CFPB issued a report on the pros and cons of an eClosing process back in April of 2014 announcing their intention to conduct a pilot program to study the effects of the process. Based on their study, they believe an eClosing process will benefit the consumer and the industry.
However, several challenges stand in the way. I previously wrote a white paper on this issue which outlines some of these challenges along with the potential benefits of the process. This was recently highlighted in the National Mortgage News. You can read it here.
CFPB just announced the results of their eClosing pilot program which took place over a 4 month period, involved 7 lenders, over 3000 consumers, 4 technology companies and a host of settlement and real estate agents.
In the end, consumers involved had completed about 1200 surveys which reported the results of those using the eClosing versus those that closed under a traditional paper closing.
They reported that the eClosings resulted in:
- A better understanding by the consumer of the process
- A more efficient closing process
- A greater feeling of “consumer empowerment”
Not surprisingly, they found that these results were reported by the consumers who had the opportunity to receive and review their closing package in advance of the closing. So, was it the eClosing that made the difference? Or, was it the mere fact that the consumer felt much better, and knowledgeable when they weren’t being rushed at the closing table to review and sign a myriad of important papers?
I’m leaning a little more toward the latter. The eClosing may have made the process a little easier for some consumers, but for those without tech savvy, it could also be a little intimidating. The fact they got their papers early for review was good for everybody. To me, that is the key factor.
What can be learned from this pilot?
- Early delivery and explanation of the closing package will improve consumer awareness and reduce last minute delays and problems, regardless of the method;
- eClosings will simplify the closing and reduce time and expense;
- Technology plays a key role in the process of gathering and delivering information and documents;
- CFPB wants an eClosing process.
The challenges still remain as outlined in my White Paper. The pilot did not report on how and when the other stakeholders, like closing agents, and recording offices, will become ready to facilitate the eClosings. They are needed to complete the cycle. I’m sure, over time and distance, they’ll come around.
In the meantime, with the new TRID rules coming soon, lenders should concentrate on getting the closing information and documentation in the hands of their customers as early as possible. This will help them comply with the new rules, help manufacture a better quality loan, with fewer errors and delays at closing, resulting in better customer service, better loan performance and/or quicker deliveries, and, best of all, bigger profits.
The game has changed (whether you like it or not); play different.