Pavaso Pioneers Enhanced E-closing for Home Purchase Transactions
May 15, 2014
Pavaso Inc. collaborated with Farris Title Group in Southlake, Texas, to successfully complete a digitally processed home sale transaction using the Digital Close solution.
“Today marks a milestone in the history of the real estate industry where the seal of the future has been opened making it a reality today,” said Mark McElroy, Pavaso’s president and CEO. “This achievement paves the way for quantum leaps in the digital processing of real estate transactions.”
McElroy said Pavaso was developed to modernize the home purchase process, to leverage technology to reduce cost and risk for service providers, and to provide the interactive, content-rich experience consumers encounter with other technology-enabled products and services. In addition to building more efficient lender operations, the system’s focus on education, transparency and security positions industry stakeholders for compliance with the Consumer Financial Protection Bureau regulations and vision for the marketplace.
Digital Close provides an online avenue for all stakeholders in a real estate transaction to securely deliver and manage home sale disclosures and forms to consumers ahead of a closing event. The documents are enriched with multimedia content, including videos and multilingual descriptions of, for example, APR, to provide new opportunities for consumers to understand their contracts before arriving at the closing table.
“The large document packages we see with mortgage transactions are just a reality of the legal environment,” said Matt Farris, founder of the Farris Title Group. “We understand that it’s overwhelming, especially for new buyers, and we’re excited to be among the country’s first title offices to offer an answer to that problem.”
As service providers produce document packages, Digital Close helps manages chain of custody, customer communications and business events with compliance implications in real-time, according to McElroy. Functions of the platform catch errors early in processing, compliance, completeness and clerical process—before they cause delayed closing dates or costly and complicated post-close rework.
In April, the Mortgage Bankers Association’s associate vice president of industry analysis reported that “per-loan profits decreased in the fourth quarter (of 2013), primarily driven by rising costs.” According to the MBA executive, production costs have historically dropped with rising volume. “In this quarter, however, despite the high origination volumes, per-loan costs reached the highest levels we have seen in this study, other than during the first half of 2011, when origination volume was 60 percent lower,” the MBA associate vice president said.
The matter of increased origination costs is one that stands to become more serious as additional rulings and regulations are handed down in pursuit of RESPA-TILA goals, according to McElroy. The Digital Close system aims to mitigate origination costs through workflow enhancements and integrations into existing industry software. It provides communication tools for lenders to process transactions with greater accuracy and faster than ever before, while managing the production and closing processes. Mortgage industry leaders estimate that technology-enabled loan processing would reduce costs by up to 50 percent.
“I was a loan officer for years and can see where this would be a big advantage for mortgage (departments) where packages are constantly moving around,” said Bill Poulter, Digital Close’s first homebuyer.
At the closing table, documents are signed and the transaction is finalized on Electronic Closing Platforms—large touch-screen devices either kept in the traditional title office conference room or used on the road with mobile hardware. The paperless process allows consumers to receive a secure electronic copy of their signed documents, while the digital original is filed in MERS-certified e-vaults.
Services within Pavaso, such as Title Check, can notify home owners when there is a lien against their title. Closing Forensics and MortgageDNA travel digitally within the loan docs to describe details about the history of the loan package and automate a number of presently tedious audit procedures.
In April, the CFPB announced an upcoming pilot program to measure the expansion of consumer understanding and the business efficiencies generated by e-closing solutions. Proposals for technology developers to participate in the government research program were due by May 14.
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