CFPB Studies Electronic Closings

In an age of online banking, e-vites, and digital media, the mortgage loan closing process sticks out as one of the few areas that remain primarily paper-driven. Mortgage loan closings, however, could be the next target of a technological revamping that would eliminate reliance on paper documents. Earlier this month, the Consumer Financial Protection Bureau (CFPB) published a report finding that borrowers can benefit from electronic mortgage closings that require fewer paper documents than the traditional closing process. The report identifies three potential benefits identified by borrowers who closed their mortgages using an electronic platform: increased consumer understanding, a more efficient process, and greater feelings of consumer empowerment.

The CFPB’s report, Leveraging Technology to Empower Mortgage Consumers at Closing: Learnings from the eClosing Pilot, sets forth the CFPB’s findings following an eClosing pilot program that spanned four months and involved more than 3,000 consumers. The program’s design divided consumers into test groups. In these groups, the consumers experienced either a paper closing, a base eClosing, or an advanced eClosing. Following their closings, the borrowers were invited to take a follow-up survey containing questions about their knowledge and understanding of the process, as well as how they felt about the process. Based on the responses to these questions, the CFPB concluded in its report that “eClosing can provide an opportunity to deliver an improved experience for this important step in the mortgage transaction and benefit both industry and consumers.”

While the CFPB encouraged the industry to continue to explore eClosing options for consumers, the report is not a part of the CFPB’s rulemaking process and, thus, is not a mandate for industry players at this time. The CFPB stated that the report is simply the latest component of its “Know Before You Owe” mortgage initiative, which was designed to improve consumers’ knowledge of the home-buying process.

We will have to stay tuned to see if traditional closings go the way of cassette tapes and car phones, with future borrowers proclaiming, “Paper closing documents are so 2015.”

Resources:

CFPB Study Finds Electronic Mortgage Closings Can Benefit Consumers

Leveraging Technology to Empower Mortgage Consumers at Closing: Learnings from the eClosing Pilot