The Consumer Financial Protection Bureau (CFPB) announced the selection of participants for its mortgage eClosing pilot program Aug. 21.
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.
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 also is 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.
“Mortgage closings can be stressful, confusing and overwhelming,” CFPB Director Richard Cordray said. “We believe that eClosings have the potential to create a better process for everyone involved. This eCosing pilot project will provide valuable insight as we work to improve the closing experience for consumers.”
In April, 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 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 that were announced include:
- Vendors: Accenture Mortgage Cadence; DocMagic Inc.; eLynx; Pavaso Inc.; and PeirsonPatterson 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.
The pilot will study many eClosing features, including those that may:
- Enable consumer understanding: The CFPB aims to better understand how educational materials such as 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 program is not part of a rulemaking process, but rather is designed to identify best practices in the marketplace. The program guidelines can be found on the CFPB’s website.