Consumer Financial Protection Bureau
ALTA CEO Participates in Forum Addressing Mortgage Closing Process
|April 29, 2014
ALTA CEO Michelle Korsmo participated in a public forum held by the Consumer Financial Protection Bureau on, April 23 to discuss efforts to improve the mortgage closing process.
- Click here to view a recording of Korsmo's remarks.
The event kicked off with featured remarks by Director Richard Cordray. Housing and Urban Development Secretary Shaun Donovan concluded the event with additional comments.
“Mortgage closings are often fraught with anxiety,” said CFPB Director Richard Cordray. “In December, with an eye toward improving the closing process for consumers, we sought comments from the public on the pain points they have experienced in the mortgage closing process. We heard about three main challenges: lack of time, too much paperwork, and forms that are complex and confusing. We are convinced that we can make important improvements in the closing process. We have taken action to address some of the problems consumers face, but more needs to be done.”
Along with the forum, the CFPB released a report
that finds many consumers are frustrated by the short amount of time they have to review a large stack of complex closing documents when finalizing a mortgage. As part of that research, in January 2014, the Bureau published a request for information about the challenges consumers face when closing on a home.
The request asked for input from market participants, consumers, and other stakeholders on ways to encourage the development of a more streamlined, efficient, and educational closing process that would be beneficial to consumers.
The Bureau heard about three major pain points for consumers during the closing process:
- Not enough time to review: Many consumers are frustrated by the short amount of time they have to look over the closing documents. Often, they do not see the paperwork until they arrive at the closing table. Consumers reported feeling pressure to rush through the paperwork and sign—even when they did not understand the terms.
- Overwhelming stack of paperwork: When consumers close on a home, they often face stacks of paperwork. Some of the forms are intended to help consumers better understand the costs and risks of their mortgages. Other forms are included by lenders as a result of their legal risk assessments. Remaining forms may fulfill federal, state, and local government requirements. The volume of paperwork varies from lender to lender.
- Complexity of documents and errors: Most closing documents are full of legalese and technical jargon. The terms and acronyms are unknown to most consumers. In addition to having little time to read through and understand a large stack of paperwork, consumers often complained that they had little help from the others in the room. Consumers also mentioned that they found errors in their closing documents. Those errors often led to delays as closing agents had to redo the entire closing package.
Korsmo said that ALTA members strongly support efforts to identify and alleviate the pain points consumers have experienced during the home closing process. She added that technology can help better prepare consumers for closing, allowing them to be more active participants.
“While we are focused on technology and the ability for us to receive, sign and return, and retain electronic documents, we cannot lose sight of the importance of personal interaction during the closing process,” Korsmo said. “At the end of the day, consumers are not buying a home from a computer.”
Improving the closing the process through technology by providing electronic documents to the homebuyer will help give the consumer more to time to digest the information about their purchase prior to the closing. Korsmo said ALTA agrees with the CFPB that any implementation of new technology in the home closing process should not reduce opportunities for consumers to ask information or replace the ceremony of the closing process which indicates the importance of the transaction.
“Based on our members’ unique vantage point working with all the parties at the closing table, the Bureau should not only focus on technological innovations but also on improving consumer education about the closing process,” Korsmo said. “The new integrated mortgage disclosure forms that the CFPB developed and will be implemented in August 2015 will help ensure the personal interaction and explanation remains part of the closing experience for consumers.
“We look forward to continuing to work on this important initiative with Director Cordray and staff at the CFPB on this important consumer initiative,” she added.