Garnet Capital Advisors Blog

April 30, 2014

CFPB efforts to educate on home loans could strengthen mortgage market

The Consumer Financial Protection Bureau recently released a report containing information on how consumers can use electronic methods to complete the paperwork involved in a mortgage closing.

The CFPB noted in the document that many become frustrated as a result of all the paperwork they must fill out to close on a mortgage, and that these potential homeowners might be able to overcome such challenges by using the right technological resources.

CFPB aims to educate consumers
The guide, called eClosing Pilot Guidelines, is part of the Know Before You Owe program spearheaded by the federal government, according to The NAFCU Compliance Blog. The CFPB is specifically working to alleviate a handful of specific concerns, including:

  • Consumers not having the time needed to review documents
  • Confusion regarding what mortgage documents and disclosures mean
  • Would-be homeowners having too much paperwork
  • Closings becoming stalled due to small mistakes in mortgage documents

The document is one of several efforts that the CFPB is making to educate consumers on the mortgage process, director Richard Cordray said in prepared remarks that he gave at the Mortgage Closing Forum on April 23.

Goals of pilot program
The government agency outlined the various objectives it sought to accomplish by creating the eClosing pilot program, which included:

  • Give consumers more time to review existing documents
  • Helping educate these individuals by clarifying what is involved in the closing process, as well as crucial terms and important documents
  • Making it easier for consumers to identify mistakes in their documents and then fix them before closing

CFPB director touts benefits of electronic closing
At the industry event, Cordray emphasized the many benefits of electronic closing.

"There are several ways that eClosings can pave the way for a more efficient process that is also more empowering for consumers. Electronic documents can make early delivery more convenient and simple - giving the consumer time to read the documents, consult with family members or professionals, and ask the lender questions." He added that "shifting to an electronic process should lead to greater consistency and accuracy, since automated processes can make it easier to detect discrepancies."

If the CFPB succeeds in clarifying the process of obtaining a mortgage, then the government agency could find that it has a strong template that can be used to educate consumers on a nationwide basis.

Bolstering the education of everyday Americans could easily help create a healthier mortgage market.

"Making clear rules for all lenders and borrowers will lead to a successful market," stated Lou DiPalma, managing partner of Garnet Capital Advisors.

Better-informed consumers might be more comfortable applying, and this development could help drive up loan origination by increasing the demand for this particular type of debt.

The situation could also impact the price and availability of loan sales by increasing the supply of available mortgage debt than can be packaged into portfolios.

Financial institutions that are interested in getting involved in such transactions might consider contacting Garnet Capital Advisors, which has significant experience in loan sales.