Two ALTA Associate Members Named to CFPB E-Closing Pilot Program

August 26, 2014

Two associate members of ALTA were selected to participate in the Consumer Financial Protection Bureau’s e-closing pilot program, which is set to begin later this year and explore how the increased use of technology during the mortgage closing process could affect consumer understanding and engagement and save time and money for consumers and market participants.

The ALTA associate members participating are Pavaso Inc. and eLynx. The companies join three other software vendors, Accenture Mortgage Cadence, DocMagic Inc. and PeirsonPatterson LLP. Seven lenders were named to the program as well, Blanco National Bank, Boeing Employees Credit Union, Franklin First Financial Ltd, Flagstar Bank, Mountain America Credit Union, Sierra Pacific Mortgage and Universal American Mortgage Co.

eLynx said it will work closely with Universal American Mortgage and Flagstar Bank during the program. The loan types to be included in this pilot will cover a broad range of mortgage scenarios, including conventional, FHA and VA residential mortgages, new home purchases and refinances.

“The CFPB’s focus on closings will accelerate the industry’s progress toward e-mortgages,” said Sharon Matthews, eLynx president and CEO. “By objectively evaluating different solutions and collecting performance metrics, the pilot will help identify technologies that improve the customer experience.  Not only are we delighted to be part of this effort, but we are pleased with the confidence our lender customers have shown in our Expedite platform.”

The vision of a paperless mortgage has been around for more than a decade. The technology to support an e-mortgage has been available for years, but with so many diverse participants and long-established processes in mortgage transactions, progress has been difficult. The pilot will evaluate how existing solutions and newer advanced capabilities can drive the evolution towards the vision of a paperless workflow.

Mark McElroy, president and CEO of Pavaso, called it an honor to be selected to participate in “historic event” that can “establish a foundation for electronic business in mortgages and the Real Estate Industry.”

“The results from this pilot may show what we believe already, that this is the answer to efficiency, reduction of expense, increase in speed, fairness to the Consumer, and compliance with regulation can be solved in one single solution,” McElroy added.

As part of the qualification for the pilot with the CFPB, the technology platforms that would perform electronic closings had to meet these minimum requirements:

  • Managing document and data transfer
  • Providing a secure technology platform enabling transparent, collaborative workflow
  • Facilitating electronic signature
  • Ability to audit
  • Ability to sanitize data

According to the CFPB, the pilot will study many e-closing features, including those that may:

  • Enable consumer understanding: The CFPB aims to better understand how educational materials like document summaries, term definitions, or process explanations that can be reviewed prior to the closing table can help improve the process for consumers. The Bureau also plans to evaluate whether the order of the documents changes the consumer experience.
  • Incentivize consumer engagement through early document review: The CFPB plans to study the various technologies that would let consumers see the entire package of closing documents ahead of time. The CFPB’s “Know Before You Owe” mortgage rules, which take effect in August 2015, require closing documents to be shared with consumers three days in advance. This pilot will help the Bureau better understand how early review of the documents may affect consumers’ experience in the closing process.
  • Make processes more efficient: The CFPB plans to study how electronic closings may help both consumers and industry members save time and money by preventing last-minute surprises and unnecessary bottlenecks caused by outdated processes.

The e-closing pilot is part of the CFPB’s “Know Before You Owe” mortgage initiative, which is designed to improve the home-buying experience for consumers. In November 2013, the Bureau issued a rule requiring two new, easier-to-use mortgage disclosure forms that clearly lay out the terms of a mortgage for a homebuyer. The first form is a Loan Estimate, which combines the Good Faith Estimate and initial Truth-in-Lending disclosure and provides a summary of the key loan terms and estimated loan and closing costs. The second form is a Closing Disclosure, which offers a detailed accounting of the transaction and combines the current HUD-1 and final TIL disclosure.

The e-closing pilot program is not part of a rulemaking process, but rather is designed to identify best practices in the marketplace. Click here to view pilot guidelines, which were announced in April 2014. ALTA’s September edition of TitleNews takes a look at renewed efforts toward e-mortgages.

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