Finally, true mortgage pioneers are showing up and advancing the space. The Consumer Financial Protection Bureau (CFPB) today announced the selection of participants for its mortgage eClosing pilot program. The three-month pilot will begin later this year, and will explore how the increased use of technology during the mortgage closing process could affect consumer understanding and engagement and save time and money for consumers, lenders, and other market participants. Here’s who has stepped up:
The companies participating in the pilot are a mix of technology vendors providing eClosing solutions, and creditors that have contracted to close loans using those solutions. The participants being announced today are:
Vendors: Accenture Mortgage Cadence; DocMagic, Inc.; eLynx; Pavaso, Inc.; and PiersonPatterson, LLP
Creditors: 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
“Mortgage closings can be stressful, confusing, and overwhelming,” said CFPB Director Richard Cordray. “We believe that eClosings have the potential to create a better process for everyone involved. This eClosing pilot project will provide valuable insight as we work to improve the closing experience for consumers.”
In April 2014 the CFPB released a report that outlined the major pain points associated with the closing process, and offered a vision for how electronic closings could help mitigate some of those pain points. Along with the report, the CFPB released a set of pilot guidelines and called for proposals. The pilot project, a follow-up to the April report, will enable the CFPB to better understand the role that eClosings can play in addressing consumers’ pain points.
The pilot will study many eClosing features, including those that may:
Enable consumer understanding: The CFPB aims to better understand how educational materials like document summaries, term definitions, or process explanations that can be reviewed prior to the closing table can help improve the process for consumers. The Bureau also plans to evaluate whether the order of the documents changes the consumer experience.
Incentivize consumer engagement through early document review: The CFPB plans to study the various technologies that would let consumers see the entire package of closing documents ahead of time. The CFPB’s “Know Before You Owe” mortgage rules, which take effect in August 2015, require closing documents to be shared with consumers three days in advance. This pilot will help the Bureau better understand how early review of the documents may affect consumers’ experience in the closing process.
Make processes more efficient: The CFPB plans to study how electronic closings may help both consumers and industry members save time and money by preventing last-minute surprises and unnecessary bottlenecks caused by outdated processes.
The eClosing pilot is part of the CFPB’s “Know Before You Owe” mortgage initiative, which is designed to improve the home-buying experience for consumers. In November 2013, the Bureau issued a rule requiring two new, easier-to-use mortgage disclosure forms that clearly lay out the terms of a mortgage for a homebuyer. The first form is a Loan Estimate, which provides a summary of the key loan terms and estimated loan and closing costs. The second form is a clearer Closing Disclosure, which offers a detailed accounting of the transaction. The Bureau is now in the process of preparing for this rule to be implemented in August 2015. The CFPB is also working to improve the consumer experience during the loan application process, exploring ways that technology can help consumers interpret and evaluate loan offers and choose the most appropriate loan for their situation.
The eClosing pilot program is not part of a rulemaking process, but rather is designed to identify best practices in the marketplace. The eClosing pilot guidelines announced in April of 2014 can be found at: http://files.consumerfinance.gov/f/201404_cfpb_guidelines_eclosing-pilot.pdf
About The Author
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at firstname.lastname@example.org.