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Various mortgage-lending and technology companies are racing nationwide to complete the first entirely paperless home purchase, and the finish line could lie in Broward County, Florida. An alliance of technology, mortgage and title insurance companies, with the help of the county Records Division, expects to gather in Weston, Fla. within days to roll out an online program intended to take the paper out of borrowing and home-buying. It would mean that from the time a mortgage application is first made, through the sale of the home and all the steps a loan takes until it’s sold to investors in the secondary market, every facet of the process would be online — including “signing” the loan forms, transferring bank funds, recording the deed and storage of all information. That’s vastly different from the usual tangle of paperwork lenders and buyers juggle, although some portions of that process have already been computerized. The group, which operates as e-cloz.com, is a consortium of national leaders and local companies that worked for a year to develop the system. After a trial run last year with 18 home buyers, they figure they’re ready for the real thing. The alliance includes Baltimore-based eOriginal Inc., which manufactures software for electronic documents; NewVision Systems Corp. of Stamford, Conn., a software vendor that has helped retool Broward’s recording system; title agency Enterprise Title of Pembroke Pines and Weston, Fla.; Attorneys’ Title Insurance Fund Inc. of Orlando; Sunrise, Fla.-based mortgage.com, a national lender that went public last year; mortgage servicer Irwin Mortgage Corp. of Indianapolis; and Fannie Mae, one of the two federally chartered corporations that buys mortgage loans from lenders and sells them to investors. At least one South Florida homebuyer will be involved, but the companies would not disclose who it is. The plan took root about two years ago, when lawyer Arnold “Skip” Straus, a principle in Enterprise Title, wanted to find a way to cut paperwork. “The time and transportation of paperwork are the primary costs in our industry,” Straus said. “I had spoken to several national players over the years, but no one really had the right solution.” A patent search for anyone working on a paperless closing led him to eOriginal Inc. The software maker’s process allows an electronic document to be created, signed, transferred among several parties in a transaction and then stored, using a security system that can determine who has access to the document and indicate whether it was altered and when. Straus then contacted colleagues, business associates, Broward’s records director, Sue Baldwin, and mortgage.com. The alliance was born. That got a boost when state and federal laws were signed recently allowing electronic signatures. Florida’s Uniform Electronic Transaction Act took effect July 1. Now, the search is on for other Florida members to join the alliance and, ultimately, to develop a national network. The alliance figures that it will get a jump-start from mortgage.com’s nationwide exposure and the participation of Fannie Mae and Attorneys’ Title Fund, one of the state’s largest title insurers, which recently acquired United General, a title insurer in Denver. “E-cloz, which is the company that cobbled everyone together, is creating a nationwide network of closing agents, county recorders, lenders, title underwriters and real estate brokers to bring them online to enable electronic closings,” Straus said. He declined to discuss specifics. Susan Penn, eOriginal’s marketing manager, says the rollout this month in Broward will be the nation’s first. But that remains to be seen. In Orem, Utah, iLumin Corp. has almost identical plans. It also is planning a rollout this month. The software company has developed a paperless mortgage process with different partners and an online storage facility. The company already has completed an online deal, but as a mortgage refinancing, and expects to conduct a full online mortgage closing this month. Ben Gould, senior vice president of marketing, won’t say when. Like eOriginal, iLumin is seeking national partners, Gould said, and therein lies the competitive pressure — so much, in fact, that both companies have confidentiality agreements with those they are courting. “Everything in the marketplace has to do with responding to competition,” said Jerry Matthews, executive vice president of the Florida Association of Realtors in Orlando, which has a confidentiality agreement with eOriginal. “If it becomes a marketplace advantage for a company or group of Realtors [to have the system], you have to respond.” Within five years, paperless mortgage deals will become commonplace, predicted Charles Clements, a vice president of Bank of America in Miami-Dade and president of the Mortgage Bankers Association of Greater Miami. “It’s a race, and everyone’s trying to get to the same place,” he said. “But everyone has to [offer it], because the big guys have the capital and resources to get there. And the smaller guys need to find a way to get there because they need access to that kind of service level.” What the paperless mortgage process will mean for consumers’ costs isn’t clear. While eOriginal touts an estimated $800 in closing cost savings, Straus said that will come with “economies of scale.” As for business-to-business expenses, alliance members wouldn’t discuss the financial aspects of their deal. Members in the network will buy or lease the system, with fees generated by each transaction. At iLumin, the software program will cost an initial $50,000 — $25,000 until it’s officially released in October — with transaction fees that could range from pennies to $5 depending on volume, Gould said. The bigger concerns, though, revolve around security. “The trade-off is between trust and speed, said Matthews of the Realtors group. “We still have people who don’t buy books or tapes online because they are worried about the security of their credit card or personal information. You’re talking about a significant transaction here involving very confidential data and the security would be [paramount] to buyers and sellers.” That’s precisely why eOriginal touts its security process, which uses encrypted cards. The cards give users at each phase of a home purchase their own code. The system tracks access to the online document and any changes made to it. “I haven’t lost a moment of sleep over the fear of increased mortgage fraud,” said Norwood Gay, general counsel of Attorneys’ Title. “It’ll be difficult if for no other reason than in the short term, this is a whole new technology for the crooks to learn. It’ll take some time for them to catch up. Some sophisticated group will do it, certainly, but I don’t see an increase in the fraud.” Still, the process will face bumps in the road like any pioneering effort, he added. “The Wright brothers didn’t take 400 of their closest friends to Paris with them, either,” Gay said. “But anyone with vision could see there would be airplanes with large numbers of people strapped inside.”

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