True E-Mortgage Inches Closer to Reality

The technology needed to enable a true online mortgage already exists today, according to David Matthews, CIO of the Federal Home Loan Bank of Chicago, who was among industry experts on a panel that discussed the future of mortgage technology at the Washington, D.C.-based Mortgage Bankers Association's recent annual conference in Chicago. The major problem, Matthews told attendees, is that the systems for application, processing, underwriting, information gathering, funding and closing aren't linked together.

While the time and paperwork for closing a mortgage has shrunk dramatically over the past 10 years, the "full" online mortgage still is a few years off, added Dain Ehring, CEO and founder of Dorado Corp., a San Mateo, Calif.-based mortgage technology vendor. The online mortgage that Ehring and Matthews envision would go far beyond today's online applications and automated underwriting to a system where the loan is applied for, underwritten, originated, funded and closed online -- outside the walls of a traditional lender, they described. By putting everything online, Ehring explained, different processes can be upgraded as soon as improvements are available, without having to worry about system integration issues.

Paper-Based Bureaucracy

According to Ehring, many lenders still operate in a siloed environment. This hampers their internal integration efforts and prevents them from bringing mortgages completely online, he said.

But the biggest hindrance to full online mortgages, Ehring contended, lies with government offices, which still use paper processes for title and tax information that are necessary to complete the loan process. However, he predicted, this will change over the next few years.

Craig Cole, senior vice president, sales and marketing manager for residential lending, for San Francisco-based Union Bank of California ($50 billion in assets), who was not on the panel, agreed with the speakers. Most of the mortgage process at Union Bank, which is a Dorado customer, already is completed outside the walls of the bank, and more processes are going digital soon, Cole related.

"We're still one or two years away from any paperless mortgages [outside of a couple of pilots]," Cole said, also citing the lack of interfaces with county governments as a major hurdle. "We also need to sort out some of the legal issues for digital documents and digital signatures."

Accepting digital signatures, according to Cole, could cut five days off the time it takes to close a typical mortgage. For Union Bank, it typically takes from a week to 22 days to close a loan, he noted. Industrywide, though, the average closing time is slightly less than half of what it was just five years ago, Cole said, adding that by 2009, mortgage closing times likely will be halved yet again. * --Phil Britt