The road leading to the eMortgage is now clear, but will lenders walk it?
By Rick Grant

As we near the end of another year, it’s time for journalists around the mortgage lending space to start measuring our progress toward one of the industry’s most consistent goals, and predicting how much longer it will be until the paper is finally removed from the process of getting a loan to finance a home. Will 2012 be the “Year of the eMortgage,” or will it join the ranks of all of the almost-there years since about 2000, when the first such year was predicted?

According to the seventh annual “Path to Paperless” survey conducted by Xerox Mortgage Services, Atlanta, we won’t make it next year, or even the year after that. According to the survey, 78% of respondents said they felt it would take three to seven years for the mortgage industry to process more than 50% of all loans as an eMortgage. But that leaves a lot of room for eMortgage success between now and then.

If even a quarter of all mortgages could be produced in a completely paperless fashion, the industry--and, by extension, home loan borrowers--could save millions that are currently being wasted on expensive, paper-based processes. According to Xerox, it won’t be just the cost savings that drive lenders deeper into the eMortgage.

Mortgage professionals surveyed by Xerox said that online collaboration across the multiple players in the loan process is a key component of a paperless process. This emphasis on collaboration has more than doubled since last year, with 96% of survey respondents (up from 45% in 2010) indicating that working together through an electronic loan folder is critical to achieving a paperless mortgage environment.

“There’s traction in the industry’s path to achieving a true eMortgage, evidenced by the growing need to extend electronic collaboration to all participants in the loan process,” said Nancy Alley, general manager for Xerox Mortgage Services.

It probably shouldn’t surprise anyone much that saving a few hundred on each loan file would not be enough to motivate lenders to invest in paperless technologies, especially when they can pass those expenses on to the borrower anyway. But in a world where compliance is measured in part by the customer’s satisfaction with the lender’s process, forging stronger electronic ties with partners and using electronic collaboration to increase accuracy and reduce surprises at the closing table makes a lot of sense.

According to the Xerox survey, lenders are already moving in this direction. Fully 63% of respondents said that they had made the decision to implement paperless origination and underwriting technology in 2011, up from 49% in 2010. And, less than 40% relied on imaging capabilities within their loan origination systems and considered them sufficient.

Much of this activity is focused on the front end of the process, with 70% of respondents saying they had implemented technology to electronically deliver disclosures, and 80% saying they saw an increase in electronic disclosures in 2011. Even so, nearly 40% said they had made the decision this year to implement eVault technology, providing a path for paperless lending extending from one end to the other.

Perhaps the most exciting result of the survey was that more lenders were delivering files to investors electronically in 2011, with 75% saying they had implemented electronic delivery of closed loan folders, up from 47% in 2010.

It appears that a critical mass of lenders now realize there is a clear path to paperless that exists from the point of sale all the way through to the investors and the eVault. It also seems likely that the industry’s new regulator will follow the path blazed by the nation’s largest mortgage investors and begin focusing more on the electronic data streams that flow from the country’s lenders. Taken together, these trends may be enough to turn 2012 into the real “Year of the eMortgage.”

But if there’s one thing we can count on in this industry, it’s that lenders will adopt technology as late in the game as possible, adopt change as slowly as possible and question ROI until their tongues bleed.

As Xerox wrote when it released its most recent survey results:

“If paperless mortgages are to become the norm rather than the exception, then everyone--from the underwriters to the attorneys--will need to get on board with the process.”

That’s a tall order for an industry that has never been much of a follower. But over the course of the next three to five years, the government may give the industry a compelling reason to deliver everything electronically. It will probably come wrapped in the idea of transparency. If that happens, I doubt anyone will go to the expense of keeping the paper around. That will truly be the “Year of the eMortgage.”

Rick Grant filed this content as a contributor to Xerox. The Focus: Real Business, Real Opinion content is the author’s opinion and does not necessarily reflect the views of Xerox.

Rick Grant is a freelance writer focused on mortgage technology who lives with his family in the Pocono Mountains of NE Pennsylvania. He can be found on Twitter at @nyrickgrant or emailed at rick@rickgrant.net.