A recent study by the Consumer Financial Protection Bureau reported the results of a year-long study to identify the most troublesome aspects of a loan closing. The CFPB, in an effort to improve the mortgage closing process for borrowers, asked consumers, lenders and other stakeholders how the process could be made more efficient, streamlined, and less stressful for the borrower. The Bureau identified three major “pain points” in the mortgage closing process.
- Not enough time to review: Study found that consumers were frustrated by the short amount of time they had to look over their closing documents, often not seeing the paperwork until they arrived at the closing. Borrowers reported feeling pressured to rush through their paperwork and sign, without anyone asking them if they understood the terms.
- Overwhelming stack of paperwork: The number of documents can be daunting in a closing. There are forms intended to help borrowers better understand the costs and risks of their mortgage, forms which are a result of the lender\s legal risk assessment and forms which fulfill federal, state and local government requirements. The volume of paperwork can vary from lender to lender, often reaching 30 to 40 documents.
- Complexity of documents and errors: Many of the closing documents are written in legal terms or full of technical acronyms not known to the average borrower. In the CFPB study, they found many consumers complained that they had very little help from the closing agent, attorney, or mortgage broker attending the closing. Many complained they found errors in the closing documents, which led to delays when the closing agent had to redo the entire closing package.
What You Can Do?
- Always ask to see your loan documents at least one day in advance of closing. There may be slight adjustments made on the day of closing, but generally all other figures will be the same. If you have any questions at all, ask the closing agent or your mortgage broker for an explanation. If an attorney is assisting in the closing. ask for explanations of each and every document or section you are unclear about.
- Take your time. It is easy to rush through the process. It may have taken you months to obtain the loan, get the approval, the credit reports, and the documentation you had to provide to the lender. You are ready to close the deal and be done with all the hassle. You may have a closing deadline to worry about It is normal to want to sign as fast as possible and end the painful process. But, the hidden problem lies in the fact that the loan may contain clauses which may apply years later, and which would be unacceptable. Or, you may find an error which needs correcting. Now is the time ask the questions and fix any problems.
- Remember, you are in the driver’s seat. Everyone wants the loan to close – the lender, the closing agent, the realtor, and the lawyer. They may handle closings every day and the documents may be second nature to them, but they know this may be your first closing, or it may be your hundredth, either way, it is your right to understand each and every document you sign. You are paying for their services and you have the right to expect answers.
Copyright © 2014 Sandy Gadow. All Rights Reserved. This article may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.