Results from a new study indicate digital loan closings improve borrowers’ understanding of the closing process, increase efficiency and provide consumers with a sense of empowerment.
More than 3,000 consumers were involved in the study. The group of borrowers closed their loans with seven mortgage lenders.
Those lenders were
Flagstar Bank, Franklin First Financial Ltd, Sierra Pacific Mortgage, Blanco National Bank, Boeing Employees Credit Union, Mountain America Credit Union and Universal American Mortgage Co.
Also participating in the project were five mortgage service providers: Accenture Mortgage Cadence, DocMagic Inc., eLynx, Pavaso Inc. and PiersonPatterson LLP.
The study, Leveraging technology to empower mortgage consumers at closing, was announced Wednesday and conducted by the Consumer Financial Protection Bureau based on a pilot program announced in August 2014. More than 1,200 surveys were completed.
The project was prompted by the bureau’s prior findings that consumers felt overwhelmed by the volume of complex paperwork involved in closings, which they didn’t have enough time to review. Consumers also complained about errors in closing documents.
In all, the project took place over four months.
According to the regulator,
borrowers can benefit from digital closings when navigating the mortgage closing process.
“Specifically, the results of the pilot indicate that those who closed their mortgage using an electronic platform are generally better off on measures of understanding, efficiency and feeling empowered than borrowers who used just paper forms,” the CFPB stated.
Consumers were asked questions about important loan information like terms and fees. They were also asked if
they understood the justifications for any differences between quotes and final costs.
Responses ranged
“strongly agree” to “strongly disagree.”
The CFPB found a seven percent positive difference in perceived understanding scores for borrowers who used eClosings versus those who utilized printed documents.
Another area analyzed was how efficient the overall process was. Consumers were asked about
delays, document errors and the time between important steps.
The bureau reported a positive 17 percent difference in favor of digital closings.
Another finding was that borrowers felt more empowered when they closed electronically — with a 15 percent positive difference in the scores.
“The study also found that the 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,” the CFPB said. “This was regardless of whether the paperwork was received electronically or through paper copies, though CFPB believes using an eClosing process can facilitate faster document delivery.”
