So-called paperless mortgages still have a long ways to go, but the number of people who believe they could be a few years away from a 50% penetration of the market has grown in the last two years, according to a survey on the topic that is done roughly every other year.
"The industry does see us getting closer," Xerox Mortgage Services vice president Greg Smith told National Mortgage News. "The population is clearly seeing progress toward the e-mortgage adoption or believing that it's going to happen."
When asked what was most surprising or unusual about this year's survey, Smith noted that it shows the number of respondents that believe there will be a 50% market penetration in three to four years grew notably to 42% in the most recent survey, from 28% in the 2008 survey.
The percentage of those who believe the progress will be more immediate, within a year or two, remains relatively low. This was 4% in 2010, up from 3% in 2008. But the percentage of those who believe it will take 10 years has fallen to 2% as compared to 11% two years ago.
"This will take awhile, to move people across this electronic bridge" in terms of being able to originate and underwrite mortgages, Smith said. Until the transition to complete automation of these processes is complete, "they will have to operate in an environment that consists of...paper, images and fully electronic documents such as an e-note or electronically signed SMART document." According to the survey 88% believe being "paperless" today involves being able to work with paper, images and electronic documents.
Part of what has been restraining e-mortgages/paperless loans has been the need for lenders to focus on compliance and the restrictions on spending power in the wake of the downturn, according to Smith.
"They've been responding to compliance issues in a defensive posture as opposed to an offensive posture, that's just the nature of the beast right now," he said.
The recent relative gains in optimism about paperless mortgages are in the longer term a recovery of some ground lost during the mortgage market's crash. As opposed to 4% in the most recent survey, the percentage of those who expected e-mortgages to achieve 50% market penetration within two years in 2005 was 8%, Smith said.
"A lot has happened in the past five years," he said. The need to simply survive, combined with the need to prioritize compliance had pulled some resources away from e-mortgage.
But in the last two years some energy has returned to paperless process as the market has recovered somewhat. Electronic disclosures in particular have gained in momentum, according to the survey, which indicated 69% of respondents, when asked if they were seeing an increase in electronic disclosures, said "yes." This was up from the 2008, when this percentage was only 36%.
Among benefits of going paperless, use of it to "support compliance for industry regulations" was ranked by 79% of respondents as "very important." Also ranked by 79% of respondents as "very important" benefits of going paperless were decreases in turnaround/processing time per loan and decreases in processing cost per loan.
Although the survey suggests optimism of paperless mortgages is growing, so far market penetration remains relatively low. There were almost 163,000 paperless mortgages registered as e-notes by MERS as of late May. There are about 37,000 electronic mortgages in Xerox's e-vault, Smith said. According to the survey, 83% see storage in an electronic repository as "critical" to going paperless and 60% said the ability to archive loans electronically is an "important benefit" of going paperless.
