Image courtesy of Flickr, Creativity103
E-Signatures simplify complex real estate and mortgage transactions, making it easier, faster and cheaper for buyers, sellers and borrowers to conduct business. What used to take days and weeks can be accomplished in as little as 15 minutes.
On June 30, 2000, Congress enacted a law to change the way buyers, sellers, lenders and borrowers close real estate and mortgage transactions. The E-Sign Act established the legitimacy of electronic signatures. It confirmed that e-signing has the same legal standing as pen-and-paper signatures.
The E-Sign Act brought up a number of questions for the real estate and mortgage industry, such as, if electronic documents are as good as paper, why do settlement agents still use paper-and-ink closings?
The real estate and mortgage industries are slowly recognizing the value of time and cost savings that come with e-signatures. They are also catching on to e-closings, which brings with it tremendous benefits for buyers, sellers, and borrowers alike.
Closing, or settlement as it is otherwise known, is the point at which the seller transfers the property to the buyer, and also where a borrower assumes a mortgage from a lender. For buyers, sellers, and borrowers, the closing marks the end of a long and tedious process.
Depending on where you live, closing is handled by a title company, escrow company or attorney, otherwise known as settlement agents. On the closing day, the parties meet with the settlement agent to sign sets of disclosures, property transfer and loan documents.
Sometimes the sellers don't attend the closing, but pre-sign the documents days or weeks prior. If a last minute review of the documents shows any mistakes, the settlement agent must correct any errors and locate the seller so they can re-sign. In many cases, the settlement agent must entirely re-do the closing documents, which further delays the time it takes to close a real estate sale or mortgage transaction.
After closing, the settlement agent is left with a bundle of documents. They must send the deed and mortgage to the county recorder for recording. The settlement agent then distributes the documents and proof of recording to the buyer, the mortgage lender and any other parties entitled to the original or a copy document.
The traditional closing process is labor-intensive, costly and time consuming to say the least.
Using electronic closing systems, the real estate sale, mortgage transaction and deed recording can occur at the same time without any of the parties involved required to be physically present. This system is entirely paperless thanks to a series of technologies that will send the documents between the signing parties and accept the electronic signatures.
Lenders and settlement agents will log into the e-sign system to create and store the documents in digital forms. Buyers, sellers and borrowers will be able to receive and review these documents well before the closing.
By clicking on a single "I Agree" button, the buyer, seller and borrower will confirm that they are satisfied with the documents and will be taken through an e-signing portal (a secure website) to provide the electronic signatures. Once e-signed, the system encrypts (secures and safeguards) the document so that they can no longer be changed.
There will be instances where the buyer, seller and borrower may only need to e-sign only one time on the closing day. With a simple push of a button, the settlement agent will electronically record the deed and mortgage with the ability to make the financial disbursements accordingly.
The closing process can happen in as little as 15 minutes, and the buyer, seller and borrower will be given a CD or Flash Drive containing the electronic copies of the signed closing documents.
More Time to Review
All the parties involved in the transaction will see the documentation well before closing, so there will be plenty of time to review, ask questions and understand what you're signing.
Faster & More Efficient
Lenders can fund loans faster and catch and correct errors, such as a misspelled names, instantly. There will be no need for rush deliveries and courier services to get the revised documents signed, re-signed and delivered. As a result, the closing times and the costs involved are substantially reduced.
Paperwork that sellers, buyers, and borrowers often receive at closing will be available electronically. You will be able to easily store, access and review these documents at your leisure, and will also be able to email these documents to another party to review.
Borrowers can click on a link in the e-closing portal to learn more about their mortgage loan or the interest rate without the need to contact the lender. You can also see what stage your loan process is in as well. You will have the ability to review disclosure documents more easily by using tools to understand the mortgage and real estate terms mentioned within these documents.
Lenders will have easy access to a trail of dated and time-stamped disclosures. They will be able to show when borrowers viewed and e-signed specific documents, while safeguarding them from the liability and costs of data and disclosure errors.
Buyers, sellers and borrowers can receive their documents on a CD or Flash Drive. This reduces the chances of a document being separated from the pack or lost through the passage of time. In addition, lenders and real estate companies will be able to digitally store these documents safely, without the need to pay for expensive storage space in an office or warehouse.
There's really only one downside: E-closing requires lenders, settlement agents, notaries and deed recorders to uniformly come on board and accept digitally signed signatures. Unfortunately, these old habits die hard and many of these professions are notoriously late adopters of new technology.
The Consumer Financial Protection Bureau (CFPB) is conducting a program designed to test electronic closings from a consumer's point of view. E-recording capabilities are now operational in deed registries across the country.
The Federal Housing Administration (FHA) accepts e-signed sales contracts and plans to accept electronic signatures on all mortgage documents in the future. As more and more agencies come on board, technologies will integrate and this will make it easier for more agencies to use e-closing as the national standard.
It is widely anticipated that the CFPB study will be the tipping point for e-closings. After more than a decade of hype and relatively little action, it seems the time is ripe for change. After all, if you can safely and securely transfer a million dollars from a smartphone app today, why shouldn't you be able to electronically buy a home or get a mortgage loan as well?
Our "Obsession for a Purpose" article discusses how BeSmartee is embracing the electronic age to simplify the mortgage process and give borrowers a powerful tool to transparently shop for and close a mortgage loan entirely online.
See what BESMARTEE’S SMART MORTGAGE can do for you.
Real estate agents receive commissions from home buyers and sellers, collectively earning over $50 Billion per year. Learn how commission amounts are set, who pays them, and how they work in this article. Read more.
List of secured property tax rates for all counties of California fiscal year for 2014-2015. Read more.
If you live in California and are over the age of 55 you can effectively reduce your property taxes when buying a new home. Read more.
Foreign real estate investment in the United States, both commercial and residential, is a huge phenomenon that is only expected to accelerate, maybe even to skyrocket, in 2016. Read more.
You've heard the term used before, but what does loan closing mean? Find out all you need to know about the process. Read more.
Whenever there is money to be made or money to be spent, some unscrupulous folks will take advantage, trying to game the system or commit all-out fraud. Read more.
Houston Vs. Dallas? If you are considering moving to either of these major metropolitan areas, we've created a resource to help you make the decision process a little easier. Read more.
Your DTI is used by mortgage lenders to determine whether you qualify for a loan, and if so, for how much. Improve your DTI with these 16 tips. Read more.
A bankruptcy will make it very difficult to attain a home loan. These 5 tips will help you re-establish your credit quickly in order to qualify for a home loan. Read more.
Homeowners in California must pay semi-annual property taxes on November 1st and February 1st. In addition to these dates, we will review the entire property tax calendar to keep you well informed about California property taxes. Read more.