By Melanie Feliciano
There appears to be a movement afoot to adopt electronic transactions, including electronic signatures, in mortgage lending transactions. Pursuant to Bulletin Number 2012-11, Freddie Mac announced recently, among other things, that federally-regulated sellers of loans to Freddie Mac may electronically deliver initial disclosure documents in the loan origination process. In addition, Freddie Mac announced that electronic signatures would be accepted if signatures are required on any of the initial disclosure documents.
The initial loan origination documents that are eligible for Electronic Transactions (defined below) under Freddie Mac’s guidelines are as follows:
- Initial loan application (Final loan application at closing must be a paper copy and signed with pen and ink)
- Real Estate Purchase and Sale Agreement (see Section 3.10)
- Initial Good Faith Estimate (GFE)
- Initial Truth-in-Lending (TIL)/Regulation Z Disclosures
- Initial Consumer Mortgage Product Disclosures
- Other Initial Federal and State Consumer Disclosures
- Internal Revenue Service (IRS) Forms (Note that IRS Form 4506-T must be ink, or wet, signed by the borrower)
- Other initial documents or forms required by the seller for the seller's use only that do not require notarization or witnesses
An “Electronic Transaction” is defined in Section 3.2 of Chapter 3 of General Freddie Mac Policies, Freddie Mac’s Single-Family Seller/Servicer Guide, Volume 1 as:
An action or set of actions occurring between two or more persons relating to the conduct of business, commercial, or governmental affairs, using electronic means. For purposes of the Guide and the Seller's other Purchase Documents, the term also includes, but is not limited to, an Electronic Transaction conducted using Systems to create, sign, transfer, maintain, send, receive, retrieve and/or store Records, Electronic Records or Electronic Signatures.
Note that Freddie Mac’s guidelines for electronic signatures can be found in new Guide Chapter 3, Special Requirements for Electronic Transactions, which consolidates its existing requirements in Guide Section 1.3, Acknowledgment and Consent to Electronic Transactions.
Freddie Mac’s acceptance of electronic transactions, including electronic signatures, is welcome news to those lenders who have been delivering their loan packages electronically and obtaining borrowers’ electronic signatures on those disclosures and documents required to be signed by the borrower in the loan origination process.
Melanie A. Feliciano Esq. is DocMagic Inc.’s chief legal officer and currently serves as editor-in-chief of DocMagic’s electronic compliance newsletter, The Compliance Wizard. She received her JD from the Georgetown University Law Center, and is licensed in California and Texas. She may be reached by phone at (800) 649-1362 or e-mail firstname.lastname@example.org.