Electronics vendors who sell to the mortgage industry speak enthusiastically about a striking uptick in sales this year, thanks to industry players looking to go all-digital in a process that usually produces reams of paper.
Linda Stahl, strategic products director for Connecticut technology company COCC, says bankers want to eliminate perennial problems: lack of space, being unable to retrieve documents, the need to comply with sharp-eyed regulators who demand flawless paperwork. More recently, the go-green trend added impetus to go paperless.
Of COCC’s 140 core processing customers, 10 percent added a paperless mortgage system in the past 12 months alone, and other technology vendors report a brisk business in products that digitize the process as well as document storage.
But other industry watchers note that the paperless revolution is a drawn-out, fits-and-starts affair, both with mortgages and elsewhere – as recently illustrated by the health industry’s attempts to digitize medical records. Even with a federal mandate, corralling the various cogs in the industry machine is easier said than done.
Slow Conversion
But the mortgage industry has no such mandate. Indeed, many want to avoid the upfront investment in time and money; many hang onto all paper documents for fear they’ll need them for litigation
For people like Hugh J. Fitzpatrick, a Tewksbury-based New England Title attorney, the digital revolution is frustratingly slow.
Fitzpatrick has been crusading for a paperless mortgage process for the past few years, even to the point of contacting the state Division of Banks in the hopes that examiners could use some of the digitized documents in the auditing process.
New England Title runs its files paperless, and can process, close and record without printing anything. If the office can partner with a bank or broker, it can integrate with most systems to communicate digitally.
It would create a streamlined, more cost-effective process for both mortgage professional and customer, he said, but many in the industry – lenders, in particular – are dragging their feet.
“Lenders by nature are not very efficient people,” Fitzpatrick said. He believes someday a mortgage applicant will be able to go electronic from the mortgage application right through to the closing, but right now, lenders simply say, ‘This is the way we’ve always done it, and it works just fine.’
Jim Jones, principal of First Wellesley Consulting Group, said he couldn’t speak to lenders being particularly behind the times, but he noted that credit unions seemed to have an especially good track record with incorporating digital systems and new technology.
“For some reason – and I don’t know why – credit unions seem to be willing to adopt advanced technology earlier,” he said.
‘Mind-Boggling Practicality’
But there are plenty of major practical obstacles in the way of an industry-wide change, he said. The digital wave is a revolution, all right, but seldom is this type of revolution quick.
“Conceptually, it makes all the sense in the world,” he said, but the practicalities of such a switch are mind-boggling.
All state and federal laws would have to accept digital documentation, and Fannie Mae, Freddie Mac and the Department of Housing and Urban Development would similarly have to agree that the loans they backed could be made with all-digital documents.
Then other players would balk because of the cost and time implementing a paperless system, he said.
Lowell-based NMTW Credit Union has a digitized system, said BSA Director Jim Sullivan, but the credit union has to keep its hard copies as well. The electronic system allows for some mortgage applicants to slide through the system more easily and allows for quick retrieval if someone needs a document quickly. But if that property becomes the subject of a legal dispute, the credit union needs original documents.
The courts aren’t in sync with the paperless movement, he said, and “it kind of negates the whole effort.”
Sullivan agrees with Fitzpatrick that there should be an easier, more environmentally friendly way to go through the process, but right now his hands are tied.
“Whether we want to go green or not, the bottom line is, we’ve got to keep that paper,” he said.
However, Bob Bessel, spokesman for COCC, said clients are able to go completely paperless and don’t fear legal issues. Similarly, David Javaheri, president of Waltham’s EFact USA technology vendor, says he pitches his system as a way for real estate title attorneys to comply with the law more easily: They’re required to hang onto documents for seven years after closing, and his digital storage equipment lets them do so more easily – since he started the company last year, he’s sold about 300 of the product.
Most people he pitches the product to are interested – if they don’t buy, it’s often because they don’t currently have the money.
Sullivan said that it’d be tough for an institution to add new systems in the current economy. Especially with some institutions afraid to ditch the paper system, few CEOs are going to green-light a new undertaking that duplicates some of the bank or credit union’s efforts.
“The way things are, if we don’t need it, we’re not buying it,” he said.
