On August 5, 2015, the CFPB issued a report on its study of the CFPB’s mortgage loan eClosing project and held a public forum addressing the study results. As we reported, the CFPB launched the eClosing project to determine if the mortgage closing process could be improved for consumers through the use of technology.
The participants in the pilot project included seven lenders, four technology companies, many settlement agents and real estate professionals and consumers with over 3,292 loans. Certain consumers received traditional paper documents and certain consumers received either all electronic documents or a hybrid of electronic and paper documents. The borrowers who participated in the project were invited to complete a follow-up survey, and 1,254 surveys were completed.
The CFPB focused on three specific areas—consumer understanding and empowerment, and the efficiency of the closing process. The CFPB advised that the study showed:
- A 7 percent positive difference in perceived understanding for borrowers using eClosing as compared to borrowers using paper documents.
- A 15 percent positive difference in the scores on consumer empowerment—or a feeling of control over the process—for eClosing borrowers as compared to borrowers using paper documents.
- A 17 percent positive difference in scores on efficiency for eClosing borrowers as compared to borrowers using paper documents.
The CFPB cited the earlier receipt of documents by consumers using the eClosing process as a benefit, and the early receipt apparently contributed significantly to positive scores regarding consumer understanding and empowerment and the efficiency of the process. However, at the forum, the CFPB did not focus on whether the earlier receipt of documents, whether paper or electronic, or the use of electronic documents was the driving factor. Certain industry participants in the forum noted the earlier receipt of documents, whether paper or electronic, was most important.
The TILA/RESPA Integrated Disclosure (TRID) rule, which becomes effective October 3, 2015, will require that consumers have the Closing Disclosure in hand not less than three business days before consummation, and the disclosure can be delivered in paper form or, with consumer consent, electronically. Certain borrowers in the pilot project not only received disclosures electronically before closing but also received the entire closing package electronically. The TRID rule will not require early delivery of the entire closing package. A consumer advocate at the forum stated that providing the entire closing package earlier would be an improvement. One particular benefit of electronic documents touted by many forum participants is the ability to include links to CFPB educational materials that provide helpful information on matters addressed in the documents.
During the forum an industry participant advocated, at least initially, the use of the hybrid approach that was included in the pilot project. With that approach, consumers received documents electronically in advance and signed paper documents at the closing. The participant noted as important factors that there are investors that will not accept, and many recording offices are not able to accept, electronic documents. The CFPB study also noted challenges to the use of electronic documents that are presented by notarization requirements.
Although the CPFB touted, at the forum, that the use of electronic documents provides for earlier receipt of documents and overall efficiency, it did not address an aspect of the TRID rule that frustrates these goals. Currently under the E-Sign Act, a creditor can deliver documents to obtain consumer consent to electronic disclosures along with the electronic disclosures. However, the TRID rule requires that the creditor first complete the consent process under the E-Sign Act and then deliver the electronic disclosures. Although in adopting the TRID rule the CFPB asserted that it did not believe that this extra step would pose a burden on the industry, industry members have found the extra step does creates a burden in the implementation of the TRID rule and the loan process.
The CFPB noted in the study that it is encouraged by the results of the pilot project and remains interested in further evaluating and encouraging more consumer-friendly closing processes, particularly after the marketplace has implemented the TRID rule. At the forum, a consumer advocate that supported moving to an eClosing process cautioned that some consumers do not have ready access to technology and that they also should be able to experience an efficient closing process.