The Electronic Records and Signatures in Commerce Act took effect 13 years ago, giving electronic signatures the same legal authority as ink on paper. But it’s only been within the last five years – coinciding with the mortgage crisis, in which missing paperwork is often named the culprit in processing delays – that community banks and credit unions are increasingly implementing e-signatures in their business processes.
The acceptance of e-signatures marked a turning point on Jan. 7 of this year. That’s when the Internal Revenue Service began to accept e-signatures on the common mortgage origination document, Form 4506-T, which lenders use to verify a borrower’s income. It had been the “hold-out” document – the last one to require an ink on paper signature. With the acceptance of e-signatures, mortgage originators can now perform the entire mortgage origination process electronically.
“Since the mortgage crisis, banks are under tremendous pressure to meet regulatory requirements,” says Mary-Ellen Power, vice president of marketing for Silanis, the nation’s leading e-signature provider.
In 2006, before the mortgage crisis, one million 4506-T forms were processed. That number is up twenty-fold today, heightening the demand for a cost-effective way to handle the forms.
E-signing can reduce error by 90 percent and eliminate 50 percent of risk. Customer error, such as failing to fill out all required data fields in a paper document, is eliminated with e-signature systems that won’t let the user sign until all data fields are filled in.
A Silanis report on a large bank client that adopted a digital approach to its retirement and wealth management processes, notes that paper document errors were requiring one or two additional visits to a customer’s home or office, and a process that took two hours to fix. Then the customer would have to sign all over again.
E-signing also documents the process the user goes through. Advisors meet with customers to review documents before signing, and make sure that the terms of the agreement are understood. Power says that financial institutions want proof when moving into the electronic domain, that if someone is going to raise a question about the validity of a signature, that the institution has a legally enforceable transaction.
“You need to make sure the process is good, with an e-signature solution underpinning that transaction, to protect the institution and to demonstrate that this is the process the end user went through,” she says.
Email: coneill@thewarrengroup.com
