Get ready for electronic mortgage closings
Consumers who have electronic closings of their mortgages have a more efficient experience with greater understanding of the process than do those who are presented with stacks of papers, the Consumer Financial Protection Bureau said on Wednesday.
The federal agency put out a report called "Know Before You Owe," which analyzed the experience of eClosings and found that they largely left consumers feeling more "empowered" than traditional mortgage closings. Sitting down in front of piles of documents, the CFPB said, can be overwhelming to consumers and isn't conducive to understanding the various documents that they're signing.
"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," CFPB Director Richard Cordray said in a statement. "We expect this pilot project and its findings to help inform further innovation that will be a win-win for consumers and industry alike."
In prepared remarks, Cordray added that in today's world, consumers have pushed past the printed document stage in so many other areas that it makes sense mortgage closings should follow suit.
"So much of our lives today can be conducted online and improved with the aid of technology," he said. "We can manage our retirement savings online. We can pay our taxes online, and access online help. We can conduct much of our banking over the Internet. Technology offers an important platform for learning and understanding many complex things."
A study by the CFPB into the mortgage process and what caused "major pain points" found that the closing process and sitting before mountains of documents was overwhelming, and that borrowers didn't have time to go through documents put in front of them. In addition, many reported finding mistakes in the paperwork.
With eClosings, the CFPB said, the information is delivered in a way that better allows consumers to process the information they're signing off on and appears to give them more time to review documents and related educational tools to smooth the closing process.
The report was part of a series of changes to the mortgage process. New mortgage disclosure rules begin in October involving changes to two forms: the Loan Estimate form, which summarizes loan terms and the loan and closing costs, and the Closing Disclosure form, which lists the transaction's details.
