While the Electronic Signatures in Global and National Commerce Act (E-SIGN) clears the way for steep reductions in mortgage closing costs, it is companies such as iLumin-an Orem, Utah software firm-that actually produce the technology banks need to capture those savings.
"Essentially, iLumin allows transactions that require a signature on paper today to be moved completely to the Internet," said Brent Israelsen, CEO and founder of iLumin. "We look at paper-based transactions as the last speed bump on the information superhighway."
The company has already helped to electronically close mortgages for Bank of America in Essex County, Mass., and for Zions Bank in Utah County, Utah, among others. Other projects underway in financial services include managing online auto loans and 401(k) plans.
iLumin is accomplishing these E-SIGN adaptations through a suite of products based around its Digital Handshake Server, which provides signatories with Internet access to legally-enforceable online documents.
Authorized participants can simultaneously enter "Online Signing Rooms" to work with documents pending action. The financial institution, which establishes clearly-defined roles for each party, controls how and when each signatory can modify particular items within a document.
The Digital Clerk contains the business logic to manage the sequence of events involved in the mortgage process. Digital Clerk also pipes specific data elements and completed documents to the database systems of the appropriate financial institutions, businesses and government agencies as required.
iCabinet, iLumin's online document storage component, retains viewable copies of past versions of all documents in order to maintain a complete audit trail. Access to sensitive information like Social Security numbers and financial records can be restricted to authorized personnel.
But E-SIGN doesn't require a paper copy at all. "We allow people to print a copy for their own convenience if they want," said Israelsen. "The idea behind this is, 'The original is the electronic.'"
Through the use of XML standards developed by the mortgage industry, iLumin can ensure that information can be easily passed to other systems within and outside the sponsoring financial institution.
Ilumin can either host the server on behalf of the lender or install it on-site.
"With Bank of America, we hosted the Digital Handshake Server," said Israelsen. "They came in as the lender and participated in the closing of the transaction."
With the technology infrastructure in place and the regulatory environment primed for online mortgage closings, the next hurdle is reaching widespread adoption of digital certificates, which can be stored on a smart card or other token, or installed directly onto a personal computer.
"Once you have that certificate you can use it again and again," said Israelsen. "For the next year, or for however long the certificate's good for, you can use it without ever having to go back to the notary."
Although banks or notaries can issue digital certificates, E-SIGN has opened up the door to online certificate issuance. A certificate authority can compare the personal information a customer provides with data stored by credit rating agencies and other sources.
"If it matches, then the certificate authorities are comfortable enough to issue a certificate," said Israelsen.
Borrowers stand to achieve estimated cost savings of $500 to $600 out of total closing costs of $2,000 to $3,000. And they don't even need Internet access: a "cybernotary" can witness the signing of a paper document and then go online to sign the electronic version on the borrower's behalf.
The lender, title company and county recorder also benefit.
"Right now their systems are designed to track data and information-print things to paper, messenger them over to a closing agent, close the transaction and then transfer it out and distribute it," said Israelsen.
"By moving to a Digital Handshake solution, everything is done electronically, so it takes out a lot of the human involvement that's required to push the paper around."
Streamlines the mortgage closing process by providing Internet access to legally-enforceable documents.
HQ: Orem, Utah