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CFPB pushes for eClosings

Fully electronic mortgages will help consumers, regulators say

Housing regulators are attempting to further open the door to the greater use of technology in the housing industry and mortgage process.

During the Consumer Financial Protection Bureau’s mortgage closing process forum in Washington, D.C. on Wednesday, Ann Epstein, product development director of single family sourcing and servicing with Freddie Mac, jested that electronic mortgages have been three to five years out for forever now.

But this should be changing soon. This forum was created to usher in the beginning steps of getting the industry on board with electronic mortgages.

“As part of our Know Before You Owe initiative, we are making a commitment to work with the various stakeholders to use technology in order to improve the mortgage closing experience for consumers,” CFPB Director Director Richard Cordray said.

“We strongly believe that electronic closing solutions – known as eClosings – can lead to more knowledgeable consumers and a much better process for everyone involved.”

On Wednesday morning the CFPB released guidelines for an upcoming eClosing pilot project to assess how electronic closings can benefit consumers as they navigate the mortgage closing process.

“Over the next 15 months before our Know Before You Owe rule goes into effect, we are proceeding deliberately by launching a pilot project.  Some lenders are already offering eClosing solutions. We plan to work with them to explore how we can best facilitate and secure the benefits of this new and improved approach,” Cordray said.

Patricia McClung, acting director of Single Family Program Development with the Federal Housing Administration noted during the forum that one of the FHA’s main goals is to find a more effective use of technology and focus on a greater electronic signature initiative.

But this new effort is not without roadblocks.

“I do think simplifying the residential mortgage loan closing process would be in the best interest of the consumer and adopting universal process/procedures makes sense,” Stan White, associate director with Control Solutions International, said. However, he noted that it could be difficult to get various stakeholders to enact legislation.

"Not all states recognize digital signatures or digital notaries, for recording purposes," White said. "So for a federal agency to enact a global rule, it gets into state rights issues, and laws would need to be passed on the state level to allow for that.”

Then there is the added risk of fraud that comes along with technology.

Michelle Korsmo, vice president of Government Affairs with the American Land Title Association, emphasized during the forum that as electronic mortgage closings gain ground, the industry needs to make sure it still serves clients who do not have ready access to technology.

Meanwhile, the greater use of technology is not stopping at the government level.

Chicago-based Guaranteed Rate recently hired Martin Logan as chief information officer to lead the company’s efforts to completely integrate modern technology into the traditionally paper-based mortgage process and develop the first fully digital mortgage.

“While there will always people who will want hand holding throughout the mortgage process, there will also be the ones who can easily tackle the online mortgage process,” said Logan.

And although it will be a fully digital process, Logan explained that there will always be allowances in the system for extra variables where humans eyes need to look at parts of the process. 

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