CFPB Study Finds E-closings Can Improve Consumer Experience

August 6, 2015

Results from a fourth-month pilot program shows that borrowers navigating the mortgage process can benefit from electronic closings, according to the Consumer Financial Protection Bureau (CFPB).

In 2014, the CFPB outlined major “pain points” associated with the closing process. The CFPB found that consumers felt like they did not have enough time to review the documents and felt overwhelmed by the stack of complex paperwork.

The CFPB identified e-closings as one solution to address some of these pain points. The bureau launched a pilot program last year that involved seven lenders, five technology companies, numerous settlement agents and real estate professionals, and more than 3,000 consumers. Some consumers used traditional paper documents, others used a complete e-closing process and others used a hybrid of electronic resources and paper documents. Borrowers who completed mortgage transactions during the pilot were invited to complete a follow-up survey. About 1,200 surveys were completed.

The CFPB report, “Leveraging technology to empower mortgage consumers at closing,” found that e-closings were associated with:

  • Better consumer understanding: The CFPB measured whether consumers felt like they understood the process. The CFPB asked consumers questions about important loan information, such as the terms and fees. And it asked consumers if they understood the justifications for any differences between quotes and final costs. The study found a 7 percent positive difference in perceived understanding scores for borrowers using e-closings compared to borrowers using paper documents.
  • A more efficient process: The survey asked consumers about their perceptions of how efficient the overall process was. This included their perceptions about delays, errors in the documents, and the time between important steps. The study found a 17 percent positive difference in scores for borrowers using e-closings compared to borrowers using paper documents.
  • Greater feelings of consumer empowerment: The CFPB asked consumers how empowered they felt after the process. The survey asked consumers to respond to statements such as, “I felt I had control over the closing process” or “I felt empowered to play an active role in my closing process.” Other questions asked about having sufficient time to review documents, ask questions, and flag concerns. The study found a 15 percent positive difference in the scores for the e-closing borrowers compared to borrowers using paper documents.

The report also found that consumers who showed the best results on all three measurements of empowerment, efficiency and understanding received and reviewed their closing documents in advance of the closing meeting. This was regardless of whether the paperwork was received electronically or through paper copies, though CFPB believes using an e-closing process can facilitate faster document delivery.

“While technology alone will not address all consumer concerns in the closing process, our study showed that e-closings do offer the potential to make the process less complex,” said CFPB Director Richard Cordray. “We expect this pilot project and its findings to help inform further innovation that will be a win-win for consumers and industry alike.”

The CFPB noted that the report is not part of a rulemaking process, but rather initiated to promote best practices in the marketplace. The CFPB will continue to work collaboratively with all stakeholders, including other regulators, to implement its new rule for mortgage disclosures and improve the mortgage closing experience for consumers.

ALTA looks forward to continue working with the CFPB on its e-closing initiative and serving as a resource to help improve the real estate transaction for consumers and industry.

“For more than a decade, the electronic mortgage has been considered the Holy Grail for real estate transactions,” said Michelle Korsmo, ALTA’s chief executive officer.  “The CFPB’s e-closing pilot program shows that advances in technology have the potential to improve the consumer experience and understanding at the closing table. ALTA members share the bureau’s goal of helping ensure consumers have a more efficient and streamlined closing process.

“As the closing experience continues to evolve, we must remember that purchasing a home is the largest investment most Americans will make in their lifetime. Homebuyers navigating their real estate transaction will continue to rely on settlement agents and real estate attorneys as important resources that provide information and guidance throughout the process,” Korsmo added.

ALTA encourages the CFPB to do five things to make e-closings work for consumers and the industry:

  1. Improve the TILA-RESPA Integrated Disclosures (TRID) rule to make it easier for lenders to comply and provide consumers an e-closing experience. ALTA believes lenders need more certainty about what evidence of compliance could look like if using an e-closing platform. Companies investing in e-closing platforms should not have to guess about whether those platforms produce compliance documentation that will be sufficient when the CFPB or other regulators come for an audit.
  2. Work with stakeholders and investors (warehouse lenders and the secondary market) to continue to the conversation about market requirements/incentives to adopt e-closings
  3. Define good e-closing practices under consumer laws
  4. Work with GSEs and local public recorders to standardize e-closings and make it easier for them to accept electronically signed documents
  5. Conduct additional research on the impact of e-closings have on mortgage fraud and how to improve consumer comprehension/actual knowledge about the transaction

Lessons Learned

The CFPB report outlined common practices that aided successful e-closings. These included:

  • Clear expectations and consistent communication between all lenders, vendors and settlement providers
  • Commitment from company leadership was vital to driving the change and ensuring buy-in across the organization for the efforts involved in implementing e-closings
  • Allowing sufficient time for preparation and/or rollout, including robust user testing, minimized technology issues that consumers and settlement agents faced during the closing process
  • Upfront and continuous training of all stakeholders

The report also revealed operational challenges and internal roadblocks to implementing e-closings:

  • In some cases, pilot participants had consumers sign more documents with paper and ink than expected for a number of reasons, including limitations of technology platforms, a perception of risk regarding e-signatures and delays in pursuing implementation of electronic notarization.
  • Some lenders were not clear if using a hybrid e-closing process was acceptable when selling loans to secondary market investors. The CFPB said all resolved the concerns with their investors and were able to implement hybrid e-closing processes.
  • Some participants reiterated that additional guidance from investors on how to address hybrid solutions would be particularly helpful, particularly before broad-based industry use.
  • Large-scale workflow and process changes were required to implement e-closing solutions, particularly early document delivery for advanced e-closing.

More information about the CFPB’s e-closing report:

If you have questions or comments about the CFPB's e-closing report, email Justin Ailes, ALTA's vice president of government affairs.


Contact ALTA at 202-296-3671 or [email protected].