The Future is Now: Electronic Mortgage Closings

By Mark Rabidoux

For several years now, we have had the ability to apply for mortgage loans on-line. Although some e-lenders have left the business in recent months, it is certain that on-line lending will continue to grow as consumers become more comfortable with putting their personal financial information out on the Web and lenders become more efficient in doing business on-line.

Recent changes in federal law and in the laws of a growing majority of states will take on-line mortgage lending to the next level: the paperless closing. The new federal law, popularly known as the "E-Sign" law, and a uniform law being adopted by the states (including Michigan this past October) called the Uniform Electronic Transactions Act will allow people to sign documents that will only exist on computers.

No stacks of legal documents or pens will be necessary to close a loan. The process might be as simple as sitting at your home or office computer and inputting your own secret code or it might involve using an electronic pen to write a signature on a touch-screen device. Notaries will also electronically notarize your "signature."

Fannie Mae and Freddie Mac, the country's two largest owners of residential mortgages, have begun devoting substantial resources to developing systems and procedures to promote lender and consumer use of electronic mortgage documents. This will make lenders more willing to invest time and money in developing the necessary technology.

For lenders, the savings in storage space and other expenses related to handling paper is obvious. For consumers, electronic loan closings may mean lower fees and will certainly remove much of the stress and frustration that is often associated with the process of applying for and closing a mortgage loan.

Mark Rabidoux is a partner with the Detroit-based law firm Jaffe Raitt Heuer & Weiss, P.C. He specializes in mortgage banking law.

This article appeared in the April 1, 2001 edition of the Observer & Eccentric Newspaper