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eSign: now it's real: the first head-to-head comparison of some leading electronic closing and signing platforms designed specifically for the real estate finance industry.

As one leading eSigning platform vendor asks, "What if your customers could sign their loan documents whenever they wanted to, even at 2:00 in the morning--in pajamas?" Dream no longer: Today's industry-leading electronic signing and closing platforms do much more than just imagine revolutionary workflows; they deliver. * This article compares electronic closing and signing platforms and reports the results of surveys conducted with some of the major industry players (see Figure 1). Jacksonville, Florida-based Lender Processing Services Inc.'s (LPS') LSI Division's ClosingStream[TM], Brookfield, Wisconsin-based Fiserv Inc.'s eClosing and Houston-based Stewart Lender Services' eClosingRoom[TM] are among the vendor platforms now changing the way Americans buy and refinance homes. * But before digging any deeper, some lenders may be wondering whether they should develop their own electronic signing technology or license a solution from a third-party vendor. * Ted Adams, director of technology standards for Freddie Mac, addresses this question unequivocally: "We expect that our customers will use eMortgage systems provided by third-party vendors rather than custom build their own," he says.

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Figure 1 eSignature/eClosing Platform Comparison

                            Fiserv eClosing              Stewart
                                                      eClosingRoom [TM]

Electronic Signature
Features

Enables consumer              [check]                 [check]
electronic signatures

Enables lender/corporate                              [check]
electronic signatures

Enables electronic            [check]                 [check]
signature of notary
public

Enables electronic            [check]                 [check]
signatures in purchase
transactions

Enables                       [check]                 [check]
spouses/co-borrowers to       (non-notarized
electronically sign at        documents only)
separate times

Notarization Features

Supports eNotarization        [check]                 [check]

Enables notary-free                                   [check]
electronic signing

Settlement Agent Features

Platform eliminates need
for national panel of
settlement agents (i.e.,
enables centralized
settlement)

Designed for independent      [check]                 [check]
settlement agent use

Emphasizes use of company                             [check]
or agent offices for
settlement

Workflow Features

Primary workflow type         * Originations:         * Originations;
                                Face-to-face meeting    Face-to-face
                                with independent        meeting at
                                closing agent using     Stewart direct
                                "paper-out" for         or independent
                                "wet" signatures        closing agent
                                                        office using
                                                        paper-out for
                                                        wet signatures

                              * Modifications:        * Modifications:
                                Face-to-face meeting    Face-to-face
                                with closing/signing    meeting with
                                agent; remote,          closing/signing
                                self-service            agent; remote,
                                electronic signing      self-service
                                for non-notarized       electronic
                                documents               signing using
                                                        centralized
                                                        settlement agent
                                                        for wet
                                                        signatures under
                                                        limited power of
                                                        attorney (LPOA)

Supports traditional          [check]                 [check]
roundtable settlements
involving electronic
signatures

Supports face-to-face         [check]                 [check]
paper-out workflow

Supports closings in all      [check]                 [check]
50 states (including
attorney-only closing
states)

Document Handling

Native documents that can     * Adobe                 * PDF
be electronically signed        [R]PortableDocument
                                Format (PDF)

                              * MISMO(R) SMART        * MISMO SMART
                                Docs[TM]                Docs

                                                      * Tagged Image
                                                        File Format
                                                        (TIFF)

Supports document                                     [check]
collection from all
transaction participants
(i.e., borrowers, lenders,
real estate agents,
builders, etc.)

Internally generates some                             [check]
documents                                             (loan
                                                      modifications
                                                      only)

Messaging

Supports e-mail campaign      [check]                 [check]
services to consumer
(e.g., reminders,
instructions, etc.)

Enables transmission of                               [check]
encrypted e-mails to
lenders

Consumer Convenience

Length of average closing     15-20 minutes           20 minutes or less

Consumer acceptance rates                             80%

eRecording

Supports eRecording                                   [check]

Cost

Cost of platform designed                             [check]
to substitute for cost of
mobile notary (i.e.,
platform cost is not an
additional cost to lender
or borrower)

Browser Compatibility

Web browser support           MS Internet             Explorer
                              Explorer[R] Mozilla
                              Firefox[R]

Integration With MERS[R]
eRegistry

Integrated with MERS          [check]                 [check]
eRegistry

Supports servicer use of      [check]                 [check]
platform for updating MERS
eRegistry with payoff,
charge-off, loan
modification or assumption
information

Supports Making Home          [check]                 [check]
Affordable program

Supports HomeSaver
Advance[TM] program
(creation of eNote,
eSigning, eVaulting, MERS
registration and eDelivery
to Fannie Mae)

Platform Acceptance
Metrics

Number of closings
performed using platform

Top-10 lenders and
servicers using the
platform

Authentication/Anti-Fraud
Features

Identity (ID) of consumer     [check]                 [check]
verified by notary public
in face-to-face meeting
with production of
traditional forms of
physical ID

Advanced/multi-factor
identity authentication
(i.e., platform does not
primarily rely on the due
diligence of a notary
public in a face-to-face
meeting with production of
traditional forms of
physical ID; platform
incorporates
identity-authentication
tools in addition to
system-issued credentials
and challenge-response
authentication)

Level of authentication
supported

Class digital certificate     Class 3                 Class 3
issued                        (tamper-evident seal
                              only)

Public key infrastructure     [check]                 [check]
(PKI) used when applying      (tamper-evident seal
consumer eSignatures to       only)
documents

Supports fraud-check
tools

eVault Features

eVault supports               [check]                 [check]
vault-to-vault transfers
to/from lender's eVault

eNote formats stored by       * MISMO Category 1      * MISMO Category
eVault                          SMART Docs              1 SMART Docs

                              * PDF                   * PDF

                              * Extensible            * XHTML
                                hypertext markup
                                language (XHTML)

Site Security

Platform site                 Statement on            SAS 70 Level II
certification                 Auditing Standards
                              (SAS) No. 70
                              Level II

Private-Label Feature

Platform can be               [check]                 [check]
private-labeled

Audit History/Court
Support

Platform captures consumer    [check]                 [check]
activity and generates
audit trail

Platform emphasis on
capturing audio and video

Platform uses scripted        [check]
polling questions to
elicit consumer
understanding

                                     Lender Processing Services'
                                         (LPS') LSI Division
                                         ClosingStream [TM]

Electronic Signature Features

Enables consumer electronic           [check]
signatures

Enables lender/corporate              [check]
electronic signatures

Enables electronic signature of
notary public

Enables electronic signatures in      [check]
purchase transactions

Enables spouses/co-borrowers to       [check]
electronically sign at separate
times

Notarization Features

Supports eNotarization

Enables notary-free electronic        [check]
signing

Settlement Agent Features

Platform eliminates need for          [check]
national panel of settlement
agents (i.e., enables centralized
settlement)

Designed for independent
settlement agent use

Emphasizes use of company or
agent offices for settlement

Workflow Features

Primary workflow type                 * Originations: Cisco [R]
                                        Systems' WebEX meeting using
                                        centralized settlement agent
                                        for wet signatures under LPOA

-                                     * Modifications: Remote,
                                        self-service electronic signing
                                        using centralized settlement
                                        agent for wet signatures under
                                        LPOA

Supports traditional roundtable       [check]
settlements involving electronic
signatures

Supports face-to-face paper-out       [check]
workflow

Supports closings in all 50           [check]
states (including attorney-only
closing states)

Document Handling

Native documents that can be          * PDF
electronically signed

-                                     * MISMO SMART Docs

-                                     * Microsoft[R] (MS) Word [TM]

Supports document collection from     [check]
all transaction participants
(i.e., borrowers, lenders, real
estate agents, builders, etc.)

Internally generates some             [check]
documents

Messaging

Supports e-mail campaign services     [check]
to consumer (e.g., reminders,
instructions, etc.)

Enables transmission of encrypted     [check]
e-mails to lenders

Consumer Convenience

Length of average closing             20 minutes

Consumer acceptance rates             30%-85%

eRecording

Supports eRecording                   [check]

Cost

Cost of platform designed to          [check]
substitute for cost of mobile
notary (i.e., platform cost is
not an additional cost to lender
or borrower)

Browser Compatibility

Web browser support                   Explorer, Firefox, Apple
                                      Safari[R], Netscape[R],
                                      Google[TM] Chrome[R]

Integration With MERS[R]
eRegistry

Integrated with MERS eRegistry        [check]

Supports servicer use of platform     [check]
for updating MERS eRegistry with
payoff, charge-off, loan
modification or assumption
information

Supports Making Home Affordable       [check]
program

Supports HomeSaver Advance[TM]        [check]
program (creation of eNote,
eSigning, eVaulting, MERS
registration and eDelivery to
Fannie Mae)

Platform Acceptance Metrics

Number of closings performed          60,000 refinance and
using platform                        loan-modification transactions

Top-10 lenders and servicers          Six top-10 lenders and three
using the platform                    top-10 servicers

Authentication/Anti-Fraud
Features

Identity (ID) of consumer             [check]
verified by notary public in
face-to-face meeting with
production of traditional forms
of physical ID

Advanced/multi-factor identity        [check]
authentication (i.e., platform
does not primarily rely on the
due diligence of a notary public
in a face-to-face meeting with
production of traditional forms
of physical ID; platform
incorporates
identity-authentication tools in
addition to system-issued
credentials and
challenge-response
authentication)

Level of authentication               Level 3
supported

Class digital certificate issued      Class 3

Public key infrastructure (PKI)       [check]
used when applying consumer
eSignatures to documents

Supports fraud-check tools            [check]

eVault Features

eVault supports vault-to-vault        [check]
transfers to/from lender's
eVault

eNote formats stored by eVault        * MISMO Category 1 SMART Docs
                                      * PDF
                                      * XHTM

Site Security

Platform site certification           Cybertrust site certification

Private-Label Feature

Platform can be private-labeled       [check]

Audit History/Court Support

Platform captures consumer            [check]
activity and generates audit
trail

Platform emphasis on capturing        [check]
audio and video

Platform uses scripted polling        [check]
questions to elicit consumer
understanding

sources: Crawford Law Co. LPA, Anderson Sinclair LLP


With Adams' perspective in mind, the authors of this article have independently demoed, researched, analyzed, vetted and compared eSigning platforms offered by third-party vendors for their ability to solve the real estate finance industry's most vexing challenges. Those challenges include the costs and errors associated with paper processing; compliance with consumer-protection laws; logistical obstacles of signing and recording; delivery of mortgage loans to the secondary market and fraud.

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A few comments from users of one of these solutions suggest their potential role in the business. "The most obvious reasons for using LSI's ClosingStream platform that come to mind are based on our customers telling us it was convenient and easy, the LSI staff was very friendly, and some customers actually say they will never close a mortgage loan again in any other fashion," says Sally Ann Mitchell, vice president/production manager, U.S. Bank, Minneapolis.

"ClosingStream is ideal for those transactions where one of the borrowers will be out of town on the day of closing. From U.S. Bank's perspective, we enjoy the benefits of ClosingStream as well. There are virtually no errors or document deficiencies, and zero notary issues. All the documents are explained in detail to the customer--thus we have no after-closing questions or issues to handle with the customer. Both our customers and U.S. Bank love ClosingStream," Mitchell says.

She adds, "Since this product is fairly new in the marketplace, it also gives U.S. Bank a perceived advantage in the marketplace. Once we offer this closing option, customers often have the impression that we offer something that other lenders do not. And over the last few months, we have really come to depend on ClosingStream as an alternative for our mail away closings and to simply help accommodate the heavy loan volume."

Not just electronic signatures

Generating an electronic signature is at the heart of any transaction involving eSigning. A common misperception is that paperless mortgage solutions primarily facilitate electronic signatures. Not so.

Creating a digital signature is perhaps the least of the challenges these platforms have overcome; electronic signature technology is now ubiquitous (see Figure 1, "Electronic Signature Features" heading). But a generation of new features has emerged around electronic signing that has solved a host of other industry challenges. Grouped into two categories, they are:

* Main Street challenges--those encountered by lenders before the consumer's electronic signature is applied to the loan documents; and

* Wall Street challenges--those encountered after the act of eSigning.

Main Street challenges

The industry's Main Street challenges involve eliminating the costs, errors and logistical obstacles associated with originating mortgage loans. In order to achieve a flawless closing experience for the consumer, lenders must coordinate a dizzying array of people, knowledge and information in a perfectly choreographed dance.

A lender's challenges at the bottom of the pipeline include obtaining accurate and complete information from borrowers, identifying mortgage fraud, managing vendors, obtaining third-party deliverables, presenting accurate and complete disclosures, preparing loan documents, scheduling and attending loan closings, obtaining missed signatures, and recording deeds and mortgages.

All of these challenges have one thing in common: they are either created or exacerbated by paper. All of the eSign platforms reviewed minimize paper-based errors, but the limited power of attorney (LPOA) workflows in particular minimize logistical challenges associated with conventional mortgage closings (see Figure 1, "Workflow Features" heading).

Wall Street challenges

The industry's Wall Street challenges involve eliminating the costs, errors and logistical obstacles associated with selling and delivering mortgage loans to the secondary mortgage market. In order to achieve the successful sale and delivery of a mortgage loan to an investor, a lender must comply with numerous regulatory and contractual requirements to mitigate or eliminate the risk of repurchase.

A lender's challenges at the top of the pipeline include eliminating the typical 30-day time lapse between funding and sale, correcting data errors, assembling a complete loan package, resolving post-closing exceptions, communicating accurate and complete information to investors, registering mortgage loans with Reston, Virginia-based MERSCORP Inc.'s MERS [R] eRegistry, delivering loan documents to custodians, reporting changes in loan servicing rights and ownership, complying with ever-increasing reporting and auditing requirements, and loss mitigation.

These challenges also are either created or exacerbated by paper. With their eMortgage delivery capabilities--in particular, their MERS registration functionalities--the Fiserv eClosing, Stewart eClosingRoom and LSI ClosingStream platforms excel at solving Wall Street challenges (see Figure 1, "Integration With MERS eRegistry" heading).

No eSign platform has eliminated paper for originations

The irony of all eMortgage platforms is that the mortgage or deed of trust (i.e., the security instrument) is one of the only closing documents that still must be signed with pen and ink on paper. This is because, according to the Property Records Industry Association (PRIA), Morrisville, North Carolina, only 400 or so of the 1,909 counties in the United States have implemented electronic recording systems.

As a consequence, most (but not all) eMortgages will initially consist of a paper security instrument and an electronic note (i.e., eNote). The fact that the industry has not achieved a 100 percent paperless mortgage life cycle should not discourage lenders from adopting an electronic closing or signing platform. Each system provider has already eliminated many of the manual processes associated with mailing and printing paper documents, vastly improved document presentment, increased lender auditable data and data integrity, and achieved higher customer satisfaction ratings as compared with traditional closings (see Figure 1, "Consumer Convenience" and "Platform Acceptance Metrics" headings).

All eSign platforms have eliminated paper for modifications

Notwithstanding that loan originations using electronic closing and signing platforms still require some paper management, all of these vendors have achieved a completely paperless loan-modification workflow where the loan modification is not recorded (customary where there is no potential for loss of priority to junior lien holders).

Given that much of lenders' current focus is on loss mitigation, including implementation of the Home Affordable Modification Program (HAMP) and Fannie Mae's Home-Saver Advance[TM] (HSA) programs, we expect the servicing side of the industry to drive adoption of electronic closing and signing solutions over the next two years.

If a lender is not prepared to implement a full eMortgage life-cycle solution, it should consider a strategy of adopting a platform that meets the industry's current, urgent demand for paperless loan modifications. Because each of these system providers will likely improve features and workflow options over the next few years, especially for loan originations, lenders may wish to consider adopting a platform for paperless loan modifications that also has a feature-release schedule that will meet their eMortgage delivery requirements in the next business cycle.

Workflow features

The face-to-face paper out workflow solution

Because most security instruments still require the "wet" signature of the borrower with an acknowledgment before a notary public in order to be recorded, national lenders wishing to implement eMortgage origination solutions must adopt one or more low-tech, out-of-platform workflow options to physically obtain these signatures. One option for obtaining these signatures is to "paper-out" any documents that need to be printed for ink signatures. This solution usually works as follows:

* Customer is in the presence of a notary public at his or her home, in a bank branch or at a title office.

* The notary public is equipped with a laptop computer connected to the Internet, and is logged on to the electronic closing or signing platform.

* The majority of the closing package is electronically signed by the borrower using the notary's laptop.

* Any document that needs an ink signature is printed and wet signed.

This workflow solution is emphasized in Fiserv's eClosing and Stewart's eClosingRoom platforms. Paper-based loan documents are signed with a mobile notary or settlement agent who is also equipped with a laptop (to present documents for electronic signature at the same time and in the same place). Both Fiserv's eClosing and Stewart's eClosingRoom support electronic notarization (i.e., eNotarization) and can be used by independent settlement agents (see Figure 1, "Notarization Features" and "Settlement Agent Features" headings).

LSI's ClosingStream supports a hybrid, self-service workflow. In this scenario, the entire closing package would be signed electronically by the borrower acting alone, outside the presence of a notary public, at a time and place that is convenient for him or her. The customer would use a home or work computer to log on, electronically authenticate his or her identity and "click-sign" the entire closing package.

A bank employee, mobile notary or title agent would obtain the customer's wet signature on the security instrument in a very brief, but separate, personal meeting (say, 10 minutes vs. 30-45 minutes for a traditional closing). This workflow also permits spouses or co-borrowers to eSign at separate times and in separate places with each party's identity being separately, electronically authenticated.

The face-to-face, paper-out workflow solution is appropriate for government-sponsored enterprise (GSE) investor closings, portfolio loan closings, and home-equity lines of credit (HELOCs)/second mortgages. Some limitations on this workflow include county land-records offices' inability to eRecord security instruments (and accept documents for recording that are eNotarized) (see Figure 1, "Workflow Features" heading).

The LPOA workflow solution

Another option for obtaining wet signatures is using a limited power of attorney to empower the settlement agent to wet-sign recordable documents on the borrower's behalf. The LPOA, signed by the borrower early in the loan origination process, appoints a third-party, lender-designated settlement agent to wet-sign the security instrument and other loan documents after the customer eSigns or otherwise agrees to the loan documents electronically (within the platform).

This solution works as follows:

* Customer receives an introductory e-mail (usually with an limited power of attorney form attached).

* Customer signs the LPOA with a mobile notary at the customer's home or office, at a bank branch, with an independent notary of the customer's choice or at a Fedex[R] Kinko's or UPS[R] Store offering notary services.

* The LPOA is returned to the settlement agent in a prepaid, pre-addressed envelope.

Having signed the LPOA, the customer is now free to review, approve and eSign all other loan documents within the electronic platform at his or her convenience.

The LPOA appoints the settlement agent to sign loan documents (for the subject transaction only) on behalf of the customer as the customer's attorney-in-fact (in the same form that the customer has approved these documents online); it does not permit the settlement agent to, for example, make unauthorized conveyances or otherwise affect the customer's ownership of the property.

This workflow solution is emphasized by LSI's ClosingStream and enables notary-free electronic signing, eliminates the need for a national panel of settlement agents, and is most appropriate for portfolio refinances and HELOCs/second mortgages. Some limitations on this workflow include borrowers' and investors' willingness to sign/accept LPOAs.

The GSEs have been known to approve originations closed using LPOAs on a lender-by-lender basis. Seller/servicers wishing to use non-hardship LPOAs should contact their GSE or private investor account manager to enter into a negotiated agreement. Portfolio lenders would not need any outside approvals to implement an LPOA workflow (see Figure 1, "Workflow Features" heading).

Web-conferencing workflow solution

A creative variation on the LPOA workflow involves document presentment via a live Web-based closing event using a Web conferencing application (e.g., Cisco[R] Systems' WebEx, Citrix [R] GoToMeeting [R], Microsoft [R] Live Meeting [R], etc.). This workflow follows a standard pattern:

* Borrower executes an LPOA (which requires the presence of a notary public) and returns it to the settlement agent.

* Borrower schedules a closing date and time with the settlement agent for the Web-based closing event.

* Settlement agent e-mails a link to the borrower for a Web meeting along with a toll-free number to join a teleconference.

* Borrower logs on to the Web meeting and dials the toll-free number.

* Settlement agent reviews all loan documents with the borrower, who also responds to questions from the settlement agent designed to elicit the borrower's understanding and affirmation of loan terms.

* Audio and video of the Web conference are captured for auditing/court support.

The benefit of this workflow is that document presentment can be standardized with professional, centralized closers using pre-approved scripts to explain loan terms and present polling questions designed to elicit the borrower's understanding and agreement. This workflow is emphasized by LSI's ClosingStream for loan originations (see Figure 1, "Workflow Features" heading).

Authentication and fraud-mitigation features

Identity verification in face-to-face closings

In a paper-based transaction, identity thieves have to present themselves in front of a notary public. In order to perpetrate a fraud, they would have to either persuade a notary public to commit the fraud with them or be able to forge paper-based identification (e.g., driver's license, etc.) to deceive the notary public. Unfortunately, modern technology has made it easier than ever for fraudsters to produce phony paper-based identification.

In an electronic closing or transaction involving eSigning, the borrower must still authenticate his or her identity using the traditional, paper-based method described earlier. In the face-to-face, paper-out workflow, the customer must appear before a notary public and present the traditional, paper-based documentation before being permitted to eSign the closing package. In the LPOA workflow, the customer must appear before a notary public and present the traditional, paper-based documentation before the LPOA is wet-signed and notarized. For electronic closing and signing platforms where an in-person signing ceremony is used, however, authentication of the borrower's identity ends here.

Consequently, the risk of identity fraud is not fundamentally different than it is in a conventional closing. Both Fiserv eClosing and Stewart eClosingRoom emphasize face-to-face closing events and rely on traditional, paper-based identity-verification methods.

Identity verification in remote closings

An electronic closing or signing conducted remotely necessarily involves some form of additional identity verification. Because remote closings are conducted without the presence of a notary public or escrow officer, an electronic authentication process must be implemented to ensure that the person click-signing is, in fact, the intended customer.

One approach to electronic authentication involves posing questions to the borrower where the answers are derived from information obtained from a credit repository (e.g., "Is the principal current balance of your auto loan between $10,001-$15,000 or $15,001-$20,000?"). Another approach poses questions where the answers are derived from a compilation of public databases (e.g., "What was your address in 2005?" or "What county did you live in when your Social Security number was issued?").

Regardless of the approach, the extra hurdle of answering identity-verification questions poses an extra hurdle for the identity thief and further mitigates the risk of fraud for lenders.

Requiring borrowers to input a correct driver's license number, answer out-of-wallet credit-based or public database questions (depending on the type of transaction), and pass a name and Social Security number fraud check, LSI's ClosingStream is the only platform meeting Level 3 technical requirements for remote network authentication as specified by the National Institute of Standards and Technology (NIST), Gaithersburg, Maryland (see Figure 1, "Authentication/Anti-Fraud Features" heading).

GSE closings/eMortgage delivery MERS eRegistry

For GSE investor eMortgage delivery closings, MERS serves as an eNote holder registry that identifies the current controller of the eNote; the location of the authoritative copy of the eNote; and the delegatee, if any, who is authorized by the controller to make discrete updates to the record on behalf of the controller.

All eNotes registered with the MERS eRegistry and delivered to the GSEs (i.e., eMortgage deliveries) must be in Category 1 SMART Doc[TM] format and stored in an electronic vault that meets GSE requirements. All of the platforms are either directly or indirectly integrated with the MERS eRegistry (see Figure 1, "Integration With MERS eRegistry" and "eVault Features" headings).

Servicers--Making Home Affordable/HomeSaver Advance

With the current industry focus on loss mitigation, many servicers are keenly interested in eSign functionality for loan modifications. As discussed earlier, all of the vendors featured in this article have achieved a paperless loan-modification workflow (where the modification instrument is not recorded).

Servicers should consider adopting an eSign solution for active loan-modification programs, including HAMP. eSigning solutions for modification workflows are quite simple, have little or no upfront cost to the servicer, and require very little technical resources.

LSI's ClosingStream has some additional functionality for the HSA program, a loss-mitigation option available to approved Fannie Mae servicers. An HSA is an unsecured personal loan (i.e., advance) of up to $15,000 designed to help eligible borrowers cure their first-lien mortgage loan delinquencies.

An HSA is documented by a borrower-signed promissory note, payable over 15 years at a fixed rate of 5 percent with no payments or interest accrual for the first six months. For the HSA program, the LPS platform manages creation of the HSA order and generation of an HSA Category 1 SMART Doc eNote. It also supports eSigning, eVaulting, MERS eRegistration and eDelivery of HSA eNotes to Fannie Mae (see Figure 1, "Integration With MERS Registry" and "eVault Features" headings).

Other features

Portals

All of the platforms have unique consumer-facing, lender-facing and third-party-facing (e.g., mortgage broker, Realtor[R], financial adviser) portals tailored to the needs of each type of transaction participant.

Document Handling

In each of the platforms, Adobe[R] Portable Document Format (PDF) and MISMO[R] SMART Docs can be electronically signed. Stewart eClosingRoom also supports the tagged image file format (TIFF), and LSI's ClosingStream supports Microsoft Word[TM] documents. Stewart eClosingRoom and LSI's ClosingStream support document collection from all transaction participants (i.e., borrowers, lenders, real estate agents, builders, etc.). In addition, LSI's ClosingStream internally supports creation of MISMO Category 1 SMART Docs (see Figure 1, "Document Handling" heading).

Messaging

All of the platforms support e-mail campaign services to consumers (e.g., "Your loan closing must be scheduled within the next 10 days or your loan commitment will expire. Please call 1-800-555-5555") and lenders (e.g., "Re: Loan No. 0505050505, John Smith has failed to electronically verify his identity and therefore must be scheduled for personal closing event). LSI's ClosingStream also supports transmission of encrypted e-mails to lenders (see Figure 1, "Messaging" heading).

eRecording

As discussed, eRecording is currently supported in more than 400 U.S. counties as of June 2009, according to PRIA. Both Stewart eClosingRoom and LSI's ClosingStream support eRecording in jurisdictions accepting Level 1 (electronic file initially executed on paper with a wet signature), Level 2 (electronic image file transmitted with metadata or a data wrapper) and Level 3 (fully electronic document initially signed in the electronic realm) electronic documents (see Figure 1, "eRecording" heading).

Cost

Because Stewart eClosingRoom and LSI's ClosingStream rely on in-network settlement agents, the cost of these platforms are designed to substitute for the cost of other types of closings (e.g., traditional desk closing, mobile notary, close by phone and mail-away closing). Stewart relies on Stewart "company stores" to perform settlements. LSI relies on remote but centralized settlement agents employed by the company (see Figure 1, "Cost" heading).

Consequently, the cost of the electronic closing/signing using these platforms does not appear to be an additional cost to the lender or borrower. Borrowers are charged a standard closing fee on the Department of Housing and Urban Development (HUD) HUD-1 form, with the lender or settlement agent remitting payment for the per-transaction cost of the platform to the vendor.

Because Fiserv eClosing relies on out-of-network, independent settlement agents, the cost of the platform appears to be additional to the cost of an independent settlement agent. It may be, however, that the additional cost for the platform could be passed on to the consumer or that efficiencies created by the solution could be used to reduce fees paid to independent settlement agents (thereby paying for the per-transaction cost of the platform by expense-reduction elsewhere) (see Figure 1, "Cost" heading).

Web-browser compatibility

Stewart eClosingRoom is compatible with Microsoft Internet Explorer[R]. In addition to Explorer, Fiserv eClosing is also compatible with Mozilla Firefox[R]. LSI's ClosingStream is compatible with each of these as well as Apple Safari[R], Netscape[R] and Google[TM] Chrome[R] (see Figure 1, "Browser Compatibility" heading).

Audit history/court support

All of the platforms offer an online, archivable closing session log that can be used for auditing and court support. The Web-conferencing workflow solution also gives lenders the option of tape-recording the teleconference and capturing video of the simultaneous, on-monitor document presentment (see Figure 1, "Audit History/Court Support" heading).

Legal basis for eSignatures

The legal basis for eSignatures was established with the federal Electronic Signatures In Global and National Commerce Act (E-SIGN) passed by Congress on June 30, 2000. The E-SIGN Act establishes that a contract or signature may not be denied legal effect, validity or enforceability solely because it is in electronic form.

Further, 46 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands have enacted the Uniform Electronic Transactions Act (UETA), which also recognizes the validity of electronic signatures. The four states that have not enacted UETA (Georgia, Illinois, New York and Washington) do, nevertheless, have laws recognizing electronic signatures.

Additional resources and conclusion

Interested parties may contact the authors for the results of a mortgage industry survey of eClosing and eSigning platform functionality and features. Additionally, MISMO's eMortgage Guide and Freddie Mac's eMortgage Handbook are valuable lender resources.

We believe that all of the platforms reviewed here produce a vastly superior experience for borrowers and lenders over traditional closings. Ralph Waldo Emerson once said, "Build a better mousetrap and the world will beat a path to your door." These industry leaders have succeeded in doing just that, and the world of mortgage lending will never be the same.

RELATED ARTICLE: eNough: Sorting Through Some Terms

In order to appreciate the differences among eSigning platforms and how they address these challenges, it is important to define some terms.

eSigning: The act of signing mortgage loan documents using an electronic process (replacing the act of signing by using a pen on paper).

eSignature: An electronic symbol or process attached to or logically associated with a document or record.

eClosing: The presentation of mortgage loan documents to a consumer through an electronic medium (replacing presentment in a paper-based format). An eClosing sometimes, but not always, involves eSigning.

eNote: A transferrable promissory note created, signed and stored in an eVault.

eMortgage: According to Fannie Mae, a mortgage for which the promissory note (i.e., eNote) and possibly other documents (such as the loan application) are created and stored electronically rather than by using traditional paper documentation that has a pen-and-ink signature.

eMortgage Delivery: The capability enabling lenders to electronically register an eSigned promissory note (i.e., eNote) with the MERS eRegistry and facilitate a more efficient sale to, for example, the government-sponsored enterprises (GSEs).

MERS[R] eRegistry: The electronic registry operated by Reston, Virginia-based MERSCORP Inc. that serves as the system of record to identify the current controller and location of the authoritative copy of an eNote.

SMART Doc[TM]: An electronic document created to conform to a specification that has been standardized by MISMO[R]. A SMART Doc locks data and presentation together in a way that can be system-validated to guarantee the integrity of a document. (The SMART acronym stands for securable, manageable, archivable, retrievable and transferable.)

Stephen Crawford is an attorney, eSign consultant and president of Everest eSign Solutions, Beachwood, Ohio Everest eSign hosts demonstrations of industry-leading electronic signing software, helps lenders implement paperless mortgage strategies and is an application service provider for leading eClosing solutions. Howard Turk is an attorney based in Huntington Beach. California, a consultant to financial services and title companies in the United States and Canada, as well as strategic adviser for Anderson Sinclair LLP, Mississauga, Ontario. The authors can be reached at scrawford@everestland.com and hturk@andsinc.com.
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Article Details
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Title Annotation:Technology
Comment:eSign: now it's real: the first head-to-head comparison of some leading electronic closing and signing platforms designed specifically for the real estate finance industry.(Technology)
Author:Crawford, Stephen; Turk, Howard
Publication:Mortgage Banking
Geographic Code:1USA
Date:Sep 1, 2009
Words:5239
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