A year ago at the New England Mortgage Banking Conference in Newport, R.I., Mark Bellenger predicted that by the end of the year, his firm would do its first true electronic closing. Not only has that seminal event not taken place, the president of Vested Technologies in Rocky Hill, CT, now says its "not even close to happening."

Although there has been a lot of hope and hype, there have only been a handful of true e- closings nationwide, according to Bellenger.

"Many closings have been labeled `electronic,' but as soon as they went into the back room, they printed out the papers," he says. "There have been a few pilots, but no one is doing them on a mass scale."

"Just because you pass (the federal financial signatures act) doesn't mean it's going to translate into widespread adoption," he laments.

Others vendors disagree, however. One is Todd Dillard of the real estate group at e-Original in Baltimore, who maintains that electronic closings are "inevitable," if only because the mortgage market is now "spending a tremendous sum of money on imaging solutions that don't even begin to eliminate physical storage requirements."

Bridget Melien of ClosingsUnlimited.com in Meriden, Conn., also believes totally electronic transactions are unavoidable. She can't say when it will happen, but she's pretty sure how it will happen.

"It will be consumers who drive" total paperless transactions," Melien says. "We have to make it easier for them They want to get the transaction out of the way as soon as possible."

Melien, who has "been in the trenches" for five years working with consumers, lenders and secondary market entities trying to develop a model system, also is certain the eventual solution is "just as likely" to come from outside the mortgage business as within.

And "it's not going to be an easier way to do the same old things," she predicts. "It's going to be a completely different process."

But Bellenger, whose firm is a division of the Connecticut Attorney Title Insurance Co., the largest domestic title underwriter in New England and the second largest bar-related underwriter in the country, says consumers are one of the barriers which stand in the way of paperless transactions.

Even though they sneer at the mountain of closing papers, buyers and sellers are "leery" of not having printed documents, he says. "Few people are asking for this."

Lenders, too, are part of the problem, Bellenger adds, and so are Fannie Mae and Freddie Mac, the two government chartered financial institutions which provide the lion's share of money for mortgages.

"Lenders are waiting for the secondary market to set standards, and give them a reason to invest in technology," he explains. "Every lender we talk to says they are not doing a thing until Fannie and Freddie do something. They want clear guidance, and they want an extra kicker, a financial benefit, to make it happen."

While "everyone thinks (paperless mortgages) are a good idea," Bellenger says, "everyone is sitting back waiting for it to happen."

But Dillard of e-Original argues that "a lot more is happening than people think."

Several large title companies now offer electronic closing platforms, he points. And business-to-business firms like the General American Corp. and Lenders Services Inc. link lenders to title insurers, appraisers, inspectors, surveys and attorneys who provide various settlement services. GAC alone says it is "closing" 500,000 mortgages a year of behalf of smaller title and closing agencies.

In addition, Dillard says perhaps a "half-dozen" document preparation firms either offer or are about to offer electronically executable document packages, and several software companies are adding electronic recordation programs to their product lines. Even some counties are in the process of going on-line.

Calling paperless mortgages a "five-dimensional jigsaw puzzle," Dillard notes that the process requires a great deal of collaboration. "At some point," he predicts, "someone will step forward" to take a lead roll.

He also says it is inaccurate to suggest that the entire process from origination through the closing to delivery of the documents has to be done entirely on line. "You can paper-in and paper-out anytime during the transaction," he says. "So you can still benefit, even if the process is not totally electronic."

Dillard says the various functions should "focus" on what they do best and "let others focus on their parts." To do otherwise will only serve to undermine the paperless movement, he suggests.

"If you operate under the presumption that you can't do anything until everybody else does something, (electronic mortgages) may never happen."

For more articles by Lew Sichelman, please press here.

Published: October 3, 2001

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