It was Leonardo da Vinci who said, “Obstacles cannot crush me. Every obstacle yields to stern resolve. He who is fixed to a star does not change his mind.” When it comes to facing hurdles, those of us working to remove paper from the mortgage process can certainly relate to one of history’s greatest innovators, a man who dreamed of helicopters and solar power centuries before they would become reality. Then again, in the 10-plus years since federal e-signature legislation was signed into law, it occasionally feels as though the e-mortgage is also centuries away from becoming a reality.
A big reason for this is the collapse of the housing market, which led to increased regulations and tighter investor guidelines that have drawn out the time it takes to originate loans. Homebuyers are familiar with these obstacles, too, as they continue to jump through an unprecedented number of hoops to qualify. That’s why the Internal Revenue Service’s decision to accept e-signatures on tax transcript requests is so important.
Earlier this year, the IRS completed a pilot program to test the ability to accept electronic signatures on its 4506-T Request for Tax Transcripts form, the standard document used by lenders to determine a borrower’s income and, by extension, the borrower’s ability to pay back a mortgage loan.
How important was this step? With e-signatures, borrowers can already give lenders near-instant access to their credit profiles and bank balances, the two most common factors for determining creditworthiness, second to tax transcripts. But because the IRS does not accept e-signatures, borrowers must sign 4506-T forms by hand and wait at least two days for their transcripts to be delivered.
This might not seem like a lot of time—and of course, most borrowers have no choice—but it’s still frustrating, and for lenders, any delay in the origination process has the potential to affect pull-through rates.
Electronically signed 4506-T forms, on the other hand, will mean that lenders will be able to verify the borrower’s income in as little as a few minutes. Imagine loan officers being able to sit down with a borrower, run the borrower’s numbers, and provide a solid loan approval in the time it takes to finish a cup of coffee. Yet those of us who have worked diligently for this moment to arrive have learned to expect questions.
For example, are lenders truly ready? Given the years it has taken to get to this point and the Mortgage Bankers Association’s own campaigning on this issue, the question sounds almost silly. Yet the mortgage industry as a whole has not always adapted to advances in technology, even when they were widely available—even automated underwriting tools took time to get off the ground.
Yet, I believe mortgage lenders—and indeed borrowers—are thirsting for this development. More than ever, it has become crucial for lenders to lower costs, and e-signed and delivered income verifications will save both time and money.
For this reason, an overwhelming number of mortgage disclosures are already delivered to borrowers electronically. And when my company started giving away its e-sign solution—allowing any lender to digitally sign PDFs at no cost—we were flooded with orders. So I’m convinced the demand is there.