By Evan M. Kohn, Esquire
While many people do not realize that a fully paperless closing is feasible, or know whether it is even enforceable, the practice was first used about fifteen years ago. In Broward County, Florida, Arvida Homebuilders sold a home to Jose Ignacio Arroyo completely electronically. Utilizing various services, which were cutting edge in 2000, Arroyo was able to close on his mortgage and the purchase of a home without ever touching pen to paper. Because his loan was through an internet-based lender (Mortgage.com), Arroyo was able to forego the voluminous stacks of paper normally associated with a note and mortgage. Instead, Arroyo electronically viewed and signed those documents, along with the various other closing forms, on a computer at his title company’s Weston, Florida office. The title company then electronically sent the deed and mortgage, along with the associated recording fees, to the Broward County Records Division. Additionally, the title insurer, The Fund, was able to issue the title insurance policy electronically. Finally, to complete the fully-paperless process, Mortgage.com electronically transferred ownership of Arroyo’s loan to Fannie Mae.
Despite the achievement of Mr. Arroyo’s electronic closing, lenders still rarely utilize paperless closings today. As of 2013, Keven Smith, president and CEO of Mortgage Builder Software Inc., estimated that only about 5-10% of closings are paperless. As of May of this year, Chris Knowlton, vice president of marketing and technology for Inlanta Mortgage, reiterated that paperless closings, at least where mortgages are involved, are still a thing of the future.
One explanation presented for the lack of progress on electronic closings since the Arroyo closing—fifteen years earlier—is that borrowers are wary of electronic documents which are so immensely important to them; they would prefer to sit with a closing agent and read over the papers. Moreover, electronic notarization has not been fully adopted in many states and where it is available, it still requires that the notary be present with the borrower while signing. Therefore, a borrower cannot easily complete the transaction from the comfort of her or his own home, like she or he might do with the various other ecommerce transactions accomplished daily.
In summary, not only may all documents pertinent to a real estate transaction be created, signed, transferred, and recorded electronically, a fully-paperless closing was accomplished well over a decade ago in Florida. Federal laws and uniform acts have paved the way for state statutes recognizing the validity of electronic documents along with the corresponding electronic signatures thereto. Florida no longer lingers in the past where formal requirements mandated a tangible signed writing in order to satisfy the statute of frauds—applicable to a conveyance of an interest in real property. In this digital age, a fully-electronic real estate transaction is within reach. Nonetheless, there is no legal requirement that a lender or title company actually perform their services sans paper. Paperless real estate transactions will be widely available in the near future, although nobody knows exactly how quickly that might transpire.
Should you have any interest in closing your real property in Florida electronically, or otherwise, please feel free to contact the real estate attorneys at Ward Damon. From strategic real estate acquisitions and expansions, to foreclosures and litigation matters, Ward Damon’s Real Estate Law Practice provides a full complement of experienced legal services in both commercial and residential real estate matters. Our experienced real estate attorneys work as a solid team of business and legal advisors to assist our clients in developing tailored solutions that meet their long-term objectives.