Mortgage Closings May Soon (Finally) Become Entirely Digital

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The CFPB (Consumer Financial Protection Bureau) released a report on their “Know Before You Owe” eClosing project, which will benefit consumers through the use of an electronic platform in the mortgage process. Their goal is to employ best practices in the field to improve the mortgage closing experience for consumers. Their study has found that consumers who’ve made use of the closing process electronically have had better understanding, more efficiency, and feelings of empowerment.

Last year, the CFPB had reported what they referred to as “pain points” in the closing process for consumers: this included lack of time and being overwhelmed by all the multifaceted documents, as well as finding errors in the very heavy load of paperwork. The bureau presented electronic closings, or “eclosings” as one solution to these pain points. Purely defined, eclosings are mortgage closings utilizing technology for the delivery of and signing of documents with aid embedded within the platform for consumers to better understand the process.

After a Four-Month Period, Here’s What They Found

Seven different lenders, three thousand consumers, and four technology companies participated in their pilot program. Some of the customers were asked to sign their documents electronically while the others used the traditional pen and paper. Here are the three major findings from the CPFB:

  • Better consumer understanding: The CFPB measured whether consumers felt like they understood the process. The CFPB asked consumers questions about important loan information, such as the terms and fees. And it asked consumers if they understood the justifications for any differences between quotes and final costs. The study found a 7 percent positive difference in perceived understanding scores for borrowers using eClosings compared to borrowers using paper documents.
  • A more efficient process: The survey asked consumers about their perceptions of how efficient the overall process was. This included their perceptions about delays, errors in the documents, and the time between important steps. The study found a 17 percent positive difference in scores for borrowers using eClosings compared to borrowers using paper documents.
  • Greater feelings of consumer empowerment: The CFPB asked consumers how empowered they felt after the process. The survey asked consumers to respond to statements such as, “I felt I had control over the closing process” or “I felt empowered to play an active role in my closing process.” Other questions asked about having sufficient time to review documents, ask questions, and flag concerns. The study found a 15 percent positive difference in the scores for the eClosing borrowers compared to borrowers using paper documents.

Moving forward, consumers will have more time to review the documents and the ability to become more educated in the home buying process, as the tools embedded within the platform will assist in their understanding through the entire closing procedure. Today, it has been reported that 90% of people do not attend their own closings. This provokes the question of whether or not they would have been more willing to attend had they had a better understand of all the paperwork and the process itself.

It has been noted that the bureau’s closure rule will take effect in October 2015. It will require two easier, restructured “Know Before You Owe” mortgage disclosure forms that will clearly present the terms of the loan for a homebuyer: the Loan Estimate & Closing Disclosure.

As a realtor in 2015, electronic platforms such as DotBlue are being used on a daily basis to facilitate & document the signing of important documents. In this digital age where people are spending more time reading the news and even books on their cellular phones and kindles, we are just steps away from making the move towards a greener and more efficient home buying experience. Who needs a briefcase full of paperwork when everything is right at your fingertips?

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