According to the Consumer Financial Protection Bureau, more people prefer electronic closings rather than in person. Based on a test pilot program over the last four months, consumers repeatedly were in favor of an e-closing rather than and in person closing. This could be a win-win for consumers and the mortgage industry alike. According to the research, consumers who participated in electronic closings gave higher positive feedback scores on their understanding of the process, upwards of 7% higher than in personal closings. Efficiency and a sense of personal empowerment were also high on the consumer's list and borrowers who use the traditional paper process.
It's no shock that just about everything is being done electronically these days, even signatures and filing taxes. The advantages for the industry and consumers alike means that accuracy inefficiencies can help educate the consumer and be a win for both sides of the closing table. However, does this take away from the personal ties that escrow and mortgage lenders provide in that closed room setting? That may not be the half of it.
Many people in support of the e-closing process state that it may be difficult to get all mortgage related parties involved, including title, escrow and real estate agents. There are multiple parties involved in a real estate transaction and mortgage lenders must consider all parties including sellers, agents and vendors alike. This option may be just that, an option, and those that prefer the old-school traditional closing could still opt for that method instead. Many people are still having problems with the greater influx of technology in many of these legal dealings and several real estate agents are still using old school methods for particular buyers or sellers.
While we cannot abandon the paper process altogether, this program may create a smoother transaction with an easier "paper trail". We realize that this doesn't necessarily apply to a one size fits all type of consumer and borrower. From the lender's perspective, they are seeing some occasional resistance from agents but eventually tend to get all parties on board with the plan.
Of course this brings up security issues for consumers, lenders and borrowers as does anything when legal documents are signed electronically. For this reason, the CFPB's plans to do more research on eClosings. Currently most courthouses do not accept electronic signatures for cash sales and mortgages, which is something that the director will need to consider as well as protecting investors of these mortgages when a foreclosure is in place. Many people feel there is too much room for fraud and that higher standards of protection should be in place, not less.
Many in the real estate industry feel that this is not only a bad idea but a horribly bad idea. It may put the integrity of the entire real estate recording system in jeopardy. What plan is in place to ensure identity and where's the protection for the lender when the borrower defaults claiming they never actually sign something? [Source]
It is a unique step in real estate and mortgage transactions but is it a healthy one?
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