As published in Scotsman Guide's Residential Edition, January 2010.
The subprime meltdown resulted in a wave of new regulations. Because many of the loans that have gone sour carried nontraditional terms -- balloon payments and adjustable rates, for example -- many of the new regulations affect mandatory disclosures outlining loans terms and costs.
Brokers and lenders can find themselves daunted by the sheer number of changes in combination with increasing economic pressure and possible monetary punishment for violations. In this climate, brokers without great workflows and processes for generating, issuing and tracking disclosures will find themselves at a competitive disadvantage.
Now is the time to make adjustments. Electronic disclosures -- also called e-disclosures -- can help. New rules concerning disclosures already are taking a toll. Some mortgage lenders report closing-table delays of as long as 45 minutes per loan, the time it can take to verify that disclosures were generated, sent and received properly. This can suck hours and days of productivity from brokers' already-busy schedules. Additionally, brokers can lose on deals that fail to close because of improper disclosures, and lenders face fines or risk buyback requests if all the paperwork isn't valid.
Brokers can counter these delays through the use of e-disclosures. The key is to have a standardized workflow that simplifies the generation, distribution, tracking and reporting of disclosures. For many brokers, e-disclosure programs represent the simplest way to implement this process.
E-disclosures not only can ensure compliance with regulations, but they also can save time because borrowers can receive electronic communications immediately.
Another potential e-disclosure benefit is the reporting trail created regarding the generation, distribution and receipt of disclosures. Brokers can ensure borrowers have opened the disclosures, and some systems will mail backup paper copies when an electronic version isn't accessed in the required time period. The switch to e-disclosures also can reduce office-supply costs and attract borrowers seeking the convenience and speed electronic communication enables.
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