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Three things to do before closing: What we learned from studying eClosing


eClosing graphic

We’ve heard from many consumers about the overwhelming process of closing on a mortgage, which can be confusing and difficult. Closing is the part of the mortgage process where you accept the terms of your loan, the last step before you owe, and usually before you owe more than you ever have in your life.

As part of our broader efforts to improve the overall mortgage experience, we’ve been exploring how technology can be used to address some of those pain points in the closing process.

Today we’re releasing the results of a pilot program where we explored tools and process changes that can help consumers better navigate closing by accessing and signing their closing documents in different ways. Specifically, we examined what would happen if there was more technology involved in the mortgage closing process, with documents being delivered electronically earlier together with online tools and resources. The electronic delivery and signing of closing documents using electronic signatures is sometimes referred to as eClosing.

We wanted to study the idea that by using technology as a tool, consumers may be better informed and prepared – putting them in the driver’s seat at closing.

What we found

Though our data is based on a limited sample of borrowers, we learned that borrowers experiencing eClosings on average scored higher on the pilot measures of empowerment, understanding and efficiency in the closing process, when we compared them to borrowers not using these elements of technology to close on their mortgage.

As the mortgage industry continues to take on eClosing and various innovations that help make such a complex process easier for you—the consumer—to navigate, we have three takeaways from this study that can help you with your mortgage closing, regardless of what closing process is available to you by your lender.

1. Ask for more of your closing documents before you get to the closing table

Consumers who participated in our pilot and received and reviewed documents before the closing meeting reported that they felt they had a clearer understanding of their loan and were less confused by the mortgage process than those who did not review the documents early.

As a part of our Know Before You Owe mortgage initiative we are working to give consumers more time to review the new mortgage disclosure called the Closing Disclosure. On October 3, 2015, our new mortgage disclosure rule will require that for most mortgages, consumers get their Closing Disclosure at least three days before closing. This new Closing Disclosure is a consumer-tested summary of your loan that gives you all of the final loan terms in one place before you sign on the dotted line. However, the Closing Disclosure will be one of many closing documents you will receive.

Ask your lender if you can see documents like the Promissory Note and the Security Instrument ahead of your closing. If you applied for a mortgage on or after October 3, 2015, use the new Closing Disclosure as the “executive summary” of your closing. Learn more about the key closing documents you can expect at Owning a Home, our suite of tools and resources for homebuyers.

2. Take time to review your closing documents in advance

The stack of documents at closing can be overwhelming. Reviewing these ahead of time allows you to focus on key documents ahead of your closing so you feel less anxious that you’re missing something buried in your closing stack.

Consumers in the pilot who received their closing documents in advance of closing and found errors on their closing documents were more likely to flag and ask for corrections on errors before they got to the closing meeting. Those in the pilot who reviewed their documents early were also less likely to say that they felt rushed during their closing meeting. Since these borrowers had the documents early, the “closing” effectively started days before meeting, and borrowers had time to ask questions before they signed on the dotted line.

3. Know about the mortgage process before you owe

Consumers in the study who used the CFPB’s educational tools such as Ask CFPB, a database of commonly asked financial questions, and our closing checklist found in Owning a Home, were more likely to feel that they could play an active role in their closing process than those who didn’t. Consumers who used some of these tools were also much more likely to report stronger agreement on statements like “I had a clear understanding of why the costs outlined in my initial Good Faith Estimate were different than my final closing costs.”

While our study is over…..

We’ll continue to promote consumer-friendly solutions in the mortgage process. In particular, we hope that the use of technology in the closing process is studied further by both the industry and government to see how it can potentially improve a borrower’s mortgage closing experience even more.

As eClosing continues to be studied and implemented, remember, you can use many of the principles we used in our study to improve your own closing.

Check out our full report to learn more about the pilot.

Register for our research conference on consumer finance


Join us for the CFPB Research Conference on May 7-8, 2015. The conference will be focused on high-quality consumer finance research, with academic and government researchers presenting their research papers. The conference will be held at:

United States Bureau of Engraving and Printing
300 14th Street S.W.
Washington, D.C. 20228

This event is open to the public, space permitting, and requires registration. You must register by Friday, May 1, 2015. Learn more about the event and register for the conference.

We hope to see you there!

Christopher Carroll is the CFPB’s Chief Economist and Assistant Director for Research.

We took a look at arbitration agreements and here’s what we found


Tens of millions of consumers use financial products or services like credit cards and student loans that include pre-dispute arbitration clauses in their agreements. This means that either party to these contracts can require disputes be resolved through arbitration, rather than through the court system.

These clauses are controversial. Critics of these clauses argue that they limit consumers’ ability to take their dispute to court – particularly class actions, which allow large numbers of people to seek relief together. Advocates of these clauses, on the other hand, say arbitration is quicker and more cost-effective than court proceedings.

What we covered

Since 2012, we’ve being working on a study of arbitration provisions and report to Congress, which was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010(Dodd-Frank Act). We’ve examined pre-dispute arbitration clauses in a number of different product markets:

  • Credit cards
  • Checking accounts
  • Payday and other small dollar loans
  • General purpose reloadable prepaid cards
  • Private student loans
  • Auto purchase loans and
  • Mobile wireless agreements

After considering dozens of comment letters and meetings with external stakeholders, we looked at nearly 850 consumer-finance agreements to examine the prevalence of arbitration clauses and their terms. We also reviewed more than 1,800 consumer finance arbitration disputes filed over a period of three years and more than 3,400 individual federal court lawsuits. We also looked at 42,000 credit card cases filed in selected small claims court in 2012.

We supplemented this research by assembling and analyzing a set of roughly 420 consumer financial class action settlements in federal courts over a period of five years and over 1,100 state and federal public enforcement actions in the consumer finance area. We also conducted a national survey of 1,000 consumers with credit cards concerning their knowledge and understanding of arbitration and other dispute resolution mechanisms.

We believe this is the most thorough empirical research on this subject, to date.

What we found

Through this research, we’ve learned that:

  • Arbitration agreements affect a large number of consumers – for instance, as much as half of all credit card debt and checking account deposits are subject to arbitration agreements.
  • Three out of four consumers surveyed did not know if they were subject to an arbitration clause.
  • Consumers are very reluctant to bring claims against companies on their own, particularly small claims.
  • Roughly 32 million consumers on average are eligible for relief through consumer financial class action settlements each year.
  • We found no evidence that arbitration clauses lead to lower prices for consumers.

Why it matters

Now that the report is complete, we’re going to spend time reviewing the results in order to determine next steps. The Dodd-Frank Act gives us the ability to issue regulations on the use of arbitration clauses in consumer finance markets if we find that doing so is in the public interest and for the protection of consumers.

To learn more about pre-dispute arbitration clauses and our findings check out our full report to Congress. Have you had an experience with arbitration? You can tell us your story.

Nearly half of mortgage borrowers don’t shop around when they buy a home


47 percent of homebuyers do not compare lendersBuying a home is a big purchase, but it’s just that: a purchase. When it comes to spending money on our daily expenses, we have lots of options to help us find the best deal possible. Take, for example, digital gadgets. To get a good deal you can search for sales, find coupon codes, and research whether it’s less expensive to buy something from a big box retailer or on the manufacturer’s website.

We shop to find the best price for laptops or appliances, but a report of recent mortgage borrowers found that almost half of us don’t shop around for a mortgage when we buy a home.

Failing to shop for a mortgage could cost you. Consumers who consider interest rates offered by multiple lenders or brokers may see substantial differences in the rates. For example, our research showed that a borrower taking out a 30-year fixed rate conventional loan could get rates that vary by more than half a percent. Getting an interest rate of 4.0% instead of 4.5% translates into approximately $60 savings per month. Over the first five years, you would save about $3,500 in mortgage payments. In addition, the lower interest rate means that you’d pay off an additional $1,400 in principal in the first five years, even while making lower payments.

The survey of 2013 mortgage borrowers also found that modern mortgage borrowers:

  • Often fail to shop: Almost half of borrowers seriously consider only a single lender or broker before deciding where to apply.
  • Apply to only one lender or broker: Seventy-seven percent of borrowers only end up applying with a single lender or broker, instead of filling out applications with multiple lenders or brokers to see which can offer the best deal.
  • Rely on information from people with something to sell: Lenders and brokers were the most popular source for information about mortgages, with 70 percent of mortgage borrowers reporting that they used them “a lot” as a source of information. Thirty percent of borrowers say they relied heavily on their real estate agent for mortgage information. While lenders, brokers, and real estate agents can be informative, they also have a stake in the transaction. The report found many fewer, 20 to 41 percent of borrowers, get a lot of their information from outside sources such as websites, financial and housing counselors, or friends, relatives or coworkers.
  • Shop more if they know more: Borrowers who were confident about their knowledge of available interest rates were almost twice as likely to shop as consumers who reported being unfamiliar with available interest rates.

We believe that mortgage borrowers should be shopping around. We’ve created Owning a Home, an interactive, online set of resources and tools designed to help borrowers approach the mortgage shopping process, with more information.

Owning a Home sets out to help you feel comfortable shopping in the mortgage market. These unbiased tools and resources aim to inform and empower you when you are shopping for a mortgage. The tools take you from the very start of the home buying process through to the closing table. At every step, Owning a Home provides information and questions to ask. The tools include:

  • Guide to loan options: A primer on the loans available to help you finance your home. In this resource, you’ll find information on the length or term of loans, whether a loan is fixed or adjustable, the different loan types available, including FHA and VA loans.
  • Tool to see what interest rates are offered to people in your situation: A dynamic tool that lets you input your information, like credit score and down payment, to see what interest rates people with similar financial situations have been offered. You can play around to see how different factors affect the rates.
  • Guide to closing documents: A document that explains the important closing forms, so you know what information is on the forms, and where to find it.
  • Closing checklist: Closing is when you finalize your mortgage. You need to go into the process prepared and ready to enter into your contract. Our checklist helps you to realize what you need to do, and gets you ready for closing, one step at a time.

Our survey will continue each year, and we look forward to hearing more from borrowers to see if our Owning a Home tools change the way the modern mortgage borrower approaches the mortgage market.

Check out our report for more in-depth research on consumers’ responses. Then check out Owning a Home to help you navigate the market, ask the questions, and take the steps that will help you find the mortgage that’s right for you.

Infographic: shopping for a mortgage can really pay off. 47 percent of homebuyers don't compare lenders. Visiting just three lenders could save you thousands. You can put that savings to use. We're here to help you with the home buying process. Our Owning a Home tools show you the interest rates that others with a similar financial background are being offered, help you understand loan options, and ease the closing process so you can make smarter decisions about your mortgage. Visit

Promoting saving at tax time


Imagine receiving a sum of money greater than your normal paycheck. What would you do with the money? Your first impulse might be to spend it. A gourmet dinner or a new television sounds nice. But, you may have bills that need to be paid first. There’s also the option to save some of the money – perhaps to get you closer to a financial goal, such as paying for college or going on a vacation, or to help you gain peace of mind for a rainy day.

At tax time, many consumers face this realistic choice, especially low to moderate income consumers who qualify for the earned income tax credit (EITC), which provides many of them with a tax refund.

Today, we’re announcing that as part of Project Catalyst, we’ll be working with H&R Block to evaluate practices to promote consumer saving behavior during tax time.

Saving for goals and stability

We want to promote saving behavior both because it can help people achieve greater peace of mind when it comes to taking care of unexpected expenses and because it can help people reach their short-term and long-term financial goals. For many people, a tax refund is the largest lump sum payment they will receive in a year. So we believe that tax time is a good time to tell people about the importance of building savings.

We’re already working with Volunteer Income Tax Assistance (VITA) sites through our Ready? Set, Save! campaign to provide consumers with information regarding savings options and to encourage consumers to save a portion of their tax refunds. This project with H&R Block will build on the work we have done with VITA sites. H&R Block is one of the largest tax preparers in the country, preparing over 20 million tax returns annually, and many of its customers have low to moderate incomes. H&R Block will be able to test certain strategies at scale, and the insights shared with us will help us better understand which practices are effective in encouraging consumers to save.

Research goals

Our collaboration with H&R Block will span three tax seasons. We have two main research goals for this project. The first is to find out which strategies are effective at encouraging consumers to save a portion of their tax refunds. The second is to demonstrate the impact and potential benefits of saving on financial health over the short term and long term. H&R Block will begin incorporating information about saving and the options available to consumers in informational materials and marketing campaigns, encouraging saving through their tax preparers in H&R Block stores, and “gamifying” saving to make saving more fun. Through this collaboration, we hope to gain insight from H&R Block’s initiatives to find effective strategies that not only increase overall consumer savings but also help encourage consumers to make saving a habit.

We’ll update you on our progress before we proceed with the second year of the study.