The Consumer Financial Protection Bureau has found that many consumers are frustrated by the short amount of time they have to review a large stack of complex closing documents when finalizing a mortgage.
In conjunction with the findings of their consumer survey, the CFPB also released guidelines for an upcoming eClosing pilot project to assess how electronic closings can benefit consumers as they navigate the mortgage closing process.
“Mortgage closings are often fraught with anxiety,” said CFPB director Richard Cordray. “We have taken action to address some of the problems consumers face, but more needs to be done. Our eClosing pilot project will provide valuable insight into how to improve the closing experience for consumers. ”
The report released today is the culmination of research conducted over the past year. As part of that research, in January 2014, the CFPB surveyed the challenges consumers face when closing on a home.
The request asked for input from market participants, consumers, and other stakeholders on ways to encourage the development of a more streamlined, efficient, and educational closing process that would be beneficial to consumers.
The Bureau heard about three major pain points for consumers:
1) Not enough time to review
Many consumers are frustrated by the short amount of time they have to look over the closing documents. Often, they do not see the paperwork until they arrive at the closing table. Consumers reported feeling pressure to rush through the paperwork and sign—even when they did not understand the terms.
2) Overwhelming stack of paperwork
When consumers close on a home, they often face stacks of paperwork. Some of the forms are intended to help consumers better understand the costs and risks of their mortgages. Other forms are included by lenders as a result of their legal risk assessments. Remaining forms may fulfill federal, state, and local government requirements. The volume of paperwork varies from lender to lender.
3) Complexity of documents and errors
Most closing documents are full of legalese and technical jargon. The terms and acronyms are unknown to most consumers. In addition to having little time to read through and understand a large stack of paperwork, consumers often complained that they had little help from the others in the room. Consumers also mentioned that they found errors in their closing documents. Those errors often led to delays as closing agents had to redo the entire closing package.
These are the latest components of the CFPB’s “Know Before You Owe” mortgage initiative, which is designed to improve the home-buying experience for consumers.
HousingWire will be covering the CFPB's mortgage closing forum in Washington, D.C. this afternoon at 2:30 p.m. ET, featuring remarks by Cordray, Housing and Urban Development Secretary Shaun Donovan and senior federal officials.