Consumer Financial Protection Bureau
CFPB Seeks Participants for E-closing Pilot Program
|May 6, 2014
In addition to releasing a report highlighting consumer pain points in the closing process, the Consumer Financial Protection Bureau (CFPB) released guidelines for an upcoming e-closing pilot project.
In its report, the CFPB identified e-closings as a potential solution to address the pain points. The pilot project, which will launch later this year, is designed to enable the CFPB to better understand the role that e-closings can play in addressing consumers’ pain points. The pilot program is open to settlement agents, lenders and technology companies that are using a digital solution for closings. Click here for details on how to apply to be a participant.
Because e-closings offer both benefits and risks, the CFPB’s pilot project will evaluate whether electronic closings can increase efficiency, consumer understanding and minimize surprises at the closing table.
The e-closing pilot project guidelines include a list the minimum functionalities required of potential participants and highlight some advanced features the CFPB will be looking to test in the pilot. Pilot participants must submit proposals as a partnership between a technology vendor providing an e-closing solution and a lender that has contracted to close loans with that solution.
The minimum required technical functionality for this pilot is as follows:
- Managing document and data transfer: Pilot participant must have an e-closing solution with the ability to store and transfer documents and data securely between different parties involved in the real estate transaction, including the lender, consumer, settlement agent and downstream investors. It must also include, or have a contract with, a secure "e-vault" to store the documents following the transaction.
- Secure technology platform enabling transparent, collaborative workflow: Pilot participant must have a technology "platform" which acts as a central repository for all closing documents and allows for the various stakeholders not only to view documents, but also to interact with them. These platforms can be based in either desktop software or an online site. It is acceptable if documents are available individually or as part of a combined file.
- Facilitating electronic signatures: Pilot participant must offer the ability to accept electronic signatures from the borrower on the closing documentation. Their process must be consistent with the legal framework outlined in ESIGN and UETA. Solutions may utilize a range of technologies to collect legally operative e-signatures, including a digital signature pad or "click to sign" (i.e., clicking to add a computer-generated graphic signature). Participants do not need to accept e-signatures on all closing documents—hybrid processes that combine both legally operative wet signatures and legally operative e-signatures will be acceptable.
- Ability to audit: Pilot participant must have a solution that creates a clear audit trail for the transaction. This requirement includes the use of date and time stamps to track when documents are sent to the borrower and electronically executed at closing. Participants must also use tamper-evident seals on all electronically-signed documentation, be able to track the authoritative, transferable document of record, and ensure that the single version of that document is readily identifiable and non-duplicable.
- Ability to sanitize data: Pilot participant should be able to strip, mask, or otherwise minimize access to sensitive data fields not necessary for analysis, including specific types of personally identifiable information. Pilot participants should also be able to support the CFPB in analyzing and mitigating the privacy risks that may be raised by the pilots.
In addition, the CFPB will require participants to include data samples and consumer awareness methodology in their proposal.
The CFPB will work with participants to test many e-closing features, including those that may:
- Enable consumer understanding: The CFPB plans to test whether educational materials like document summaries, term definitions, or process explanations that can be reviewed prior to the closing table help improve the process for consumers. The Bureau also plans to evaluate whether the order of the documents changes the consumer experience.
- Incentivize 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. Within this pilot, the Bureau would like consumers to have at least three business days prior to closing to review the stack of documents. The Bureau wants to evaluate how early review of the documents may impact the closing process.
- Facilitate error detection: The CFPB wants to test tools that will help both industry members and consumers spot errors and discrepancies in the closing documents. Such a tool could help consumers easily find the differences between their original estimate and their closing disclosures, preventing last minute surprises.