By Gabe Minton

The industry has made marked progress in the ongoing adoption of eMortgages. Eight years or more in the making, eMortgage adoption is slow and methodical, whereas "hybrid" solutions are most common.

The industry bellwether, MERS, is registering more eNotes than ever before — but where are lenders incorporating this eMortgage technology across the entire origination process?

This column focuses on imaging in the front office and provides additional thoughts on how to think of imaging technology as you consider your options for procurement or expanding systems already in place.

Definitions
I will define five classifications of documents involved in the lending process : upfront disclosure documents (Good Faith Estimate, Truth in Lending disclosure document, etc.); loan processing ancillary documents (W- 2, tax returns, bank statements, etc.); real estate service ordering and fulfillment documents (credit report, flood certification, title documents, etc.); closing documents (HUD-1, the note, etc.) and any follow-up documents missed or needed from the closing (or before).

First and foremost, it is important to define the different methods of electronic mortgages and files. I will define "simple images" as simple scans of paper documents—such as tagged image file format (TIFF), fax or portable document format (PDF). Keep in mind that PDFs are heavily used today across the board in the real estate finance process, but most of these PDF files are "simple" as well, meaning they are just images of loan documents.

Then there are "enhanced" PDFs, which are defined as having data embedded in some form and/or signatures applied to the files to make them tamper-evident (note that non-repudiation is not usually provided here, because there is still no mainstream way to authenticate consumers when they are remote—i.e., not in a co n t rolled environment, such as a closing room, where they can be identified). There are also MISMO SMART Docs and other formats that combine standardized data, a view and tamper - evident seal all in one file.

Consumers and businesses are getting more comfortable using their e-mail to identify documents to a transaction (through double - confirmations, special questions, etc.), and because of the Federal Financial Institutions Examination Council (FFIEC) guidance that took effect at the end of last year, banks are very savvy this year on authenticating people by username, password, e-mail and, now, by the computers they log in from (which can be multiple in number).

I believe all of this is slowly evolving into an environment where we will be able to authenticate consumers remotely.

For instance, if you are a bank or mortgage servicer and have multi-factor authentication in place for consumers to log into their account, why would you not trust them to sign a Good Faith Estimate (GFE) using the same account login information?

If we now combine the five groups of documents with the definitions covered here, we can get to a state of the industry:

Up front disclosure docs — heavily provided in simple PDF form from a loan origination system (LOS) or point of sale (POS). There is a very large ramp-up of secure Web delivery (eSIGN - based or not) . There is some development of eSIGN-based solutions, but it is difficult due to the fact that there is no standardized "closing room" type environment (e.g., companies have to be satisfied with consumers clicking buttons on a Web site for signing events).

Loan processing ancillary documents — very heavily implemented as scanned files straight from the consumer. However, more often than not, consumers will fax in the files that are automatically captured into a queue or holding place in, or attached to, the lender 's LOS.

Real estate service ordering and fulfillment docs—very heavily implemented as simple PDF or TIFF images, many standadized data streams (MISMO is the most adopted here) are sent to complement files, and most LOSes store the image file and the data.

Closing docs—eMortgages are taking off here, but more often than not, it is still a hybrid or full paper solution. Even so, most of these documents are scanned back into the lender 's system but still need to be manually "scraped" for data. eNotes are steadily on the rise, but they are only a fraction of the total number of loan units. The e is much PDF usage as well, mostly in a "simple" state. eNotes that are currently so ld on the secondary market are all MISMO SMART Doc–based. eRecording is also on the rise, and the recording industry (through the Property Records Industry Association [PRIA]), too, has shared the same basic definitions—simple imaged eRecordings all the way to SMARTDoc eRecordings. To date, most eRecording is accomplished using the "simple" imaging place, then you can improve and update it technologies.

Post-closing follow-up docs—similar to loan processing ancillary docs, they are captured and scanned on the fly as necessary.

Deployment options
When choosing imaging solutions, especially in conjunction with an LOS, there are three implementation types to consider.

Build it yourself: This is very rarely done anymore, but you could build the solution yourself, usually by taking basic components and creating all the logic that holds them together. Likewise, some software providers have taken this approach. These modules tend not to be very sophisticated, but they can get the job done. If you choose to do this yourself, it would be very expensive not only to build, but to maintain.

Embedded: This is fairly common these days. The imaging system is made up of off-the-shelf (OTS) components that are robust, scalable and feature-rich. While still expensive to build out, it is less costly to maintain.

Software as a Service (SaaS): The market is actually expanding nicely here. Only eight years ago, lenders would look at you as if you had two heads if you proposed that a new business - to - business Web site would house all their documents as a service with transactional fees. However, this has come a long way in a short amount of time. Particularly for small and mid-sized lenders, provided all the big fish are accessible on the platform, this can be a very attractive option and it certainly costs less to set up (sometimes nothing).

Regardless of the method of implementation you choose, you will have to build a system that is the lowest common denominator across all your operations—i.e., no matter how "enhanced" the files are that your system can produce or consume, you will always have to be able to also accept paper documents and "simple" PDFs and TIFFs for the foreseeable future (may be forever, to some extent).

Upping the ante
Once you have the basic infrastructure in place, then you can improve and update it in many ways. Barcoding technology continues to evolve, but it still lacks any comprehensive industry standards — so frequently standards are set lender - by - lender. Still, advancements have been made both in the amount of information that can be contained in a barcode (e.g., two- and three- dimensional), and in the technology to get away from using barcodes at all. (Using technology to train a scanning engine to "recognize" a certain document based on certain properties, then using optical character re cognition [OCR] for the data you need, is becoming more common in implementations.) Keep in mind t h at there is the cost and time of training the software to consider with this approach.

There also has been significant development in the distribution mechanisms for document images. Because consumers are comfortable logging into secure sites to access their financial information, the industry has noted a rise in secure document exchange Web sites, where a link is sent to the customer via e-mail, and, after the customer successfully creates an account and agrees to any electronic disclosures, he or she can obtain documents securely from the Web site.

Correspondingly, Web sites and their operators are getting increasingly comfortable with simple button signing (the consumer "signs" by clicking a button), which is legally binding per e-SIGN and the Uniform Electronic Transactions Act (UETA) depending on how this is presented to the consumer.

Finally, eMortgages themselves are increasing in number. Make no mistake — this is the future, so it is just a matter of time. In 2002, some in the media approached me (while I was at the Mortgage Bankers Association) and asked when I thought eMortgages would be mainstream — meaning when more than 50 percent of documents would be electronic and executable in some form. I said 10 years. It looks like I have four more to let it play out.