Closing on a mortgage can be a frustrating, overwhelming and sometimes baffling process for consumers. That’s why the federal Consumer Financial Protection Bureau has decided to launch a pilot project in which it will evaluate whether electronic closings can help consumers navigate the process better.
The bureau has released guidelines for the project along with a report detailing borrower challenges during the mortgage closing process. The top three “pain points” noted in the report were: not having enough time to review closing documents; an overwhelming stack of paperwork; and documents that were full of terms they could not understand or contained errors.
A new rule that will go into effect in August 2015 requiring the use of new, simplified mortgage disclosure forms will address at least one of these concerns: Consumers will receive a Closing Disclosure form at least three business days before their closing date.
“Mortgage closings are often fraught with anxiety,” said CFPB Director Richard Cordray in a statement. “We have taken action to address some of the problems consumers face, but more needs to be done. Our e-closing pilot project will provide valuable insight into how to improve the closing experience for consumers.”
Those who would like to participate in the pilot project must submit proposals as a partnership between a technology vendor providing an e-closing platform and a lender that has contracted to close loans with that platform. The project will launch later this year.
Some of the features the agency would like to test are those that could enable consumer understanding, such as educational materials that could be reviewed before the closing table; technologies that would let consumers see an entire package of closing documents at least three business days before closing; and tools that would help both industry pros and consumers detect errors and discrepancies in closing documents.