The results are in and borrowers can in fact benefit from electronic closings as part of the mortgage loan process.
The Consumer Financial Protection Bureau finished its study on the benefits of electronic closings that it started back in April 2014.
The CFPB wanted to work with some of the lenders that already offered eClosing solutions in order to explore how they can best facilitate the process.
The pilot program went alongside the bureau’s Know Before You Owe initiative, which goes into effect on Oct 3.
The new initiative requires closing documents to be shared with consumers three days in advance. Through this program, the CFPB wanted to better monitor how the early review will impact the consumers’ experience in the closing process.
The CFPB selected several companies to kick-start the exploration of the increased use of technology during the mortgage closing process. Click here for the list.
In particular, the pilot program found the following three things to be true:
1. Better consumer understanding:
The CFPB measured whether consumers felt like they understood the process. The CFPB asked consumers questions about important loan information, such as the terms and fees. And it asked consumers if they understood the justifications for any differences between quotes and final costs. The study found a 7% positive difference in perceived understanding scores for borrowers using eClosings compared to borrowers using paper documents.
2. A more efficient process:
The survey asked consumers about their perceptions of how efficient the overall process was. This included their perceptions about delays, errors in the documents, and the time between important steps. The study found a 17% positive difference in scores for borrowers using eClosings compared to borrowers using paper documents.
3. Greater feelings of consumer empowerment:
The CFPB asked consumers how empowered they felt after the process. The survey asked consumers to respond to statements such as, “I felt I had control over the closing process” or “I felt empowered to play an active role in my closing process.” Other questions asked about having sufficient time to review documents, ask questions, and flag concerns. The study found a 15 percent positive difference in the scores for the eClosing borrowers compared to borrowers using paper documents.
“While technology alone will not address all consumer concerns in the closing process, our study showed that eClosings do offer the potential to make the process less complex,” said CFPB Director Richard Cordray. “We expect this pilot project and its findings to help inform further innovation that will be a win-win for consumers and industry alike.”
Check here for the full study results.
