The Consumer Financial Protection Bureau (CFPB) selected participants for its mortgage eClosing pilot program. 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.
“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 eClosing 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 issues. The bureau also 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 bureau announced pilot participants on Aug. 21. The pilot participants are a mix of technology vendors providing eClosing solutions, and creditors that have contracted to close loans using those solutions.
Vendor companies participating in the pilot include: Accenture Mortgage Cadence; DocMagic Inc.; eLynx; Pavaso Inc.; and PeirsonPatterson LLP.
Creditors taking part in the pilot include: Blanco National Bank; Boeing Employees Credit Union; Franklin First Financial Ltd.; Flagstar Bank; Mountain America Credit Union; Sierra Pacific Mortgage; and Universal American Mortgage Co. (UAMC).
Through the pilot, the bureau hopes 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 CFPB also plans to evaluate whether the order of the documents changes the consumer experience.
The CFPB plans to study various technologies that would let consumers see the entire package of closing documents ahead of time. New disclosure rules that take effect in August 2015 will require closing documents to be shared with consumers three days in advance. The pilot will help the bureau better understand how early review of the documents may affect consumers’ experience in the closing process, the agency said.
The pilot also is aimed at assessing 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.
Companies participating in the pilot provided further details and touted there technology solutions. For instance, eLynx noted that it will work closely with UAMC and Flagstar Bank on the pilot, which will cover a broad range of mortgage scenarios, including conventional, FHA and VA residential mortgages, new home purchases and refinances.
“Our culture is built around innovation and using technology to make the home financing process easier for our customers and business partners,” Tom Moreno, vice president and chief information officer of UAMC/Eagle Home Mortgage, said in a press release. “We look forward to working with other industry leaders and the CFPB to realize the vision of a smooth, paperless closing for the consumer.”
“The CFPB’s focus on closings will accelerate the industry’s progress towards eMortgage,” Sharon Matthews, eLynx president and CEO, added. “By objectively evaluating different solutions and collecting performance metrics, the pilot will help identify technologies that improve the customer experience. Not only are we delighted to be part of this effort, but we are pleased with the confidence our lender customers have shown in our Expedite platform.”
DocMagic announced that its strategic alliance with Pavaso will be expanded to allow the two firms to serve Franklin First Financial as part of the pilot.
“Lenders are now ready for a completely paperless loan closing process,” Dominic Iannitti, president and CEO of DocMagic, said. “Digital Close from Pavaso is designed to be a neutral technology platform that seamlessly integrates with other systems. That, along with DocMagic’s eSign, eVault and eDelivery offerings, provides a fully supported, shrink-wrapped solution for anyone to do an eClosing. This partnership will show the industry and the CFPB that any lender can make the closing process better for consumers through the use of a completely electronic process without incurring the time and cost of creating or maintaining their own systems.”
The eClosing pilot is part of the CFPB’s “Know Before You Owe” mortgage initiative, which is designed to improve the homebuying 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 CFPB is in the process of preparing for this rule to be implemented.
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, the bureau said.
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