Mortgage lenders can save nearly $444 in costs per loan by conducting full eClosing, while savings for the title/comparison provider can be as high as $97, according to research published by Notarize.
Participants also reported shorter deals through the use of online processes, reducing time by 99 minutes for a hybrid eClosing and 157 minutes for a full eClosing.
Those savings can be important for an industry struggling with tighter margins. Total production costs increased to $9,140 per loan in the third quarter of 2021, from $8,668 in the second quarter, the Mortgage Bankers Association reported.
Even though the pandemic has led to increased adoption of various forms of digital locks, this is still a small part of the overall market.
Without the push of COVID, Minnesota Title would have found it difficult to complete 20% of its closings remotely with an online notary. Lately, the company that uses Notarize was expecting to hit that mark in about six to 10 months in its Midwest market.
That pace has now accelerated even further and it is now looking to achieve that goal by the end of March, said Nicholas Dreher, series development/industry engagement director.
COVID caused all parties to question the truth in the past.
"The common belief among industry professionals like real estate agents and mortgage servicers was still that you have to be able to go to the closing, let's celebrate and take the photos," said Dreher. "But for the consumer, that was just the background noise that didn't benefit them."
This actually created additional friction because everyone wanted to be present and it had to work for all schedules.
And achieving that compounded the problems, added Jason Doshi, CEO of Payments.io, which offers fund withdrawal services.
The costs incurred for a conclusion include, for example, the notarial trip to the borrower's house or to another location. And if there's a delay or cancellation, and things have to be postponed, that only adds to the cost.
Of the $97 savings for a title company, $60.69 was attributed to communication with the lender, close timing and planning, and post-close follow-up, according to the survey.
Doshi was a former mortgage lender from 2009 until about two years ago. From this perspective, “when we have a digital solution, the return on investment is always there. What really takes time is implementation and then consumer adoption.”
This is where lenders need to invest both time and money upfront. "Whenever we've implemented a solution, it's always been 'okay, how many team members do we need to implement it, what's the training like, how do we educate consumers?'" Doshi said.
The ROI ranged from $7.73 per dollar invested for a hybrid eClose to $9.86 for a full eClose, depending on the method.
It's a new process, especially for consumers involved in the transaction, but once they get comfortable with it and make their next transaction a few years later, less training is required, further paving the way, Doshi said.
"Using digital solutions generally saves you money and provides a better experience over time," Doshi said. "But also a small part of the X-factor is the consumer experience that if the customer has a good experience, they're more likely to work with that mortgage company or title company again in the future."
While the pandemic has spurred adoption of RON and digital closures, the associated fall in interest rates has propelled mortgage activity to record levels.
Ironically, this may have hampered adoption, said Aaron Davis, the owner of Florida Agency Network, a processing service provider that also uses Notarize.
"From the lender's perspective, they had to make a decision," he said. "Are we going to focus on eClosing initiatives or are we hiring more mortgage processors to handle the surge in volume?"
As such, scaling up staffing has been a priority, and now they are more willing and able to "investigate how to make a better mousetrap and now continue to invest in eClosing initiatives, including RON," Davis said. "I think everything is fine, everyone is saying 2022 should be a great year for adoption."
On average, there are 500 to 800 digital transactions per month between FAN and another Davis company, Network Transaction Solutions, which provides RON services on an outsourced basis.
The study was conducted by MarketWise Advisors and examined the impact of eClosing with RON via Notarize.
"Consumer expectations have shifted to digital first and this is an incredible opportunity for the lender and title industry to be at the forefront of what consumers want and what is also most financially and operationally efficient," said Terri Davis, General Manager of real Estate at Notarize in a press release. "EClose is the final frontier of real estate and we are seeing incredible ROI, both in numbers and in consumer feedback, from those who are fully embracing eClosing mortgages with online notarization."
Lender cost savings vary depending on how much of the closing process is digitized. With a hybrid eClose, the savings per loan is $154.52. Adding RON increases savings to $211.97, and a hybrid degree with an eNote generates savings of $231.87.
Lower error rates also reduce costs for lenders, ranging from $17 to $23 per transaction, depending on the method.
Where savings could be seen with RON and eClosings in the future is in regulatory compliance, said Dreher of Minnesota Title.
Although not currently done, these sessions could be recorded and stored. If a problem arises, the recording would provide proof that the rules were followed at the final table, Dreher said.