Real estate industry folks call it the bunny-slipper closing, the transaction that allows buyers to purchase houses while sitting in front of a home computer in their pajamas.
It all sounds very cozy, but several key participants - including lenders focused on the recent refinancing boom and technology-deficient local government offices - have not warmed to the so-called paperless mortgages.
Also standing in the way are consumer concerns about identity theft, because mortgage applications require personal financial information. Banks faced a similar barrier when they introduced automated teller machines, prompting the industry to begin a public education campaign to assure consumers that the machines were safe and reliable.
Today's homebuyers have been slow to demand online closing but are increasingly using the Internet to search for houses or mortgage lenders.
"We're at least five years away from this process being widely used," said Johanna Cooper, associate vice president of the Navy Federal Credit Union of Vienna, Va., one of the few lenders that issue partial paperless mortgages.
The idea of paperless mortgages surfaced during the late 1990s, when several companies, including eOriginal Inc. of Baltimore, began urging the real estate industry and lenders to give consumers the option of all-electronic mortgages.
They didn't run into a stone wall, but the software companies did meet resistance. In a world where a consumer can buy a Rolls-Royce or a Picasso online, most can't buy a house the same way.
But many experts believe homebuyers aren't ready to switch from having a person walk them through the mortgage process to having a computer do the same thing online.
"You're looking at making one of the biggest financial investments in your entire life, and you want someone helping you along the way," said Bob Kaestner, a spokesman for the Maryland Mortgage Bankers Association and a Bank of America mortgage account executive in Owings Mills. "Few people are ready to tackle it on their own."
Products - such as electronic mortgage applications - that make it easier for consumers to handle the process electronically are being introduced. But experts say the industry is far from the point where consumers will be buying homes in their pajamas.
The heavy lending volume of recent years has prevented many companies from developing the technologies to make electronic mortgages part of the real estate landscape. But they think they are making headway.
This is going to be a year of new technology that essentially has been postponed because of the volume of refinance activity in recent years, said Douglas Duncan, senior vice president and chief economist at the Mortgage Bankers Association.
But even though electronic mortgages are expected to make progress this year, it will be years before computerized home buying becomes widespread, he and other experts said.
"There is so much more involved than people realize in going from a paper world to a purely electronic world," Duncan said. "What we are seeing now are hybrid mortgages that are partly electronic and partly paper."
Five years away
Most lenders are experimenting with elements of electronic mortgages, but it will be at least five years before an appreciable volume is completed electronically, he said.
There are signs that his prediction is starting to come true.
EOriginal recently announced that BCE Emergis has licensed the company's electronic signature and software product line to enhance its eLending product.
The product offers a paperless mortgage process that digitally brings together everyone involved in approving, preparing, closing, financing, servicing and securing mortgages.
But Stephen F. Bisbee, eOriginal's president, said the company has had more success with electronic auto loans.
Bisbee thinks the electronic mortgage business will expand as the real estate industry continues to embrace online products.
Mortgage Electronic Registration Systems Inc. of Vienna, Va. unveiled its eNote registry last month. The system tracks online loans to ensure that borrowers have the same rights and protections afforded in paper promissory notes, said Katie Paolangeli, the company's director of business integration.
"What we are seeing now are hybrid mortgages that are partly electronic and partly paper," Duncan said. "Over the next five to seven years, this hybrid mortgage will emerge as the dominant way of doing things in the industry before the complete e-mortgage is adopted."
That might happen faster than lenders think. A new generation of consumers, raised with computers, could begin pressuring the industry to step up the pace.
Electronic commerce has already shortened the time it takes to complete the sale of a home. What once took 45 days can take as little as 21, saving a homebuyer more than $700 in closing costs, lenders said.
At Navy Federal Credit Union, borrowers are saving an average of $230 by going partly paperless.