Real Estate NewsOn-line Loans Save Time and Money, but Close the Old Fashioned Way
The first job of the Internet mortgage broker was to attract consumers to
the idea of applying for a loan on-line. The next big step, according to
industry analysts, will be for mortgage brokers to provide improved service,
namely faster loan closings.
On-line loan applications and origination have developed at the speed of
light over the last two years, but what is bogging down the industry is lack of
a uniform platform for processing the loans. If so much time is shaved off the
origination process, why do loans still take three, four or five weeks to
close?
"The on-line mortgage companies have done a great deal to help consumers
search for a lender, search for a loan, choose a loan and apply on line," says
Doug Galen, president of E-Loan. But there are many steps in the processing that are not automated
and that is where it slows down. Appraisals and pulling title, for example, are
not automated yet."
Appraisals are headed in the right direction. Although Fannie Mae"s desktop
underwriter has debuted with favorable reviews from lenders, the software
appraisal program is not able to substitute the eyes and ears of a certified
appraisal specialist. The program is able to provide tax records, property
records and CMA"s for homes in the
vicinity of the property in question, but the program is not able to include
such evaluation factors as the home"s condition, neighboring conditions, and
information such as impending zoning, a death in the home, or other factors
which may affect the home"s value.
"At E-Loan, we are working toward a faster closing by forcing title and
appraisal companies to feed us information electronically," Galen explains. "By
the end of the year, E-Loan will have a shorter loan product and we will cut
the time it takes to close a loan."
Galen points out that more mortgages were originated in 1998, both on-line
and through traditional means, a $1.3 trillion year, 40% more than any other
year on record.
"The industry was swamped. And the on-line mortgage centers were held
hostage by traditional processing," notes Galen.
Another slow-down is that the loan application and closing documents must be
Fed-exed back and forth, because they require a signature. How close are we to
on-line closings?
Galen says, "To ultimately close on line, you must be able to accept a
signature on-line. You have to know that the signer is who they say they are.
To replace title companies as insurers, which are willing to notarize
signatures, we have to verify signatures. The technology is here to do that,
but there is no one willing to insure the signatures, yet.
According to Doug Lebda, CEO of Lending Tree, "The loan industry is still far away from on-line closing
of home loans, and entities like title companies, local governments, and other
industry participants need to all adopt common platforms."
There are still ways the loan origination process can be improved. Lending
Tree is working on a program to improve the origination process by introducing
a feature which allows borrowers to contact lenders who have bid for their
loans, and tell them which items need to be changed for the lender to get the
loan. This puts more power into the consumer"s hands, according to Lending Tree
spokespersons.
On-line mortgage sites are still the fastest, most efficient means of
applying for a loan. Pre-approval also speeds the home buying process, as it
lets sellers and their agents know that you have already taken the time to shop
for a loan and to become pre-approved. You can compare loans on line, compare
service between lenders, and apply for a loan without leaving your den.
With all those elements going for them, on-line loans are still the way to
go.
Related Articles:
Applying for a Loan On-line
The Best On-line Mortgage Centers
E-Loan Is Helping Make History
LendingTree Turns the Tables on Lending Process