The Vision - the Quest. We go in search of the Elusive Paperless Mortgage

Posted by Donny Mak on Monday, June 25th, 2012 at 1:00am.

Paperless Mortgage - E Signature
Paperless Mortgage - E Signature
By: Alan Aptheker

Been to a closing lately? Did you see any indication that electronic signatures have been legal in the United States since the year 2000?  Click to sign has the potential to be the new “swipe to buy,” but it’s been slow to catch on, as acceptance at the Federal Housing Administration and the Internal Revenue Service has been tepid.

Ask Well Fargo spokesman Jim Hines. "For some lenders, having an inconsistent process across all products is not an option. They're holding off implementing electronic signatures until they can offer them for all products." There are signs that the IRS and the FHA are softening by developing policies that let mortgage lenders and borrowers e-sign a variety of mortgage documents – but not all.

According to the IRS, e-signatures are okay on a form called 4506-T, which gives lenders permission to review a borrower’s tax returns to verify income. The FHA is coming around. They’re thinking about updating their policies that incorporates e-signatures and getting “on par” with e-doc rules that are already in place at Fannie and Freddie.  FHA and IRS progress is slow, but it’s progress. Some industry experts are making the assertion that changes will take effect in 2012.  

In July of last year, Mortgage Bankers Association officials met with the IRS to discuss e-signing adoption for the masses.  Here’s how it works: Take for example that “4506-T” form I mentioned earlier, which lets banks review a borrower’s tax documents. Lenders send an electronic version of the 4506-T to the borrower along with the other documents in the disclosure package.
However, rather than the current practice of printing, wet signing, and then scanning or faxing the form back to the lender, the borrowers will e-sign and return the 4506-T electronically with the other disclosures. It’s a beautiful thing.
But technological progress can be a dream for some, an irritation for others, and for those truly resistant to change, a disaster.  Doing the e-signatures for “part of” the mortgage doc process is somewhat akin to horseshoes and hand grenades.  It’s all or nothing, the experts say, if you’re going to get the full effect.

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