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57 » VISIT US ONLINE @ DSNEWS.COM NATIONAL CFPB TAKING STEPS TO IMPROVE PROCESSES AND INCREASE EFFICIENCY By: Jessica L. Valdez, TitleClose.com If you are in a room with two other people, statistically, one of you does not understand the mortgage origination process. According to the J.D. Power 2014 U.S. Primary Mortgage Origina- tion Satisfaction Study, 35 percent of all mortgage customers indicated that they do not completely understand the mortgage origination process. For first-time homebuyers, 43 percent responded that they do not understand the mortgage origination process, and more than one-half of first-time home- buyers do not fully understand the loan options that were available to them. But why is there so much confusion on the origination process in this digital era where we have a plethora of knowledge at our fingertips just one click away? e Consumer Financial Protection Bureau (CFPB) has been researching these issues since its formation in 2011. Two of the methods identified by the CFPB to help consumers include simpli- fication and consolidation of the loan disclosure and closing forms and encouraging technologi- cal advancements within the real estate industry, which includes allowing the consumer to shop for certain services. Simplification and Consolidation – Loan Estimate and Closing Disclosure Changes One of the challenges faced by consumers is the complex and voluminous origination documentation and the fact that most documents are not provided to the consumer until the day of signing. According to the second quarterly release of VirPack's Mortgage Origination Loan File Sta- tistics Report, the number and size of documents filling loan files continues to increase. VirPack's research found that 85 percent of all conventional loan files contained between 400 and 2,000 pages as of first-quarter 2014, which is an increase of 12 percent when compared with 2013. e CFPB in particular reviewed a sample of closing packages, which ranged from 25 forms (about 40 pages total) to 50 forms (more than 100 pages total). As a result of this research, the CFPB is simpli- fying and consolidating some of these forms. ere are two new disclosure forms that will be incorpo- rated into the loan process on August 1, 2015: the Loan Estimate and the Closing Disclosure. e loan estimate will replace the disclosures that are currently housed in the initial Truth-In- Lending (TIL) and the Good Faith Estimate. is is a three-page form to de-emphasize the annual percentage rate (APR), which consumers found confusing. It includes additional new simplified language, and must be provided to the consumer within three business days of receipt of the com- plete loan application. e closing disclosure will replace the final TIL statement and the HUD-1 settlement statement, and provides a detailed accounting of the transac- tion. Consumers must receive this form three business days before consummation of a loan. Technilogical Advancements To Allow Shop- ping Aand eClosing Shopping Part of this effort to increase transparency includes developing methods that provide the tools and op- portunities to empower consumers to make better financial choices. The CFPB has found that shopping in particular is in the best interest of the consumer, as it will enable the consumer to "shop for different financ- ing options with clear, reliable estimates." e loan estimate in particular encourages consumers to shop by listing those services that the consumer can shop for, including title services, lender's title policy, settlement agent fee, title search, surveyors, and pest inspectors. e lender is also required to provide the consumer with a writ- ten list of service providers. e effect of encouragement to shop? Service providers within the real estate and title industry are likewise encouraged to advertise their services and fees directly to the consumer, thereby provid- ing the marketplace for the consumer to shop. is is a new concept; historically, the realtor or lender would be the driving force behind which vendors were selected to provide services. However, under these new rules, vendors are encouraged to adver- tise their services directly to the consumer, and the consumer is encouraged to shop around. Of the people who are shopping online, millen- nials are by far the largest group, with 19 percent of their spending spent on the web, compared with Gen X and Baby Boomers at 15 to 17 percent. e potential for brands to utilize the web to reach millennials is huge; within the next 10-15 years millennial online shopping numbers are projected to reach the low- to mid-20 percent range. ese are our homebuyers of the future; it is reasonable to expect that they will want to shop for financial service and products with the same ease with which they have become accus- tomed for most other products. eClosings In addition to simplifying and consolidating the forms, the financial services industry is also encour- aged to advance technologically. Guaranteed Rate CEO and founder, Victor Ciardelli, has stated, "It's incredible that in 2014, with all the technology we have…the mortgage business is still paper and is slow and lethargic." Electronic closing solutions (eClos- ings) are one way in which the industry could adapt to current consumer desires. Per the CFPB, eClosings could "contribute toward the long-term vision of improving the closing process and providing specific benefits to consumer," including increased under- standing, increased convenience, decreased delays and costs, and reduced consumer anxiety. eClosings are not new to the mortgage industry; however, adoption of the eClosing processes slowed when the housing market crashed. eClosings would offer an alternative solution to paper by allowing documents to be electronically delivered by secure email or by the consumer accessing an online portal. is functionality would help ensure compliance with the disclosure timeframes, as set forth above. In addition, eClosings allow the consumer to elec- tronically sign the documents that are tranditionally signed by hand with "wet signatures," which would increase the convenience of a closing. e Future Is Coming – August 1, 2015 With online reviews and mobile web access, with a click of a button the consumer will learn about the types of services that are offered in the mortgage trans- action process and will have the ability to choose which services, and service providers, to opt for. In a time where social media, smartphones, tablets and the cloud have set the standard for how business is done, the financial service providers now have an opportunity to embrace these new opportunities through technology.

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