Building a foundation for digital mortgage success.
Discover Home Equity Loans (Discover) is among the most innovative companies in the mortgage industry, successfully combining an end-to-end digital mortgage with back office automation and superior live customer service. The six-year old mortgage arm of Discover Financial Services (NYSE: DFS) has outpaced closed-end home equity loan growth at other banks and credit unions, growing to over $1 billion in home equity loan balance and becoming #1 in net receivable growth of closed-end second mortgages for 2019.
Concurrent with this growth, Discover has simplified, standardized, and automated processes from sales through funding, driving productivity gains and realizing manufacturing costs that are less than half the mortgage industry average. Whether a customer is looking for a cash-out refinance or a second mortgage, Discover’s loans have zero lender fees, zero appraisal fees, zero points, and zero cash due at closing. By making the process simple and the product easy to understand, Discover has helped tens of thousands of homeowners consolidate debt, make home improvements, or pay for major expenses.
With momentum behind eClosings gaining steam throughout the mortgage industry, Discover was interested in taking its closing process digital. However, Discover was under the impression that eClosings may be more expensive than traditional closings and wanted to ensure there was a net positive benefit to changing its existing processes. Discover was also concerned about the regulatory complexity associated with eClosings and wanted to understand how all the pieces fit together – eSignatures, eNotes, eNotarization, remote online notarization (RON), and eRecording.
Discover remained interested in adopting eClosings because more than 80% of its applicants apply online and nearly all of them use Discover's secure website between application and closing to complete tasks related to their loan. Discover wanted to bring that experience through to the closing process and also saw an opportunity to eliminate some of the causes of rework and delay that can occur in the traditional closing process, including:
- Lack of opportunity for borrowers to pre-read documents before closing;
- The need to have borrowers re-execute documents due to overlooked signature or initial lines;
- The costly and time-consuming process of shipping original documents;
- Faxing errors in the post-closing review process; and
- The increased time it takes for counties to record paper mortgages.
"We knew the variations in requirements for each state and county were complex so we were looking for expert partners to guide us through all of the requirements and find the best way to make eClosings work within our process," said PK Parekh, senior vice president of Discover Home Equity Loans.
After Discover's document provider Docutech made an introduction to its strategic partner Simplifile, the two companies were able to demonstrate to Discover how it could pick and choose the digital execution components that it was most comfortable with and that created the most value. From that point on, Discover was fully convinced to move forward with eClosings.
"Simplifile and Docutech made it easy for us to understand each of the potential components of eClosing and decide which parts to pursue first," Parekh explained. "Simplifile demonstrated an exceptional understanding of county-level requirements and were proactive in identifying ways to adapt their out-of-the-box solution to meet our needs. We had great prior experience with Docutech building other parts of our process, and they created rigorous system designs to support eClosing so we knew Simplifile's strategic partnership with Docutech would make integration easier."
The integration of Docutech's Solex™ eClosing platform and Simplifile's suite of services, which include loan collaboration, eRecording and post-closing, create a seamless eClosing process for agents, lenders and borrowers that allows each transaction to be as "e" as it can be – down to a document and jurisdiction level – while maintaining a standardized process. The combined solution allows borrowers to preview the closing package and (optionally) eSign documents that do not require notarization. The platform also includes full eNotarization capabilities so that on the day of closing, the entire transaction can be completed as digitally as possible. Once the closing is complete, closing agents can electronically submit documents to counties for recording and automatically return all recorded documents and data, along with other trailing documents, to the lender.
Discover opted for a phased approach to rolling out its eClosing strategy, focusing initially on a select group of counties where eRecording was already well established. This allowed Discover to understand what operational processes it might need to change to implement eClosings on a broader scale with minimal disruption or inconvenience to customers and/or partners.
Discover also established clear objectives and metrics for success, documented its current and future state processes and created an integrated project plan that incorporated internal stakeholders as well as Docutech, Simplifile, and Discover’s settlement agent partners. Discover’s goals for the initial phase of its eClosing roll-out included:
- Reduction in rework due to missing signatures/initials;
- Reduction in recording turn times; and
- Increase in customer satisfaction levels.
"Getting the first phase of technology up-and-running was easy and only took a few weeks, due to the speed and quality of Docutech’s implementation of system changes," Parekh said. "Together with Simplifile and Docutech, we maintained open lines of communication with all parties and carefully monitored all of the loans going through the pilot, which enabled us to quickly identify improvement opportunities and work together to continually refine the process."
Once Discover was in production with eClosings in its test markets, it quickly saw benefits, including:
- 46% reduction in notary errors;
- 80% reduction in turn time from closing to recording; and
- Higher operational productivity due to the reduction in required support for each closing.
"The keys to Discover's success were its strong project management, establishing a repeatable process for rolling out eClosings county by county, and measuring the success of each rollout to maintain momentum and drive adoption goals," said Nancy Alley, vice president of strategic planning at Simplifile. "Too many lenders attempt to make the switch to eClosings by simply deploying technology in a piecemeal fashion without taking the time to map out how the entire loan origination process must change. To Discover's immense credit, it avoided falling into this trap and, as a result, has reaped the benefits of a successful transition."
While acknowledging that Discover's per-unit cost for eClosings/eRecording was slightly higher than its cost for manual closings/recording, Parekh says these incremental transaction costs are more than offset by time savings Discover achieved as a result of reduced error rates, faster document reviews and more efficient tracking of trailing recorded documents.
"The amount of reduction in cycle time was very surprising and encouraging," he explained. "Our customers like the ability to review closing documents beforehand and feel better prepared for the closing session, and they appreciate that those closing ceremonies tend to take less time. What's more, our settlement agents also like having a smooth digital process where files move forward more quickly."
"Discover has been a model of innovation in our industry. As such, their feedback has been key to optimizing our eClosing capabilities in all areas, including eSignature of Closing documents, eRecording, and eNotarization," said Emily Shapiro, chief operations officer for Docutech. "As the Digital Mortgage evolution gains momentum with Remote Online Notarization and the increasing adoption of eNotes, we look forward to continued insightful collaboration to improve the lending process for all involved."
Once Discover began seeing consistent results in its test markets over a set timeframe, it moved on to the second phase of its eClosing rollout by expanding to additional counties and states. To date, Discover has roughly 25% of its loans going through a hybrid eClosing process, which includes eSignatures and eRecording, with an end goal of executing 100% of its production volume via a hybrid eClosing process in all states and counties that support it.
"We are always looking for new ways to improve the experience for our customers, and eClosing is a great example. With the help of Simplifile and Docutech, we have created an eClosing experience that combines exceptional service from our agents with intuitive online capabilities, making the final steps of the loan process faster and easier for our customers," Parekh said. "We are already the leader in closed-end second mortgages, and we see continued opportunities for growth as more potential customers become aware of the great products and service we deliver."
For more information on Discover Home Equity Loans, visit DiscoverHomeEquityLoans.com.
Simplifile, the nation’s largest e-recording network, was founded in 2000 to connect settlement agents and county recorders via its e-recording service. Today Simplifile has broadened its services to include collaboration tools and post-closing visibility for mortgage lenders and settlement agents working together on real estate documents. Through Simplifile, users can securely record, share, and track documents, data, and fees with ease.
To learn more, visit simplifile.com or call 800.460.5657.
Simplifile LC is a subsidiary of Intercontinental Exchange, Inc. (NYSE:ICE). Information regarding trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located at www.intercontinentalexchange.com/terms-of-use. Other products, services, or company names mentioned herein are the property of, and may be the service mark or trademark of, their respective owners.
Docutech offers a wide range of document technology solutions for mortgage, home equity, and consumer lending from document generation to eDelivery, eSign, eClose and print fulfillment. The company sets the standard in providing market-proven technology and unrivaled customer service to the financial industry. Docutech’s knowledge and solutions empower lending professionals to efficiently produce accurate loan packages in all 50 states to ensure compliance with constantly changing laws and regulations. For more information, visit the company’s website at docutech.com or follow them on social media at LinkedIn or Twitter @Docutech.
This presentation is provided for informational purposes only. The information contained herein is subject to change and does not constitute any form of warranty (either express or implied, as to merchantability, fitness for a particular purpose, or any other matter), representation, or undertaking. Nothing herein should in any way be deemed to alter the legal rights and obligations contained in agreements between Discover Home Equity Loans, Docutech, Simplifile and/or any of their affiliates and their respective clients relating to any of the products or services described herein. Nothing herein is intended to constitute legal, tax, accounting or other professional advice.