eClosings: Coming Soon to a Closing Table Near You

By Maggie Thumberg, Senior Manager, Continuing Legal Education, Attorneys’ Title Fund Services, LLC

ARECS members have been hearing a lot about electronic closings and digital mortgages since the passage of the Florida Uniform Electronic Transactions Act in 2000; but in the past 18 years there have not been many instances of the talk being put into action. Recently, that has started to change as a few lenders have decided to move into the electronic closing space in earnest. This started with the launch of Quicken Loans’ Rocket Mortgage product, but has since spread to other lenders such as Fairway Independent Mortgage Corporation, Flagstar Bank, F.S.B., and others.

Lenders are increasingly looking into transitioning some or all of their lending processes to a digital format and real estate attorneys should be prepared to receive a call from a lender, real estate agent, or borrower who wants to engage in an electronic closing.

Before being able to engage in an electronic closing, however, it is important to know exactly what the lender means. The most common form of electronic closing today is known as the “hybrid e-closing.” This is a closing where some, but not all, of the closing documents are signed electronically. One thing to keep in mind with the hybrid e-closing is that which documents will be electronically signed and which documents will be “wet signed” (i.e., signed with an ink pen) can be different depending on the parties to the transaction, the loan originator, and the ultimate purchaser of the loan.

For as different as each electronic closing may be, there are generally three categories of documents in the electronic loan closing to deal with – the promissory note, the mortgage, and the “ancillary documents,” e.g., the appraisal acknowledgement, flood insurance acknowledgment, etc. When starting their electronic loan closing process most lenders start with the ancillary documents and will then add the mortgage, the promissory note, or both. When speaking to a lender about conducting an electronic closing on their behalf, it is important to determine which documents the lender will ask to be electronically signed.

In addition to determining which documents are to be electronically signed, it is important to determine what technology the lender uses to effectuate the electronic signature. Most lenders have partnered with an electronic closing platform such as Pavaso or DocMagic to allow borrowers and settlement agents to view and sign the closing documents in the cloud.