different rules behind the acceptance of RON technology. For example, some require an attorney to be present and some do not. Some states didn’t offer RON at all but were considering it. So it has always been something that vendors need to stay on top of.

The pandemic resulted in a huge spike in the need for RON technology due to social distancing requirements and borrowers’ fears of contracting the virus. Consequently, many states started implementing emergency measures to help notaries do their jobs safely and effectively. However, some states haven’t implemented RON guidelines, or had stopgap measures which prevented fully leveraging RON technology, or offered some lower-tech alternatives to RON such as remote ink-signed notarization (RIN).

Like with RON, RIN permits notaries to use videoconferencing technology to legally notarize documents remotely. However, it requires actually wet-signing paper documents as opposed to utilizing eSign and eNotary technology. So the RON vs. RIN difference adds a bit more confusion to the already constantly changing and complicated state regulations. Some states allow RON, some allow RIN, and others allow both. In that regard, it just requires more attention to what the states are doing. But that’s the technology provider’s job to worry about, not the lender.

5. Are eSignatures and RON the new norm for the mortgage industry?

Yes. Like work-from-home orders essentially serving as a giant case study that proved the telecommute model actually works, the same goes for eSignings, RON, and eClosing technology. It works, and it works very well. It’s just unfortunate that it took a pandemic to move the adoption curve in the right direction. But ultimately, it’s going to serve the mortgage industry well by further automating the paper-based processes of yesteryear that was hampering business-to-business as well as business-to-consumer efficiency.

Related Content:

• Ginnie Mae, 3 FHLBanks start accepting eNotes (8/5/2020)
• MortgageCountry closing loans in 13 days using DocMagic solutions (7/21/2020)
• RON update: Lots of forward momentum—but also a setback (6/26/2020)

More than 40 people braved 100-degree weather to participate in a recent charity blood drive, receiving a pair of DocMagic's distinctive novel bunny slippers in appreciation of their life-saving donations.

The drive was held in honor of what would have been Ayden Brown’s sixth birthday. He was diagnosed at 13 months with Stage 4 Alveolar Rhabdomyosarcoma, a rare type of cancer that can occur at any age but mostly affects children.

DocMagic has a history of helping charitable causes, especially those involving children. Our longtime mascot, “Doc,” is a novel bunny that has become a recognizable part of our brand within the mortgage industry.

Here are some of the happy people who received DocMagic slippers at the event, including Benji, a multiple-cancer survivor whose father (not pictured) donated blood.

Related Content: 

• DocMagic Provides Raffle Donations, Helping NEXT Conference Raise Over $3,200 for Girls Inc. of Chicago (8/29/2019)
• DocMagic Employees Join Together to Support 5th Annual U.S. Red Nose Day Fundraising Campaign (5/28/2019)
• DocMagic Teams With the Art to Grow On Children's Art Center to Provide 100 Customized Holiday Art Boxes for Patients at Chldren's Hospital Los Angeles (12/21/2018)

It may seem like the need for print fulfillment services is counterintuitive to digitizing the mortgage process, but the two things aren’t mutually exclusive.

There are several reasons why lenders going digital may still need some loan documents, such as initial disclosures, to be physically printed out and mailed to customers.

Compliance is key

Chief among them is compliance. The many regulations that guide mortgage lending — especially TRID (the TILA-RESPA Integrated Disclosure rule) — include specific compliance requirements to protect the customer.

For example, while the federal ESIGN Act paved the way for the legality of electronic signatures, the Uniform Electronic Transactions Act (UETA) allows customers to opt out of the electronic signing process and request paper documents. Even in an eClosing, borrowers may still prefer to have some or all of their documents papered out.

Don't rush to implement RON: Take these 3 steps instead

Even if borrowers don’t specifically request paper documents, they may simply neglect to respond to or accept electronic documents within the legally required time frame. And even though in such a situation it would be the borrower who dropped the ball, it is the lender who is on the hook for ensuring compliance.

TRID is a major factor

This is especially important when it concerns TRID. Print fulfillment is often used to provide the initial package, as lenders must provide the Loan Estimate (LE) to consumers within three business days of receiving the loan application.

If any compliance regulation is unmet then penalties for the lender can be costly; the smallest fine for a TRID violation is at least $5,000 per day for a single violation and can reach as high as $1 million per day for knowingly committing violations. 

What DocMagic can provide

That’s why DocMagic’s print fulfillment services are so important. Our print fulfillment supercenter in Torrance, California is a fully automated, centralized, and touch-free system. When the lender orders documents, a printer automatically feeds the paper documents directly into a system that scans and reads the bar codes to ensure that no documents are missing. The docs are then inserted into envelopes, sealed, and stamped — all without human intervention.

Even if the lender doesn't order documents, they're protected with DocMagic. If the borrower does not electronically consent to view initial disclosures, our system automatically prints fulfillment to satisfy TRID requirements. 

Our system logs and stores all actions, and lenders can review them and produce detailed information about any document's activity at any time; we can provide a detailed audit trail for proof of compliance. The result is a drastic reduction in the risk of errors, omissions, compromised data, and compliance-related fines.

Related Content:

• 5 key questions about ID validation during RON (8/12/2020)
• Ginnie Mae, 3 FHLBanks start accepting eNotes (8/5/2020)
• Happy National ESIGN Day! 5 facts you didn't know (6/30/2020)

Lenders who are interested in a remote online notarization (RON) closing often have questions about how the identity validation works. Here are some of the most common questions and answers about it.

1. Can borrowers simply show an ID while on camera?

No. During a typical in-person session, the notary primarily verifies the borrower's state- or federal-issued ID to confirm their identity. During a RON closing, however, it's not enough to just flash your ID on camera. States that allow RON usually require that a borrower’s identification be verified via knowledge-based authentication (KBA) and/or credential analysis.

2. Do lenders have to provide these requirements?

No. When you work with DocMagic and our partner NotaryCam, we handle these technical requirements in-house, including any variations in states’ RON ID validation requirements.

3. What is knowledge-based authentication (KBA)?

KBA requires the borrower to provide information about themselves via personal questions that only they should know the answer to. A third-party technology provider will provide the borrower five questions in the form of multiple-choice inquiries. Some examples of these questions include: Which property did you live at in the last five years? Which university did you attend? What type of car have you driven?

The borrower has two minutes to answer all the questions, must get four out of five correct, and is allowed two attempts to complete this task. If the borrower fails both attempts, they must wait 24 hours before trying again.

However, in the rare instance that a borrower cannot complete the KBA portion of the ID validation, it’s always possible to simply paper out those notary document or pivot to an eClosing that includes In-Person Electronic Notarization.

4. What is credential analysis?

This is the process by which third-party technology is used to confirm that a borrower’s government-issued ID is valid. The most common forms of acceptable IDs include valid driver’s licenses, state identification cards, or passports (the identification must not be expired or else it is automatically invalid).

NotaryCam requires the borrower to submit a photograph of the front and back of their government-issued ID in advance of the RON eClosing. The credential analysis technology confirms that the ID is valid and that all security elements are present. When the borrower enters the RON session, they show this same ID to the eNotary via their camera so that eNotary can confirm that the borrower matches the ID and is the appropriate signer.

Many times in the paper notarial process, notaries are unable to determine if the ID is fraudulent and expiration dates are often overlooked, said Leah Sommerville, a senior account executive at DocMagic. Credential analysis eliminates these issues.

5. Why is ID verification more secure in a RON closing?

“RON is an improvement to the current face-to-face notary process because of these ID valuation requirements,” Sommerville said. “The increased compliance and confirmation/recordation of compliance are significantly beneficial to all stakeholders.”

RON providers are also required to record the entire RON signing session and store it, usually for 10 years. That means a visual record is kept of both forms of ID validations, providing additional protection for all stakeholders in the closing process.

Related Content:

• County recorders, eRecording, and RON—by the numbers (7/8/2020)
• RON update: Lots of forward momentum—but also a setback (6/26/2020)
• 3 reasons why underwriters haven't jumped on the RON bandwagon (6/24/2020)

eNotes are having a moment. Last month, Ginnie Mae formally kicked off its Digital Collateral Program to begin the process of accepting electronic promissory notes—or eNotes—and other digital loan documents as collateral.

A few weeks before that, on July 1, the Federal Home Loan Bank of Des Moines became the first of the 11-member FHLB system to announce it would accept residential mortgage eNotes as collateral. By mid-July, FHLB Dallas followed suit, while FHLB Chicago just announced two days ago that it was also on board.

On top of that, MERSCORP registered an all-time monthly high of 40,170 eNotes in July, while the number of eNotes registered in the first half of 2020 alone (just under 150,000) already outpaces the total registered in all of last year (127,358). It's clear that eNotes are the wave of the mortgage industry's future.

Compliance Alert: What lenders should know about Ginnie Mae's new program

With this move Ginnie Mae, a federal agency that guarantees bonds issued against pools of FHA and VA mortgages, follows in the footsteps of GSEs Fannie Mae and Freddie Mac, which have been accepting eNotes for a few years now and are to date the largest buyers of eNotes.

eNotes have been on an upward trajectory since early 2018, but this year the pandemic—due to social distancing mandates and a growing preference for closing loans remotely—has accelerated its adoption. Since July, eNote registrations have set a new monthly record in 10 of the last 12 months, MERSCORP has seen a 1,300% increase in companies starting the process to integrate their operations to eNotes, and 18 warehouse lenders are currently funding eNotes—up from one in 2015.

"It’s fair to say that 2020 has been the year of the eNote," said Chris Lewis, DocMagic's Director of Enterprise Solutions. "In my opinion, by the end of the year, any investor that doesn’t accept eNotes will be in the minority and will lose business opportunities as a result."

Related Content:

• Compliance Alert: GNMA Announces Launch of Digital Collateral Program
• MortgageCountry closing loans in 13 days using DocMagic solutions (7/21/2020)
• Improving the Loan Process With eNotes

We’re excited to announce that our state-of-the-art, 25,000-square-foot technology center in Torrance, Calif., is up for Architizer’s A+Popular Choice Awards in the “Architecture +Workspace” category!

Click here to vote for DocMagic.

In 2013, our facility was also recognized by the American Institute of Architects with an AIA Institute Honor Award for Interior Architecture.

The AIA jury praised the buildings’ “beautiful design [that] creates a powerful and fluid space where light dominates” and “the effect of ‘fuzzy space,’ a subtle, experiential, and poetic reference to the digital world.”

Check out these stunning photos of our headquarters:

Related Content:

• MortgageCountry closing loans in 13 days using DocMagic solutions (7/21/2020)
• 3 reasons why DocMagic's document generation solution is so fast (7/15/2020)
• AIA recognizes DocMagic for one of the 2013 Institute Honor Awards for Interior Architecture (1/15/2013)

DocMagic is joining forces with Simplifile, a document collaboration and eRecording provider, to create new process efficiencies that will further digitaize the closing process.

The two companies’ technologies—which include DocMagic’s 100% paperless Total eClose™ platform and Simplifile’s eEligibility data for eNotarization acceptance—are combining to facilitate eClosing usage, instantly qualify eNotarizations by county, and automatically eRecord documents post-closing.

“This integration further streamlines the post-closing process by extending the eClosing process to include county recordings,” said Dominic Iannitti, DocMagic’s president and CEO. “Our partnership with Simplifile provides their vast network of more than 39,000 settlement agents with easy access to DocMagic’s Total eClose™ services.” 

Using Simplifile, settlement agents can seamlessly connect to all of DocMagic’s eClose-enabled lenders in one place to exchange documents, data, and closing logistics.

Additionally, loan closings implemented through Total eClose™ can now be automatically routed to the agent for eClosing coordination, streamlining access to the Total eClose™ room. The digital lift continues beyond the closing table with integrated eRecording in participating counties. Those recorded documents and the title policy are then returned electronically, along with associated recording metadata, to the lender.

“Process consistency is key to driving eClosing adoption with lender closing teams and settlement agents, regardless of what percentage of loans qualify to be closed digitally or where individual loans fall on the digital spectrum,” said Paul Clifford, president of Simplifile. “The combination of DocMagic’s proven eClosing technology and Simplifile’s settlement agent network creates a powerful foundation that enables lenders to scale their digital mortgage efforts as jurisdictional, and investor requirements allow and capture every drop of efficiency and cost-savings possible.”  

Simplifile is a part of ICE Mortgage Services, which applies technology and high-capacity infrastructure to make the mortgage process electronic and more efficient.

Related Content:

• MortgageCountry closing loans in 13 days using DocMagic solutions (7/21/2020)
• 3 reasons why DocMagic's document generation solution is so fast (7/15/2020)
• DocMagic offers free verson of its eSign technology for non-mortgage uses (6/1/2020)

During its first two months of lending, MortgageCountry has been closing loans in an average of 13 calendar days—setting a new standard for speed.

The new mortgage banker accomplished this feat with the help of DocMagic’s 100% digital e-enabled documents and Total eClose™ platform.

How they did it: Download the MortgageCountry case study

“DocMagic completely exceeded our expectations, helping us make our origination and closing process next-level efficient and creating a second-to-none closing experience for our clients,” said Sheila Salvitti, MortgageCountry’s director of communications and social media. “After seeing the level of perfection achieved, we knew we chose the right technology partner to realize our belief that the sky is the limit.”

The feeling was mutual. “It was a pleasure collaborating with the tech-savvy, forward-thinking team at MortgageCountry in a combined effort to master the eClosing process before they ever funded a single loan,” said Dominic Iannitti, DocMagic’s president and CEO. “The unprecedented success we had with the solution configuration, troubleshooting, and implementation of the platform helped set up MortgageCountry to be one of the most efficient independent mortgage bankers in the country."

Working with with DocMagic’s eClosing team, CountryMortgage was able to automate its entire eClose workflow from start to finish in less than 30 days. Salvitti said DocMagic tailored Total eClose™ to CountryMortgage’s business needs, helping them be “flawless from the start.”

Founded in 2019, MortgageCountry entered the industry with a mission to cut the cost of a mortgage by using forward-thinking technology and a re-engineered mortgage process. The company's unique business model includes the fact that it's run virtually via a 100% browser-based technology.

MortgageCountry identified that the primary reason for rising costs is the industry’s reliance on a large outside sales infrastructure, absorption of mortgage brokers, and corporate expenses throughout the banking industry. It aims to reverse this trend by partnering with the best technology partners to provide an intuitive and simple platform that meets clients everywhere and anywhere.

“To be successful in today’s fast-moving, rapidly changing lending landscape, implementing the right technology is business-critical to disrupt an industry plagued with good ideas but poor execution,” Salvitti said. “MortgageCountry has successfully delivered on our promise to make the client experience as simple, quick and easy as possible.”

MortgageCountry reported that its clients valued the fact they were able to receive the complete closing documents well ahead of the closing and could sign on their own time without a rigid schedule. Clients said the process was more comfortable than prior experiences because they were able to review and sign the closing documents without the pressure of someone looking over their shoulder.

To learn more about how MortgageCountry found success amid challenging economic conditions, check out our updated blog post, where you can download the free case study.

Related Content:

• 3 reasons why DocMagic's document generation solution is so fast (7/15/2020)
• DocMagic offers free verson of its eSign technology for non-mortgage uses (6/1/2020)
• New AutoPrep tech accepts docs from ANY provider for paperless eClosings (4/3/2020)

At DocMagic’s May 27 webinar, “Road-Tested eClosing Strategies for Today,” Ben Sherman, president of real estate recording services firm Synrgo, shared some surprising facts and numbers about county recorders and electronic closings.

First, what's eRecording?

eRecording is a method of electronically delivering documents to the county recorder. So instead of mailing or FedEx-ing a document package, you’re scanning it and sending an electronic version to the courthouse via the Internet.

County recorders' ability to eRecord depends on their software systems. eRecording can be completed in minutes or hours, instead of the days or weeks that it takes to manually record a paper document.

What does this have to do with RON?

Any lender that wants to close a loan using remote online notarization (RON) has to find a jurisdiction that allows eRecording (except for specific papering-out exception we'll get to later). “Otherwise, you can’t get that document on record there,” Sherman said.

Now for the numbers…

The U.S. has 3,143 counties, but 3,590 recording jurisdictions.

Why the disparity? Certain states have more jurisdictions than they have counties. Connecticut, for example, only has eight counties but has 169 townships, and each township has its own clerk that handles the land record system.

As of May 31, there are 2,161 jurisdictions that eRecord.

These counties represent about 90% of the U.S. population, according to the Property Records Industry Association, which maintains an exhaustive list of all counties that eRecord.

Out of the jurisdictions that do eRecord, some still don’t accept electronic deeds.

Sherman says about 1,600 to 1,700 jurisdictions don’t accept electronic deeds, and that overlaps with some that do accept eRecordings. He calculates that about 58 million people, or 18% of the U.S. population, reside within these non-electronic deed-accepting jurisdictions.

13 states allow non-eRecording jurisdictions to paper out electronic documents.

As of July 1, there are 11 states that allow recording entities to print out and scan a paper version of an electronic document for recordation — including a RON document. They are: Florida, Idaho, Iowa, Kentucky, Minnesota, Montana, North Dakota, Ohio, Oklahoma, Tennessee, and Texas. By Oct. 1, Maryland and Washington will also allow papering out.

“That’s really important because that pertains to 452 counties in those 13 states,” Sherman said. “That’s a lot of recording jurisdictions that you can actually still do RON transactions.”

There are 3 key reasons why more county recorders aren’t accepting RON documents.

• Money: The software systems needed to manage eRecordings could cost a jurisdiction tens of thousands just to get started. “Believe it or not, in the United States we have counties that still write in a book,” Sherman said.
• Security: People worry that eRecording has more exposure to fraud than manually submitting a document, but Sherman says it's actually safer. Unlike paper, eRecording leaves a traceable audit trail—you can track who submitted the document, when it was submitted, from which organization, etc.
• Inertia: People may find it hard to change the way they've been operating, said Mike Lyon, executive vice president at Nexsys Technologies, at the May 27 webinar. “So, even though it’s super inefficient ... it’s what we’ve been doing forever and therefore we’re going to keep on doing it until somebody tells us to do it different,” he said.

With the onset of the pandemic, though, the landscape has changed dramatically in favor of eClosings and eRecordings. “That inertia is kind of gone now," Lyon said. "The ball is rolling and … it’s rolling at the county recorder’s office as well."

Related Content:

• RON update: Lots of forward momentum—but also a setback (6/26/2020)
• 3 reasons why underwriters haven't jumped on the RON bandwagon (6/24/2020)
• RON vs. RIN: Why you should know the difference (6/10/2020)