Hybrid closings reduce friction in the mortgage process

Lots of stories have emerged over the past few years about community banks quickly pivoting to digital solutions during the pandemic. Avidia Bank in Hudson, Mass., was slightly ahead of the curve, bringing on new technology for residential mortgages in December 2019. “We could see that was the direction the industry was headed into, and if we wanted to stay competitive, we needed to adopt it,” says Laura J. Hughes, vice president and CRA officer at the bank.

The $2.1 billion bank with 10 branches was looking for a better solution to get required disclosures in the hands of borrowers and collect necessary documentation via file uploads. The bank chose SimpleNexus, an nCino company, in part because of a mobile app available for borrowers.

“We wanted to make sure that we were on top of everything and had the best to offer our borrowers,” said Natalie Sousa, senior vice president of residential lending at the bank. “We want … the most current things that are available to us.”

Jay Arneja, vice president of eClosings at SimpleNexus, has worked with mortgages and mortgage technology for decades. She could see the need coming, though not quite in the way it unfolded: “We always wondered, those of us that were working on automating the closing side, ‘What will mandate this?’ And the ‘what’ was 2020.”

“It was a game changer when the pandemic hit,” Hughes said. “Almost everything came through the SimpleNexus app at that point because no one was meeting in person.”

Rolling out hybrid closings

Hybrid loan closings offer a combination of documents being signed electronically and others being signed on paper (such as notary documents). Borrowers receive a link or notification via email, log into a portal and get all documents signed, either through their mobile devices or on the web. 

Borrowers then plan a visit with a title company or loan officer to complete the documents that need a signature. Some states are able to offer remote online notarization, but Massachusetts is not one of them. But with most documents signed in advance, the visit to sign the final few documents is quick. 

Avidia Bank initially rolled out SimpleNexus to just the residential loan officers, but later included branches that were originating home equity lines of credit. “Our customers embrace it; we embrace it,” Sousa said. “We’ve become so familiar with it that we’re able to educate our borrowers on it too.”

Most of the time inquiries start with a phone call. The loan officer then directs the borrowers to the bank’s website for the online application, which then goes to the online portal. Sousa noted that it has made the bank more efficient: “We can do a lot more, with the same amount of people, in the same amount of time.”

App notifications and customer interactions

Throughout the application process, Avidia Bank’s loan officers can keep customers updated via the app. Borrowers are notified that a closing package is available for review. Information about one of their most valuable assets — their homes — is right at their fingertips with the mobile app.

Loan officers get notifications when borrowers have started an application or downloaded the SimpleNexus app. But often, officers will pick up the phone when they receive such notifications rather than correspond with the borrower through the app.

“It doesn’t replace the person,” Sousa emphasized. “We’re always going to need the person; it’s just meant to make things easier and facilitate everything, but it’s not going to replace the loan officer or the process.” When loan officers get notifications, they’ll follow up with a phone call and explain the next steps to the borrower and anything still needed. 

While Avidia Bank knew it wanted to offer cutting-edge technology, Arneja has seen many reasons that banks implement hybrid closings. Some focus on time savings for borrowers who don’t need to come into the bank to sign a large stack of closing documents. Others are trying to reduce costs from printing paper, using services like FedEx to send documents back and forth, and the costs associated with physical storage. Arneja also notes the risk of paper in the event of natural disaster and added security of digital loan files, such as an audit trail of who accesses the documents.

Sousa notes another type of risk for banks that don’t adapt to changing technology: That they may lose loan customers and eventually feel a pinch in their portfolios. “As a borrower, that would make you kind of scratch your head and wonder, why aren’t they up on the technology?” Hughes added.

Reaching more borrowers

Arneja believes that community banks are realizing that they can be “like a big bank,” serving both their communities and beyond with the right technology. Homeowners don’t have to miss out on a refinancing boom simply because they’re not located close to their bank of choice. Every stakeholder in the process benefits — from the borrower to the title company — when loans can be closed from anywhere and a bank’s reach can go a lot further.

And hybrid loan closings put community banks at an advantage. “I think it always comes back to … the reputation of the bank,” Sousa said, “how good we are at retaining our customers and giving the best service.”

Arneja feels that there are two sides to technology: the seen and the unseen. The seen can be directly experienced, such as increased customer satisfaction or improved productivity. But the unseen expands further, serving a greater good. For mortgages, that means making home ownership more accessible. “I think with technology, you’re going to see the ability to educate better, give better financing, and a better rebuilding of our communities,” he said.