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Your Money Adviser

Using Technology to Close a Mortgage, and Relieve Stress

Anyone who has purchased a home knows how stressful the closing of a mortgage loan can be.

A typical closing — the meeting to complete the loan — involves signing stacks of legal-size documents laden with financial jargon. Borrowers may be anxious about the amount of money involved and worry about whether they understand the forms they’re signing. Document packages can total 100 pages or more, and closings can take hours.

That’s why some lenders are starting to automate the process, using technology to create “e-closings” that require fewer paper documents.

Mountain America Credit Union, with branches in Utah and four other states, has been offering largely “paperless” closings for several years. Amy Moser, the credit union’s vice president for mortgage services, said about 70 percent of its mortgages were closed using a hybrid electronic process.

Crucial closing documents are provided to borrowers electronically in advance. Just the note — the legal document you sign, agreeing to repay the mortgage — is signed the traditional way, on paper with a pen. Everything else is signed with just one signature, on an electronic pad, and a set of the documents is given to the borrower on a portable drive.

“You don’t have to carry a stack of documents home,” she said.

Overall adoption of electronic closings remains low, but their use could make things simpler for borrowers, according to recent findings by the Consumer Financial Protection Bureau.

This year, the bureau conducted a four-month pilot program involving seven lenders, several technology vendors and 3,000 consumers. The program found that on average, borrowers who used electronic closings scored higher on various measures, like their understanding of the process, its perceived efficiency and borrower “empowerment.” (The findings are limited because the program wasn’t a randomized study, since borrowers could opt out of electronic closings if they wished, the bureau noted.)

The bureau concluded that early access to closing documents benefited borrowers regardless of whether the closing was electronic or paper-based. But it said that early delivery of documents occurred more consistently with electronic closings.

Ms. Moser, whose credit union was among those taking part in the study, said first-time borrowers in particular liked the process, since they could more easily review documents electronically in advance and consult with a relative or other more experienced borrower.

Other lenders in the study, however, were new to electronic closings, or worked with partners who were unfamiliar with it — and there was a learning curve. Some borrowers reported frustration because the closing agent lacked experience with the electronic process. “Those with more experience before had an easier time,” said Patricia McClung, the bureau’s assistant director for mortgage markets.

What’s more, significant barriers remain to broad adoption of e-closings, the report noted. A sticking point, for instance, is the varying availability of electronic notary services; some states allow notaries to sign forms remotely, others do not.

New federal rules taking effect this fall aim to simplify the borrowing process for consumers, even if they use the traditional paper closing format.

Under the new rules, which take effect Oct. 3, borrowers must be given a simple loan estimate, including information about the loan amount, interest rate and monthly payment, three days after submitting a mortgage application.

Then, at least three days before the scheduled closing, applicants must receive a five-page disclosure, so they can review the loan terms, see how much they must pay at the closing and ask questions. Currently, borrowers might not receive such information until they show up for the closing, and might feel pressured to sign documents without fully understanding them.

Here are some questions to consider about mortgage closings:

How can I find a lender that offers electronic closings?

Only a small proportion of lenders currently offer some form of electronic closing, the Consumer Financial Protection Bureau says. But it doesn’t hurt to ask your mortgage lender, Ms. McClung said. “It’s becoming more prevalent all the time,” she said.

Weren’t the new mortgage forms supposed to be in use this summer?

The new rules and the redesigned disclosures were originally scheduled to take effect Aug. 1. But the bureau delayed the them, partly because of administrative problems.

How will borrowers receive the new disclosure documents?

Lenders can supply the closing disclosure in person or by other means, including traditional mail and email, according to bureau guidelines.

Email: yourmoneyadviser@nytimes.com

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