For borrowers about to wrap up what is normally their biggest investment, mortgage closings can be a scary process full of stacks of documents demanding their signatures and initials.
But consumers who close their mortgage using an electronic platform, or eClosing, are generally better off on measures of “understanding, efficiency, and feeling empowered than borrowers who used just paper forms,” according to the U.S. Consumer Financial Protection Bureau (CFPB).
A pilot program conducted by the CFPB at seven lenders found that customers who received and reviewed documents electronically prior to closing demonstrated greater understanding of the process.
But the improved eClosing outcomes were more beneficial for homebuyers making purchases than for those refinancing, the CFPB said.
Moreover, mortgage closings were much shorter with eClosing because borrowers took the time to review documents before the final signing session.
“While technology alone will not address all consumer concerns in the closing process, our study showed that eClosings 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 benefits of eClosings can include faster delivery of the documents and embedded links to help consumers understand specific terms.
The CFPB points out that eClosing transactions are already happening in the market today. But adoption is low, the Bureau said.
The CFPB says it “believes that the eClosing process has the potential to give consumers more time to review closing documents while also providing them with educational tools that can help them navigate the closing process more successfully.”