HOMEBUYERS WHO RECEIVE THEIR CLOSING DOCUMENTS well in advance of their closing date are more likely to report higher levels of understanding, efficiency and empowerment regarding the real estate closing process, according to a study conducted by the Consumer Financial Protection Bureau.
CFPB Director Richard Cordray delivered prepared remarks during a forum about the pilot project known as “eClosings.”
“Though the sample for this pilot was somewhat limited, the correlation between eClosings and the positive outcomes we observed is encouraging and consistent with our expectations,” Cordray said.
The program seeks to assuage three primary gripes consumers have about the real estate closing process: They don’t have enough time to review documents; they are overwhelmed by the sheer volume of closing documents; they discover errors in closing documents but remain under urgent pressure to close.
Over a four-month period, the project surveyed approximately 1,200 homebuyers about their feelings surrounding the real estate closing process. Some of the respondents closed with traditional paper documents, while some closed with electronic documents and others still closed with a combination of electronic and paper documents.
“[H]omebuyers end up signing documents without properly understanding or evaluating the most critical information,” Cordray said. “This creates new anxiety as they worry about what was buried in the stack of paper that may create some nasty surprises in the years ahead.”
The findings of the eClosings pilot program are consistent with the impetus behind the “Know Before You Owe” rule and implementation of the TILA-RESPA Integrated Disclosures that have many title agents and lenders scrambling to ensure they are in compliance by October 3 when the new rule takes effect.
Implementation of the new mortgage disclosure rules is expected to cost settlement service providers $67.8 million and lenders $207 million over the next five years, bringing the total cost to $1.3 billion. In his remarks, Cordray said eClosings “hold much promise” for the mortgage industry to improve efficiency and accuracy at a potentially lesser cost.
“While technology alone will not address all consumer concerns, eClosings do offer potential to make the process less complex,” Cordray said.
View Cordray’s remarks in their entirety at the CFPB newsroom.