One day, perhaps in another galaxy, far, far away, home buyers will be able to receive and review disclosure and inspection reports; track the progress of appraisals, repairs and other transaction-specific events, and even affix a legal, secure and reliable digital signatures to electronic loan and closing documents, all over the Internet.

Yeah, right. A paperless transaction? Not in our lifetimes.

Well, hold on there, cowboy. Paperless closings may not be right around the corner, but they're moving much closer to reality than you might think. And wonder of wonders, our government is there to help. No really. Government, both federal and state, is doing its part.

Why just two months ago, according to National Mortgage News, lawmakers in Pennsylvania passed legislation to facilitate conducting business, including mortgage transactions, online. And Ohio and California have cleared similar e-business statutes, reports the trade paper, which is considered the Bible of the mortgage business by many readers.

At the national level, meanwhile, both the House and Senate have approved versions of digital signature legislation that would permit borrowers to receive and sign all the necessary disclosures on line.

Both versions would establish national standards for electronic signatures, which would be digitally scrambled passwords or script written on a touch-sensative computer. But the House version would also preempt state laws which specifically prohibit the use of electronic signatures. And that's going a little too far for President Clinton, who has threatened to veto legislation that's too sweeping the first time out of the box.

The differences in the two measures still must be reconciled by a conference committee before consensus legislation is sent to the President's desk. But under both versions, consumers must first request electronic disclosures, so you could still close the deal the old fashioned way -- at some closing agent's office peering over mounds of paperwork. Also, foreclosure and eviction notices would still have to be delivered on paper.

In Pennsylvania, the Electronic Transactions Act, which took effect Jan. 15, also supports e-commerce while protecting the rights of consumers.

Like the proposed federal laws, it does not require electronic commerce. Consumers must agree to it first. But, according to National Mortgage News, it does set up a dispute mechanism and covers how an electronic contract will be treated in court.

"The law goes beyond just electronic signatures," attorney Henry Fowler of Schnader, Harrison, Segal & Lewis in Philadelphia is quoted as saying. "It covers the entire business relationship and cuts across many different fields."

But another Keystone State lawyer, Kenneth Kettering of Reed Smith Shaw & McClay in Pittsburgh, told the paper that online mortgages won't happen until public recording offices start accepting deeds and other key documents electronically.

As usual, though, private enterprise isn't waiting. eOriginal of Baltimore and Mortgage.com are testing electronic closings -- and with some success, too. According to eOriginal, the process so far has produced a savings of more than $750 per loan. Now that's progress.

Stay tuned. Tape at 11.

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Published: February 7, 2000

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