The Consumer Financial Protection Bureau (“CFPB”) has issued a report on its 2014 “Know Before You Owe” eClosing pilot project, saying that consumers who used electronic closing understand the process better and that the system itself provides important efficiencies over paper forms.
“While technology alone will not address all consumer concerns in the closing process, our study showed that eClosings do offer the potential to make the process less complex,” said CFPB Director Richard Cordray. “We expect this pilot project and its findings to help inform further innovation that will be a win-win for consumers and industry alike.”
The Bureau’s eClosing program was conducted over a four-month period and involved seven mortgage lenders, four technology companies and more than 3,000 consumers. Some of the consumers conducted their closings with traditional paper documents; others used both paper and electronic resources. Consumers were then surveyed about their experiences with a focus on three areas: understanding, efficiency and empowerment.
According to the CFPB, eClosings provided:
- Better understanding of important loan information like terms and fees;
- A more efficient closing process, with 17% more borrowers finding eClosings more efficient than traditional paper methods; and
- A greater feeling of empowerment by consumers, who said they felt they had more control over the process and played a more active role using eClosing rather than paper.
While the report is not part of the CFPB’s rulemaking process, the Bureau expressed the hope that the mortgage industry would use this information to improve the closing process for consumers. The Bureau’s report pointed out several areas for lenders to address in improving the process, including:
- Technology platform limitations and consumer concerns about eSignature risk
- Need to address lender and investor confusion about hybrid closings
- Coordination and acceptance challenges because of the number of stakeholders involved in the process
- Matching the closing document process to eClosing processes presents a challenge
The Bureau also called on the mortgage industry to conduct further research into how the eClosing process can benefit borrowers.
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