One of the key findings of the FREEandCLEAR Mortgage Survey is that borrowers find the mortgage process challenging, if not overwhelming. One of the primary objectives of our survey is to identify the most challenging components of the mortgage process and better understand the source of borrowers’ frustrations. Knowing what part of the mortgage process borrowers find most challenging should hopefully enable lenders and regulators to take steps to improve the mortgage process.
When asked to choose the most challenging part of the mortgage process, 56% of borrowers selected paperwork, more than four times the second place response of borrower qualification. The response to this question reflects a common theme in the FREEandCLEAR Mortgage Survey: borrowers are overwhelmed and confused by the volume of documents involved in the mortgage process.
Over the course of the mortgage process borrowers are typically required to review over 50 separate documents comprising hundreds of pages. Borrowers are often under pressure, such as during the mortgage closing process, and usually do not have time to fully comprehend the documents they are asked to review. In many cases, overwhelmed by the volume of paperwork and in a rush to close their loan, borrowers sign whatever documents are put in front of them without understanding the meaning or purpose of the document.
Given the dynamic of not understanding a large number of documents that you have been asked to sign in a rushed time frame, it is no surprise that borrowers selected Paperwork as the most challenging part of the mortgage process.
The question then becomes what can be done to address this challenge? Although all mortgage documents are intended to serve a specific purpose, usually legal or regulatory, the tremendous volume of paperwork clearly creates challenges for borrowers. In many cases mortgage documents are designed to protect borrowers but as evidenced by the results of our survey, sometimes too much information, or documentation in this case, can be overwhelming.
The implementation of TRID in 2015 streamlined certain documents but significantly more paperwork has been introduced to the mortgage process in the aftermath of the real estate crisis. Additionally, neither lenders nor government regulators are inclined to eliminate any documents that are intended to protect borrowers.
Digital and mobile lending platforms may streamline certain parts of the mortgage process but they do not reduce the number of documents that borrowers are required to review. Plus, under current laws, digital signatures are not usually permitted for mortgages.
The second and third ranked responses to this question, mortgage qualification and understanding your mortgage rate / closing costs, are also noteworthy and both selections registered more than 10% of survey respondents. Borrower qualification requirements have certainly tightened since the real estate collapse and the more stringent guidelines appear to present a challenge for many borrowers. Additionally, 12% of respondents found understanding their interest rate and closing costs to be the most challenging part of the mortgage process, perhaps due to the complexity of the APR and other figures used by lenders. Understanding your mortgage rate and closing costs is fundamental to the mortgage process so this result is cause for concern.
While there are no easy answers to address these mortgage challenges, lenders and regulators would be well served to work together to implement solutions that make mortgage documentation, qualification and fundamentals more manageable and understandable for borrowers.
We will continue to provide a detailed analysis of each survey question on our blog in the coming weeks and you can review the full results from the FREEandCLEAR Mortgage Survey to better understand how borrowers think about and experience the mortgage process.