Compliance Blog

Written by Elizabeth M. Young LaBerge, Regulatory Compliance Counsel

Happy Friday everyone! My name is Elizabeth Young LaBerge and I have recently joined NAFCU as Regulatory Compliance Counsel. My background is in litigation, and I have previously practiced law in Kansas City, Missouri and Portland, Maine. Now, I am thrilled to have joined the Compliance Team here at NAFCU. I look forward to interacting with all of you in the near future.

On April 28, 2014, we blogged about the CFPB’s announcement of a pilot research program on eClosings. This Wednesday (August 5), the CFPB released its report on that eClosings pilot and held a forum summarizing the results, featuring a panel discussion that included some participating lenders.

The pilot research program was aimed at determining whether eClosings could simplify the closing process for consumers by allowing more time for consumers to review closing paperwork, reducing the amount of that paperwork, and offering more educational materials so consumers can understand the paperwork. Seven lenders participated in the pilot, including two credit unions.

While the pilot had some significant data and methodological limitations, the report suggested that consumers who participated in eClosings expressed more perceived empowerment and efficiency in the closing process, as well as a better understanding of the loan and their own rights and responsibilities. This effect was higher among consumers in purchasing transactions than it was for consumers in refinancing transactions. Consumers who received and reviewed documents before closing also reporting higher levels of empowerment, understanding, and efficiency than those who did not. Additionally, closing meetings for eClosings were reported to be much shorter than in traditional closings.

In Section 5.1 of the report, participating lenders noted several steps they took to facilitate successful implementation of eClosing processes for their consumers:

• Clear expectations and consistent communication with all partners.
• Commitment from company leadership and buy-in across the organization.
• Sufficient time for preparation and rollout to avoid technology issues at closing.
• Early and continuous training of all stakeholders.

At the forum, two participating credit unions emphasized the importance of the first two of these steps in implementing eClosing processes. When asked by the panel about the most critical aspects of implementing eClosing processes, Lorraine Stewart, Vice President of Mortgage Lending at Boeing Employees Credit Union emphasized the importance of having strong partners in technology and settlement services who are aligned with the credit union in their commitment to provide service to members through eClosings. Amy Moser, Vice President of Mortgage Services at Mountain America Credit Union highlighted the importance of ensuring that everyone within the organization has the same level of commitment and a top-down belief in the importance of the eClosing process in trying to help members to be successful in achieving financial dreams.

The report also contains descriptions of several operational challenges presented to lenders in implementing eClosings:

• Limitations in technology platforms and concerns from compliance and legal departments lead to more lenders providing paper documents than anticipated.
• Approval processes of eClosings by secondary market investors were sometimes reported as lengthy, extensive, or confusing.
• Large-scale workflow and process changes were required to implement eClosings processes, especially for early document delivery.
• External stakeholders, such as settlement agents, real estate agents and closing attorneys found it difficult to invest the time and resources necessary to implement and learn eClosing processes.
• eNotarization capabilities were insufficient in number due to lack of confidence in the legality of the practice.
• eClosing platforms may require significant IT changes before eClosing processes can be fully implemented.

Participants recommended that while technology and compliance concerns are being resolved, lenders interested in implementing eClosings should start with a hybrid process where only some documents are provided electronically and others provided on paper. Additionally, participants recommended proactively offering educational materials about eClosings to members and stakeholders at each step of the loan process. Ultimately the CFPB determined that lenders should continue to explore eClosings as a viable option for providing an excellent experience for consumers and cost savings benefits to lenders, and suggested that additional research by stakeholders is necessary and welcome.