In its ongoing efforts to use technology as a way to reduce “pain points” associated with the mortgage closing process, the Consumer Financial Protection Bureau (CFPB) last week named the participants in its new mortgage eClosing pilot program.
The three-month pilot, which is slated to kick off later this year, will explore how the increased use of technology during the mortgage closing process could impact consumer understanding and engagement, as well as save time and money for lenders and other market participants.
Companies participating in the anticipated pilot are a mix of technology vendors that provide electronic mortgage closing solutions, along with creditors that have contracted to close loans using those solutions.
Participating vendors include Accenture Mortgage Cadence; DocMagic, Inc.; eLynx; Pavaso, Inc.; and PiersonPatterson, LLP.
Creditors include Blanco National Bank; Boeing Employees Credit Union; Franklin First Financial, Ltd.; Flagstar Bank; Mountain America Credit Union; Sierra Pacific Mortgage; and Universal American Mortgage Company.
The eClosing program aims to highlight how education materials related to the mortgage closing process, such as document summaries, term definitions or process explanations can improve the experience for consumers if they can be reviewed prior to the closing table. Additionally, the CFPB also plans to evaluate whether the order of the documents changes the consumer experience.
The Bureau also plans to study the various technologies that would let consumers see the entire package of closing documents ahead of time, as this could show how early review of the documents may affect consumers’ experience in the closing process.
Above all, the eClosing program intends to make processes related to mortgage closing more efficient.
Through the pilot, the CFPB plans to study how electronic closings may help both consumers and industry members save both time and money by preventing “last-minute surprises” and “unnecessary bottlenecks” caused by outdated process, the Bureau stated in a release.
“We believe that eClosings have the potential to create a better process for everyone involved,” said CFPB Director Richard Cordray in a written statement. “This eClosing pilot project will provide valuable insight as we work to improve the closing experience for consumers.”
In April, the CFPB identified in a report the most “painful points” associated with the mortgage closing process, assessing input from consumers, along with various other market participants and stakeholders.
The report, which was birthed from CFPB’s “Know Before You Owe” initiative, highlighted three major pain points, including not having enough time to review loan closing documents, overwhelming stacks of paperwork and the complexity of documents in general.
In November 2013, the Bureau issued a rule requiring two new mortgage disclosure forms that lay out the terms of a mortgage for a homebuyer.
The first form included a Loan Estimate, which provides a summary of the key loan terms as well as estimated loan and closing costs. The second form is a Closing Disclosure, which offers a detailed accounting of the transaction.
Currently, the CFPB is in the process of preparing for this rule to be implemented in August 2015.
While the eClosing pilot is not part of the rulemaking process, CFPB says it is designed to identify best practices in the marketplace.
Written by Jason Oliva