The Consumer Financial Protection Bureau (CFPB) selected its participants for its mortgage eClosing pilot program. In April, the agency announced it would launch a new electronic closing (eClosing) pilot program to explore new avenues to make closings less complex for consumers.
The three-month pilot will begin later this year, and will explore how the increased use of technology during the mortgage closing process could increase understanding.
BREAKING NEWS: CFPB unveils eClosing initiative
“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.”
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:
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 American Credit Union; Sierra Pacific Mortgage and Universal American Mortgage Co.
Developing a more streamlined and efficient closing process is the next phase in the CFPB’s Know Before You Owe initiative that began in May 2011, when the bureau released its initial RESPA/Truth in Lending Act integrated mortgage disclosure prototypes.
The first phase of the initiative was to draft and release the new disclosure forms, which the bureau did in November 2013. Then, in January, the CFPB published a notice in the Federal Register, requesting information from the public about the closing process. The bureau said it was looking for “key consumer pain points” associated with closings and how those pain points could be “addressed by market innovations and new technology.”
The pilot will study many eClosing features, including those that may:
Enable consumer understandings: 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.
Incentive 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. 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.