Homebuyers complain so much about the “mounds” of paperwork they have to deal with at closing that perhaps the term should become a certified, government-approved measurement. Until then, according to a new study, borrowers are going to continue to consume more than 260,000 trees a year just to buy their houses.
That’s because the typical closing involves some 252 pages, according to the study by FreeandClear, an educational website that helps people make sense of the lending process, in collaboration with the Environmental Paper Network, an organization that works for environmental transformation in the production of paper.
Add in the documents borrowers must supply lenders during the underwriting process — tax returns, bank statements and the like — and the number of pages jumps to an eye-opening 280.
Source: FreeandClear LLC
The study found that 55 entities plus the lender require paper, typically only a few pages each. The items with the most pages are the sales contract and the appraisal, at 30 each. But the title insurance policy and the research abstract consume 24 pages each.
Other big paper-gobblers are the deed of trust or mortgage note (18), escrow instructions (12), the credit report (10) and the state and local disclosures (10).
“Our thought-provoking analysis illustrates that mortgage paperwork is as tough on the planet as it is on borrowers,” says FreeandClear co-founder Michael Jensen. “While borrowers often cite document overload as the most challenging part of the mortgage process, the massive amount of paperwork has a profound toll on the environment as well.”
Indeed it does, the study found. Based on 7.8 million mortgages a year and 280 sheets of paper per loan, it estimates that 2.2 billion pieces of paper are used for home loans. And that translates into 41,000 tons of wood per year, which means 264,000 trees are consumed by mortgages annually.
The paper concedes that double-sided printing and digital documentation has reduced the mortgage business’s paper consumption in recent years, as has the use of recycled paper. But it says those practices are “more than offset” by the millions of pages in applications for financing that failed to end up as a mortgage and as well as lenders’ internal paperwork retention requirements.
“In light of these factors,” it says, “we believe (the) 264,000 tree consumption figure is likely conservative.”
But there’s more because the environmental impact of the home loan process isn’t limited to trees. The production of paper requires considerable energy, for example. It also uses up water and generates significant greenhouse gas emissions and waste.
Based again on 2.2 billion sheets of paper a year, the study figures that 358 million BTUs in net energy is gobbled up by the mortgage process every year. It also estimates that 61.6 million pounds of greenhouse gas is spit out, 251 million gallons of water is used and 21 million pounds of solid waste goes to dumps.
The paper says various suggestions to end the paperwork overload — digital technologies is one, changing government requirements is another — present borrowers with a whole other set of concerns. It also notes that “it seems unlikely that government regulators will eliminate or streamline any document that is designed to protect borrowers, especially as the long-term affects of the mortgage crisis continue to linger.”
Still, it calls on lenders and their regulators to take up the problem.
“Big problems lack easy solutions and that certainly applies to the issue of mortgage paperwork,” it says. “Despite meaningful obstacles, lenders and regulators have a tremendous opportunity to collaborate to implement a solution that addresses mortgage paperwork overload. Borrowers and mother nature are counting on it.”
Lew Sichelman’s weekly column, “The Housing Scene,” is syndicated to newspapers throughout the country.
