An eClosing is the act of closing a mortgage loan electronically. This occurs through a secure electronic environment where some of the closing documents are accessed and then executed online. This is often a hybrid process in which certain key documents, such as the deed of trust or mortgage and the note, are still printed to paper and then wet–signed, while other documents are signed electronically.

An eClosing requires use of a specialized software platform, generally referred to as an eClosing System. The security instruments are scanned into the recording package and then sent to the recorder electronically, where available.

The unwillingness of a recorder to accept electronic instruments is an underlying obstacle to complete an eClosing. The recorders' offices often reject either type of electronic documents:

• Digital Form: Documents are created and remain in electronic form
• Digitized Form: Documents are created on paper and made digital by scanning

Despite the obstacles, this hybrid process is being successfully utilized in many areas of the country.

eMortgage
An eMortgage is a mortgage loan where the critical loan documentation — specifically the promissory note — is created, executed, transferred and ultimately stored all electronically. An eClosing produces an eMortgage if the promissory note is signed electronically. An eMortgage may still include a traditional wet–ink signed security instrument.

Many lenders are already participating in at least one phase of an eMortgage transaction. Here is a list of items which make up an eMortgage:

• Loan Applications
• Delivery of disclosures, such as the Loan Estimate and/or Closing Disclosure
• Signing of the loan documents (all or some of the documents)
• Secondary market sale and custody of the eDocuments

eVault
The borrower's eMortgage payments and other mortgage services are managed by approved loan servicers with full eVault capabilities. The eVault system integrates with the Mortgage Electronic Registration Systems (MERS) to identify and track individual mortgages and related information electronically.

An eVault provider's software must be built based on legal best practices for maintaining ownership, control and enforceability of transferable records for the storage of any electronic contract and contract–related documents.

eClosings Improve Risk Management
eClosings reduce operational errors and improve document execution. The systems utilized do not let a borrower miss a signature or initial, which otherwise can cause delays at closing. eClosings can also improve compliance by providing automated audit trails.

Enabling Process Efficiency
eClosings reduce costs and origination cycle time, and automate the post–closing process. They improve the borrower's experience by increasing their awareness of the closing process. This results in educating borrowers in the entire loan process.

The process serves as a competitive edge and enables lenders to pass cost savings on to their customers. For example, the Mortgage Bankers Association states an average of 15 to 25 overnight deliveries and/or couriers are used on a single paper loan. eClosing helps to significantly reduce that number. This reduces cost and prevents frustrating and costly issues such as carrier delays, weather delays, packages sent to the wrong address or lost packages.

To successfully initiate an eClosing process, a lender must consider the following:

• How the borrower's consent will be obtained to use electronic records and signatures at closing.
• Creating and executing an eNote and/or electronic security instrument.
• Ensuring the eVault can enable a transfer of control of the eNote as required under the ESIGN Act and UETA, and investors such as Fannie Mae and Freddie Mac.

Loan servicers servicing eMortgages have to keep accurate records of the eNote and paper notes they service. Although the movement towards eClosings is exciting there are many different vendors, which results in settlement agents having to learn each lender's program. The software providers are private companies who work closely with lenders such as Fannie Mae and Freddie Mac to ensure their systems meet each party's interests and needs.

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Article provided by contributing author:
Diana Hoffman, Corporate Escrow Administrator
Fidelity National Title Group
National Escrow Administration