The Consumer Financial Protection Bureau gave fully electronic mortgage closings a major endorsement earlier this month when it released the results of its eClosing pilot program. And that could spur wider use of electronic notarization in loan closings.
Technology to improve the closing process
“We are ardent believers in the promise of technology, including electronic closing technologies,” CFPB Director Richard Cordray wrote in the opening of the eClosing report. “Using the power of technology has shown the potential to simplify the closing process and empower consumers with better organized information, more time to review that information, and the ability to embed educational resources.”
Cordray said the bureau will continue to explore eClosing technologies as a means of improving the borrower experience.
“We are pleased to see that more companies are adopting eClosing solutions,” Cordray noted. The mortgage industry, he added, sees “eClosing as likely to improve efficiency and accuracy and to lead to lower costs. That could be a win-win outcome on both sides of the closing table.”
Technology also could be used to help implement the Bureau’s new Closing Disclosure, which lenders are required to use for most residential mortgage applications beginning October 3, 2015.
Under CFPB rules, borrowers must receive the Closing Disclosure at least three days before the loan closes. Cordray indicated that eClosing technology could help lenders meet this requirement.
Key findings of the pilot program
Among the key findings of the pilot program:
- Consumers going through an eClosing, on average, received the documents sooner and had more time to review documents than consumers who did a paper closing.
- eClosing meetings, on average, were much shorter than paper closings.
- Borrower perceptions of efficiency were higher for eClosing borrowers than for borrowers in the paper closing group.
Some challenges with eClosings
The report acknowledged a number of challenges to implementing eClosing systems, including the need for companies to carry out large-scale changes to their workflow and loan-processing procedures.
Further complicating the process is the large number of separate entities involved in a mortgage transaction.
While a fully electronic closing is the goal, the report noted that it may be more feasible to achieve in increments, such as using a hybrid system that has some documents signed electronically and some with pen and ink.
The pilot program’s findings suggest eClosings will address many of the pain points NSAs raised during a CFPB public comment period prior to the pilot program.