Digital Mortgage Closings May Make Process Easier, Less Overwhelming
A study by the Consumer Financial Protection Bureau (CFPB) found that consumers who used an electronic process during mortgage closings felt more knowledgeable and empowered than those that used strictly paper documents.
The study used survey data from 1,200 mortgage borrowers to address some of the pain points associated with the closings process. Data seem to suggest that electronic closings, or eClosings, could make consumers feel more at ease and knowledgeable about the terms of their loan.
The surveys come about a year after the CFPB released a report that outlined the major pain points associated with the closing process. The report found that consumers felt like they didn't have enough time to review the giant stack of documents they are required to sign. On top of feeling overwhelmed, the mountain of paperwork sometimes included errors.
eClosings isn't a new phenomenon, as the industry has already started using the process. That said, adoption by lenders is still low. The study, done over a four-month period, involved seven lenders, more than 3,000 consumers, four technology companies, and many settlement agents and real estate professional. About 1,200 surveys about the process were completed. Consumers either used eClosings, traditional paperwork, or a mix of both.
Consumers who used the eClosings system reported that they felt that they had a better understanding of the process, which they said was also more efficient. All groups that had an opportunity to review the documents beforehand felt better about the process, and the CFPB believes that eClosings can speed up the rate at which documents are sent to consumers.
New Mortgage Documents Coming in October
Borrowers who apply for a mortgage after Oct. 3 will be provided two additional forms that intend to clearly outline all associated loan terms and costs.
The Loan Estimate is provided to consumers within three business days after they submit a loan application. It provides a summary of the key loan terms and estimated loan and closing costs. Consumers will then receive a Closing Disclosure three days before closing, which offers a detailed accounting of the transaction.