Mortgage banks and their vendors are competing to be first with technology to close loans on-line-and may be approaching the finish line.

Technology specialists have identified signature and notary requirements as two of the biggest obstacles and predict they may be only 18 months to two years from a solution.

The country's biggest home loan lender, Norwest Mortgage, Des Moines, has little on-line interaction with prospective borrowers. Though the unit of Wells Fargo & Co. had $74.8 billion of originations through the third quarter, it only accepts an abbreviated application on-line, and a loan officer then contacts the borrower. Documents are not produced at each location.

"The Wells Fargo merger will probably have a huge impact on this because Norwest is not up to" Wells' level on the Internet, said Norwest spokesman Dan Frahm. "The majority of people who currently start on-line with Norwest end up going to a branch office."

Online Documents Inc., Concord, Calif., provides software and links to customers' in-house systems. It automatically updates documents with any regulatory change on a national, state, or local level. A second generation of software is being developed to make documents available on the Web.

Stan Baldwin, vice president of marketing for Online Documents, said a typical loan process requires 30 to 60 documents and the company charges $45 per document set.

"A lot of large lenders have proprietary software they use, which is cumbersome and can cause problems with closing," Mr. Baldwin said. "With our system, you can change the document right there and print it out if there's an error."

Though Online Documents has not found a way to close on-line, Mr. Baldwin said possibilities include centralized telemarketing centers, field or mobile closers, and even closing centers at Kinkos stores, where a notary public would be available.

Laura Lee Shapiro, a spokeswoman for Alltel, Jacksonville, Fla., said digital pads for electronic signatures are one option that the company has the capability to produce if needed., the Internet division of USA Mortgage, St. Louis, also processes loans on-line up to the closing signatures.

"Banking institutions are going to have to recognize electronic signatures-especially Fannie Mae. They dictate the rules we all follow as lenders," said Chris McKanry, senior vice president of "I think we're about 18 months away from that happening, which is good because we've even had to increase our rates because we couldn't handle the volume we had coming in."

Mr. McKanry said the company closes about $6 million of loans daily and has cleared $180 million of loans a month since launching its on-line service six months ago.

Flagstar Bank, Bloomfields Hills, Mich., is one of Online Documents' largest clients; it expects to originate $17 billion of mortgages this year.

"Time constrains us from keeping up with regulatory situations in all 50 states when they all do something different," said Kelly Cruz, vice president of wholesale operations for Flagstar. "It's less risk for us to do it this way, and we don't need a whole separate department to draw these documents and affidavits."

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