Executive Conversations is a HousingWire web series that profiles powerful people in the financial industry, highlighting the operations and the people that make this sector tick. In the latest installment, we sit down with Mark McElroy, president and CEO of Pavaso, to talk about the potential for eClosings to change the way lenders and others connect with consumers.
Q. Pavaso was part of the CFPB’s eClosing pilot program, which found a direct benefit to consumers with electronic closings. What insights did Pavaso gain from being part of that program?
A. Clearly there are benefits to eClosing for both the consumer and the businesses involved in the transaction (lender, Realtor, title company) – all of which surround the ability of each party to work together in the same place with the same data to understanding the circumstances of the deal they are working on and ultimately create a positive well informed consumer experience.
For the most part, the mortgage closing process hasn’t really changed that much over the past 50 years. The eClosing pilot certainly outlined the difficulty in breaking with the traditional closing process, but once the stakeholders got past the initial shock of “change,” they found it wasn’t nearly as difficult as they thought it would be.
The pilot program proved beyond a shadow of a doubt the industry can find ways to work together and at the same time create a positive world-class consumer experience without changing current processes of production. This effort marked the start of the digital transformation of the industry.
Q. There seems to be some confusion on the difference between eSign programs and actual eClosings. What is the difference?
What really distinguishes eSign from eClosing is the consumer experience aspect. eSign simply replaces wet ink with a digital signature and has very little impact on how the transaction is completed. On the other hand, a true eClosing transforms the closing transaction through process standardization, using technology as a focal point for all stakeholders to participate equally, collaboratively and individually.
Most business stakeholders view the traditional real estate transaction as being comprised of three separate processes – contract to purchase via the Realtor, financing for purchase via the lender and finalization of the purchase via the title company. eClosing provides the ability to present a real estate transaction as one closed-loop process, rather than three distinct, yet tangentially related, transactions, which is how the consumer views it today.
eClosing is often confused with eSign because many hold the mistaken belief that you must have eSign in order to conduct an eClosing, which is not true. All stakeholders receive at least, if not more than, 90% of the value proposition of an eClosing even when paper and wet signatures are involved because eClosing doesn’t just speed up the traditional closing process. It transforms how the process is completed.
Q. What will lenders and others involved in the closing process gain by adopting Pavaso's Digital Close?
A. The idea behind how Pavaso has deployed Digital Close, and our entire suite of applications, is to provide the end user the ability to customize their suite based on their needs and desires. Think about the iPhone. At its core, it’s really just a device that facilitates endless combinations of configurations, based on what apps the user decides to purchase. The Pavaso platform works much the same way, and the value and possibilities are endless because of the creative way we bring stakeholders together in one place.
Ultimately, what we want to achieve for our customers can be distilled into four main goals:
- Reduce the time to process loans and the cost to close;
- Increase revenue via long-term consumer relationships, referrals and cross-sell/up-sell opportunities;
- Align organizations with the CFPB’s mission to provide transparency, education, participation and fairness to consumers; and
- Provide a world-class consumer experience where the borrower can manage their entire home ownership lifecycle and actively participate in the process.
Q. Closing on a mortgage loan is really only the beginning for homeowners. How does the Pavaso platform enable mortgage lenders to continue to engage with those consumers?
A. In addition to facilitating the closing transaction, Pavaso has built in additional functionality to keep the consumer engaged within the platform throughout their homeownership lifecycle and connected with all the various stakeholders from the original transaction, not just the lender. For example, Pavaso provides consumers with a tool to help them ensure their title stays clean. Not only does this provide a valuable service to the consumer, but it also keeps them connected with the title company.
In addition, Pavaso also provides the consumer the ability to keep track of their original service providers. Once a stakeholder performs any service for a consumer as part of the closing transaction, that stakeholder becomes connected to that consumer through the My Team functionality inside Pavaso. The platform is designed, from the consumer perspective, to function as a repository for everything related to the purchase of the home. Given the quality of the initial closing experience, it is far more likely that the consumer will want to use the previous lender, Realtor and/or title company for their next real estate transaction, and by keeping contact information for those entities closely tied to the information on the home in general, it makes it easy for the consumer to locate that information and make contact once more.
We have also created and/or partnered with other companies to bring additional services and value, such as home-related promotional offers, to keep the consumer engaged throughout their homeownership. Depository lending institutions will also have the opportunity to cross-sell credit cards, checking accounts and any of the other products they have. The world of possibilities is endless once you establish the connection and maintain the relationship with the consumer.
