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Notary Trend: CFPB Backs eClosings For Mortgages

New eClosing systems are expected to improve the mortgage borrower experience.

The Consumer Financial Protection Bureau gave fully electronic mortgage closings a major endorsement earlier this month when it released the results of its eClosing pilot program. And that could spur wider use of electronic notarization in loan closings.

Technology To Improve the Closing Process
 

“We are ardent believers in the promise of technology, including electronic closing technologies,” CFPB Director Richard Cordray wrote in the opening of the eClosing report. “Using the power of technology has shown the potential to simplify the closing process and empower consumers with better organized information, more time to review that information, and the ability to embed educational resources.”

Cordray said the bureau will continue to explore eClosing technologies as a means of improving the borrower experience.

“We are pleased to see that more companies are adopting eClosing solutions,” Cordray noted. The mortgage industry, he added, sees “eClosing as likely to improve efficiency and accuracy and to lead to lower costs. That could be a win-win outcome on both sides of the closing table.”

Technology also could be used to help implement the Bureau’s new Closing Disclosure, which lenders are required to use for most residential mortgage applications beginning October 3, 2015.

Under CFPB rules, borrowers must receive the Closing Disclosure at least three days before the loan closes. Cordray indicated that eClosing technology could help lenders meet this requirement.

Key Findings of the Pilot Program
 

Among the key findings of the pilot program:

  • Consumers going through an eClosing, on average, received the documents sooner and had more time to review documents than consumers who did a paper closing.
  • eClosing meetings, on average, were much shorter than paper closings.
  • Borrower perceptions of efficiency were higher for eClosing borrowers than for borrowers in the paper closing group.

Some Challenges with eClosings
 

The report acknowledged a number of challenges to implementing eClosing systems, including the need for companies to carry out large-scale changes to their workflow and loan-processing procedures.

Further complicating the process is the large number of separate entities involved in a mortgage transaction.

While a fully electronic closing is the goal, the report noted that it may be more feasible to achieve in increments, such as using a hybrid system that has some documents signed electronically and some with pen and ink.

The pilot program’s findings suggest eClosings will address many of the pain points NSAs raised during a CFPB public comment period prior to the pilot program.

Michael Lewis is Managing Editor of member publications for the National Notary Association.

7 Comments

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Peter W Arnold

17 Aug 2015

Why am I being ask to fill this out to read the article requested? I'm am a member of NNA etc. Please exlain.

National Notary Association

17 Aug 2015

Hello. All our articles are open to the public to read. If you're encountering something that is preventing you from accessing an article, please contact us at social@nationalnotary.org. If you can provide us with a description of the problem and the type of device you're using, we'll try to help you solve the issue.

meaghan

17 Aug 2015

just fyi

Csthy

21 Aug 2015

With the deed of trust being on Eclosing how does that get notarized ? Or will that still need to be printed out and notarized by pen and paper.

Csthy

24 Aug 2015

With the deed of trust being on Eclosing how does that get notarized ? Or will that still need to be printed out and notarized by pen and paper.

National Notary Association

26 Aug 2015

Hello. How the document is notarized would depend on several factors, including state laws regarding electronic documents and whether the recording office has the capability to accept electronic documents or not.

dallasnotarygal@gmail.com

08 Sep 2015

I think that although Eclosings seem to simplify things, it would not allow the borrowers the advantages of having a professional signing agent provide the service that clients have become accustomed to. Also the notarization of the documents would not be in accordance with the state's requirement for a face to face and observing the signing of the document, verifying the valid identification of the signer, etc. Not feasible in the long run.

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