The first totally paperless, fully electronic mortgage closing AND new home purchase has been closed on-line. Other loans have been closed electronically, but never in conjunction with an on-line sale.

The milestone event was completed in Florida through the combined efforts of a broad range of participants. But the entire process -- closing the loan, recording the documents and delivering the packing to the secondary mortgage market -- took less than three hours to complete.

The home was sold by Arvida Homebuilders to Jose Ignacio Arroyo, who electronically executed the promissory note and mortgage at Enterprise Title's office in Weston, Fla. Arroyo's mortgage was originated, underwritten, processed and approved through Mortgage.com. He and his builder then executed all closing document's at the title company's settlement table.

Once all of the borrower's loan documents were executed and Mortgage.com performed its online quality control, the deed and mortgage were electronically transmitted to the Broward County Records Division, which also verified the papers, recorded them and collected fees electronically.

Securing and transferring mortgages is a complex business process with many participants, many steps, and very specific requirements for the control and management of contracts, records and other sensitive documentation. But in this case, the entire transaction was made possible using various proprietary technologies that were enabled through a process patented by eOriginal.com of Baltimore, Md.

After recording, moreover, the mortgage and deed documents were instantaneously available for public search through the Internet by accessing the Broward County web site. A title insurance policy also was issued immediately and ownership of the loan was electronically transferred to Fannie Mae, completing what is believed to be the first purchase of an electronically originated mortgage loan by a secondary mortgage market company.

Additionally, the loan servicing rights were released electronically to Irwin Mortgage, complete with all legal and credit documents as well as a data file that Irwin used to "board" the servicing into their permanent system. And the eOriginal process sealed all documents with the participants' electronic signatures each step of the way, ensuring their integrity and authenticity.

"Recent state and federal legislation is enabling an entirely new level of e-commerce," said eOriginal President Stephen Bisbee.

With the recent passage of federal electronic signature legislation, Bisbee explained, "one of the most significant barriers to true, end-to-end e-commerce has been removed, and companies can now complete deals that require major contracts and critical records to be produced and managed electronically."

Florida is one of many states to have enacted the Uniform Electronic Transaction Act, enabling electronic signatures and documents to be legally binding. But passage of the federal e-sign legislation allows a nationwide adoption of electronic signatures and documents that are legally binding for various types of business transactions, including mortgages and home buying.

Most importantly, companies like eOriginal can now produce and manage documents that carry all the characteristics of papers with "blue-ink" signatures in fully electronic form. "This is what will enable consumers to complete mortgages, buy cars, transfer stocks, execute leases, and even manage critical source records like patient medical files, all electronically," Bisbee said.

eOriginal says the benefits of the electronic mortgage process are compelling, not just in administrative cost savings but also in the compression of the business cycle and the reduction of the risk associated with changing interest rates.

"The time it took to bring the loan to the secondary market was reduced from an average of 45 days to less than 5 hours," said Joe Bryant, senior vice president and general manager of eOriginal's real estate division. "The potential additional savings in risk reduction for the mortgage industry are significant."

Published: July 27, 2000

Use of this article without permission is a violation of federal copyright laws.