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July 02, 2020

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Lenders: Are You Using Electronic Signatures?

Earlier this year, the Federal Housing Administration (“FHA”) announced that they would begin accepting electronic signatures on documents associated with mortgage loans. FHA already allows e-signatures on some third party documents, outside of the lender’s control. The announcement, which became effective immediately, expanded the documents for which e-signatures are acceptable and now includes:

(1)    Any documents associated with servicing or loss mitigation;

(2)    Any documents associated with the filing of a claim for FHA insurance benefits;

(3)    The HUD Real Estate Owned Sales Contract and related addenda; and,

(4)    All documents included in the case binder for mortgage insurance except the Note.

Starting December 31, 2014, FHA will also accept e-signatures on the Note for forward mortgages, but not Home Equity Conversion Mortgages.

Lenders who have decided to rely on e-signatures must be sure that they are in compliance with the Electronic Signature in Global and National Commerce Act (“ESIGN”). In addition, authentication systems should be in place that can confirm that a signature may be attributed to the purported signer and lenders should take steps to confirm the signer’s identity as a party to the transaction. There must also be record retention controls in place that are consistent with the retention policies of ink-signed documentation.

Hopefully, the acceptance of e-signatures will reduce mortgage origination costs and streamline document submission processes for both lenders and borrowers. The move is just a part of the overall initiative to make the home buying process easier for consumers (see what the Consumer Financial Protection Bureau is doing here).

By now, lenders should have had time to review their technological capabilities and update their policies and procedures on e-signatures. If you are a lender and have not done so, consider how accepting e-signatures can improve your processes and efficiency.

© 2020 by McBrayer, McGinnis, Leslie & Kirkland, PLLC. All rights reserved.National Law Review, Volume IV, Number 100


About this Author

Christopher A. Richardson, McBrayer Law Firm, Real Estate Attorney

Mr. Richardson was admitted to the Kentucky Bar in 2002, after graduating from the University Of Dayton School of Law in 2001. His practice has been concentrated primarily in real estate, where he is experienced in residential and commercial closing transactions, landlord/tenant relations, and mortgage lien enforcement/foreclosure. Mr. Richardson has closed enumerable secondary market and portfolio residential real estate transactions and his commercial practice ranges from short-term collateralized financing and construction lending to development revolving lines of credit....