August 6, 2015
eClosings
The Consumer Financial Protection Bureau has issued a report on its eClosing pilot, Leveraging Technology to Empower Mortgage Consumers at Closing. The term “eClosing” refers to technology-enabled loan closings. The CFPB became interested in how eClosings “could facilitate embedding educational materials to closing platforms in addition to early review of closing documents” and conducted a pilot program to evaluate them. (6) The study has methodological limitations (see discussion on page 11), but the CFPB has drawn some interesting conclusions from its study. These include,
- On average, eClosing borrowers in the pilot had higher scores than paper borrowers on our measured outcomes, including perceived empowerment, understanding (perceived and actual), and efficiency.
- Consumers who received and reviewed documents before the closing meeting reported feeling more empowered in the closing process, with higher levels of perceived understanding and efficiency. Additionally, these consumers had higher scores on the actual understanding quiz relative to those who did not review documents before the meeting.
- Most pilot borrowers with access to CFPB educational materials stated that they used these materials and reported that they were useful.
- eClosing transactions in the pilot exhibited shorter closing meetings and earlier document delivery, which matched higher scores on consumer perceptions of efficiency.
- First-time homebuyers, low/moderate income borrowers and borrowers with the most years of formal education all had the largest positive gains between paper and eClosing, yet all scored relatively low on our measures of understanding and perceived empowerment. (9-11)
All of this seems good enough, but not great — a bunch of subjective improvements for consumers. One would have hoped that there would be some objective measures (other than the length of the closing itself) of the benefits for consumers.
This does not mean that the CFPB should stop pushing eClosing technologies. But I do think that consumer protection initiatives should focus more on objective measures of success. Too often financial education initiatives report that consumers feel better without proving that they are, in fact, better off.
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