On April 23, in conjunction with its “Know Before You Owe” initiative, the CFPB hosted a mortgage closing process forum, which featured remarks from Richard Cordray, HUD Secretary Shaun Donovan, consumer advocates, and industry representatives, including BuckleySandler’s David Whitaker. The Bureau published a report summarizing the results of its Request for Information about the challenges consumers face when closing on a home. The Bureau identified several “pain points” consumers regularly experience during the closing process. Consumers reported being frustrated by:
- The short amount of time they have to review a large number of closing documents, even when they did not understand the terms;
- The lack of resources capable of providing explanations about closing documents, which are often full of legalese and technical jargon; and
- Minor errors in paperwork resulting in long delays affecting multiple parties.
The CFPB’s Know Before You Owe rule, which combines the current TILA and RESPA mortgage disclosures, seeks to address several of these concerns by requiring that the new closing disclosure be provided at least three business days prior to closing. The new rule will be effective August 1, 2015.
At the forum, the CFPB expressed the view that more comprehensive use of electronic records and signatures in residential mortgage closings, or “eClosings”, also have the potential to significantly ameliorate these “pain points.” To that end, the Bureau released guidelines for an upcoming eClosing pilot project to study how eClosings can benefit consumers and address some of the challenges borrowers face at closing. Because eClosings offer both benefits and risks, the CFPB’s pilot project will evaluate whether they can increase efficiency and consumer understanding while minimize surprises and delays at the closing table. The guidelines list the minimum functional requirements of an eClosing platform including capabilities related to data security, workflow, and electronic signature collection. The Bureau is also interested in testing advanced functionality that will empower consumers to better understand and engage in the closing process, enable and reward early document review, and facilitate the detection and correction of errors in closing documents. Potential pilot participants must submit proposals as a partnership between a technology vendor providing an eClosing platform and a lender that has contracted to close loans utilizing that platform.
The CFPB was joined at the forum by representatives by the VA, FHA, FHFA, USDA, Ginnie Mae, Freddie Mac and Fannie Mae, all of whom voiced support for expanding the use of electronic records and signatures in mortgage closings. All of the agencies and GSEs expressed their willingness to collaborate with industry and the CFPB on the eClosing pilot project.
An audio and video recording of the forum will be available at consumerfinance.gov shortly.