In-person closings are to 2022 what fax machines were to 2010. Sitting in an office to ink-sign a giant stack of papers when so many processes in our life have gone fully digital can feel archaic — or just totally baffling.
Fortunately, closing on a home loan doesn't have to be an all-or-nothing, paper-based endeavor. Today, there are more options for borrowers to choose from — either through a fully online process or a hybrid mix of paper and electronic documents — depending on the lender.
Let's look at the difference between a hybrid eClosing and full eClose, the different types of hybrid eClosings and a quick exploration of which method saves lenders and title agents the most time and money.
Full eClosings have become more and more prevalent, especially with the pandemic forcing many people to complete transactions solely online. However, with the return of in-person business, some lenders and title agents prefer to complete parts of the transaction in person.
There are a multitude of benefits for both full eClosings and hybrid eClosings. Here are the differences between the two.
A fully online closing (full eClosing) allows borrowers, lenders and title agents to complete the entire loan process — from document uploads to underwriting to notarization — digitally and remotely. Borrowers sign documents using digital signatures, and can connect with a notary public online from anywhere, via computer, tablet or any device with a camera and audio. A full eClosing requires only a few things: sign-off from lender and title participants, an underwriter to insure the transaction and a county clerk that accepts eRecordings (depending on the state).
This is what the full eClosing process looks like:
During a hybrid eClosing, borrowers can sign most documents ahead of time, with the exception of those that require notarization. Unlike a full eClosing, a hybrid eClosing still happens in person and notarizations occur with ink and paper. Though in-person signing is still required for some of the documents, fewer papers mean a quicker in-person transaction.
There are options for borrowers within hybrid eClosings, depending on the lender's capabilities, the borrower's needs and local regulations.
Most documents (sometimes including the promissory note) are digitally signed through a closing platform, while other notarized documents are ink-signed during an in-person, traditional closing.
All loan documents that do not require notarization — including an electronic promissory note (eNote) — are sent digitally to the borrower and signed using eSignatures. Signers go through knowledge-based authentication prior to completing the eNote. Because the note is digital, this allows lenders to quickly sell the loan to the secondary market.
Documents that require notarization are then completed during an in-person notary session.
The answer to this question may depend on the transaction timeline, the comfort level of the borrower and the state's regulations.
Hybrid eClosings are legal nationwide since the most important documents are still handled in person. Signers can receive and sign all documents ahead of the closing that don’t require a notary or closing agent. The actual closing still happens in person, meaning you don't need to worry whether the closing will be valid or accepted by the relevant county.
However, full eClosings can save lenders and title agents more time and money than hybrid eClosings. According to a recent study conducted by MarketWise, title agents can save $97 per transaction with full eClosings. For lenders, the financial impact of a hybrid eClosing is $155, whereas the impact of a full eClose is $444 per loan. Additionally, a full eClose has the potential to eliminate 7.16 days from processing/funding time. This shortened processing period means that lenders can close more loans in the same amount of time.
While it may take some time for every lender and borrower to feel comfortable with a fully digital or even hybrid eClosing process, the tide is turning toward more digital closings for their convenience and time and money savings.