A preliminary look at the role of technology in improving the closing process for consumers, April 2014

“The mortgage closing process is complex and often onerous for all involved. For most consumers, closing a mortgage signifies the most substantial financial transaction they will complete in their lifetimes. However, the process can be time-consuming and confusing. Consumers face a daunting package of closing documents that is too large to absorb and too difficult to understand. This makes many consumers feel overwhelmed and with little control over this important process. For industry, the cumbersome process and flood of paperwork increases complexity, produces delays, and ultimately adds cost. The CFPB asked consumers and industry stakeholders for comments in order to understand the key challenges generating these frustrations during the closing process. In addition to the number and complexity of documents mentioned above, consumers, lenders, settlement agents, and others often reported issues with the process itself. In many cases, consumers do not see the closing package until they arrive at the closing table, which is usually too late to digest the information, ask questions about changes in fees, or correct errors, without delaying the closing. Furthermore, consumers often feel alone in the process; some claim that key participants are difficult to reach and that they do not know who is available to explain the documents and process. As a result of these challenges, consumers are often stressed and confused and do not think they can play an active role in their closing process, and industry stakeholders are burdened by complexity and a lack of standardization. According to the CFPB’s research, two root causes drive these problems. First, the closing package is large and complex due to the high number of federal, state, and local regulations requiring disclosures, as well as additional documents added by lenders and investors as part of their risk management processes. Second, the closing process has a high level of variability due to the number of stakeholders involved and the fact that neither documents nor practices are uniform across transactions; this variability often leads to increased confusion and errors.”