eClosings and eMortgages FAQs

Frequently Asked Questions (FAQs) about Fannie Mae's eMortgage (electronic mortgage) Delivery and eClosings.

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Basics

What is an eClosing?
What is an eMortgage?
What are the benefits of eClosings?

Implementation

Who sets the industry standards for eMortgages?
Does Fannie Mae accept electronic signatures on mortgage closing documents?
What laws form the basis for eNotes and eSignatures?
Are eNotarizations allowed in my state?
Which counties allow eRecording?

Closing

Can Fannie Mae help me locate a technology vendor?

Delivery

What are the requirements for delivering eMortgages to Fannie Mae?
Which type of mortgage loans can be delivered to Fannie Mae as eMortgages?
What are the steps of an eMortgage delivery process?
Does Fannie Mae allow third parties to act as custodians of eNotes?
What is the MERS eRegistry?
Which parties are required to register with MERSĀ®?
What is a Bailee and Bailee Letter?
Can a Bailee Letter be submitted by a warehouse bank for eNotes?

Servicing

Which servicers support eNotes?
How are eMortgages serviced?
Does Fannie Mae purchase eMortgages (eNotes)?

Basics

What is an eClosing?

An eClosing is the act of closing a mortgage loan electronically. This occurs through a secure digital environment where some or all of the closing documents are executed and accessed electronically.

This is often a hybrid process in which certain key documents, such as the promissory note and security instrument, may be printed to paper and wet-signed, while other documents are signed electronically.

eClosings result in eMortgages only if the promissory note is signed electronically.

What is an eMortgage?

The term "eMortgage" generally refers to the use of electronic processes and signatures in the mortgage production process. More specifically, it refers to electronically-signed closing documents paired with an original electronic promissory note (eNote) signed on an eClosing platform and registered with the MERS eRegistry® upon execution. The term "eMortgage" is often used to indicate an eNote even though eMortgage is the broader term for the electronic process that includes the eNote and the electronic security instrument.

What are the benefits of eClosings?

Based on feedback Fannie Mae has received from lenders conducting eClosings, here are some of the reasons why they chose to implement eClosings within their businesses:

  • A more streamlined closing experience for borrowers.
  • Consistency and accuracy in the closing process (fewer, if any, post-closing conditions).
  • Shorter funding times.
  • Loss of notes eliminated, resulting in better collateral control.
  • Streamlined post-closing processes with almost no rework.
  • Faster liquidity into the secondary market.
  • Quicker warehouse inventory turn times, shorter warehouse line usage times.
  • Operational efficiencies and cost savings.
  • Elimination of inefficient manual workflows.
  • Increased data quality.
  • Smaller environmental footprint because of reduced printing.
  • Reduced courier and shipping fees.

In some cases, a borrower may still want the option of a paper closing, and lenders should address this need as part of their eClosing strategy and processes. However, Fannie Mae does not require lenders to perform paper loan transactions.

Implementation

Who sets the industry standards for eMortgages?

The Mortgage Industry Standards Maintenance Organization® (MISMO) eMortgage work group was formed in 2001 to develop standards for efficient eMortgage processes, transactions, and XML data protocol.

Fannie Mae leverages MISMO specifications for producing and executing eNotes utilizing MISMO SMARTDoc V1.02 standard. The MISMO eMortgage Guidelines and Recommendations are available at www.mismo.org.

Does Fannie Mae accept electronic signatures on mortgage closing documents?

Yes. Per the Selling Guide, we accept eSignatures on most documents used to originate or service a loan. However, lenders seeking to service or deliver eNotes, must seek prior approval. See the Selling Guide for specific exceptions. Lenders seeking to originate and deliver eNotes must seek prior approval. Refer to Selling Guide sections A2-5.1-03 (Electronic Records, Signature, and Transactions) and A2-5.1-04 (Lender's or Document Custodian's Electronic Transactions with Third Parties).

What laws form the basis for eNotes and eSignatures?

Both federal and state legislation form the legal basis for eNotes and eSignatures. In 2000, Congress passed the Electronic Signatures in Global and National Commerce Act (ESIGN). Forty-seven states, DC and the U.S. Virgin Islands have adopted state laws modeled on the Uniform Electronic Transactions Act (UETA). The remaining three states (WA, IL, and NY) each have their own statutes regarding electronic signatures. Please consult your legal advisor for more details about these laws.

Are eNotarizations allowed in my state?

In order to be truly paperless, the mortgage or security instrument must be electronically notarized prior to recording. ESIGN has provisions regarding electronic notarization.

Below are outside resources that may track this information by state. Lenders should check with their specific statutory authority to confirm the most current data. Pennsylvania Association of Notaries (PAN) and Property Records Industry Association (PRIA).

Which counties allow eRecording?

eRecording is permitted in approximately two-thirds of the U.S. population.

Coverage has steadily increased year over year and continues to do so. To determine if your jurisdiction allows eRecording, please consult with the recording official of your jurisdiction or visit the eRecording County List published by the Property Records Industry Association (PRIA).

Closing

Can Fannie Mae help me locate a technology vendor?

We can neither endorse technology vendors nor establish compliance checks for technology solution provider systems, including correspondents and third-party originators systems.

However, we include a list of technology solution providers that have conducted technical integration testing with Fannie Mae. Please note that it is up to the lender to ensure that their specific provider meets their legal and regulatory requirements around electronic signatures.

Lenders should be sure to choose a solution that fits their respective needs and adheres to the representation and warranty framework and Selling Guide. Take advantage of our Decision Support Selection Tool (DSST) which can provide you clarity by helping you identify and select technology solution providers that support eMortgage submissions.

Below are considerations for choosing eClosing solution providers:

  • Do they support full execution of a complete closing package, including an eNote?
    • If not, what are their plans to implement eNote delivery?
    • If so, do they require access to a third-party closing platform? What implementation requirements are involved?
  • Do they offer a fully automated workflow with your current document provider?
  • Does their solution include an eVault solution? Have they partnered for eVault integration?
  • Does their solution facilitate the creation of valid eSignatures and eNotes under applicable laws, including ESIGN and UETA?
  • Have they completed proper testing protocols for delivering an eNote to an investor?
  • Can they provide up-to-date audit trails within the process?
  • Do they utilize encrypted user authentication, protected access to accounts, and tamper-seal evidence (where appropriate)?
  • Can they provide transaction-level reporting on file status?
  • Do they provide a paper option if or when a document cannot be delivered electronically?
  • Is their disaster recovery plan up-to-date and how could it impact you?
  • Do their features and benefits align with your vision and your eNotes implementation plan and timeline?

Delivery

What are the requirements for delivering eMortgages to Fannie Mae?

Once a lender obtains Fannie Mae's approval to deliver eMortgages, standard Selling Guide requirements regarding underwriting and eligibility for delivery apply. Additional eMortgage-specific delivery guidelines and technical requirements are contained in the Guide to Delivering eMortgage Loans to Fannie Mae.

Which type of mortgage loans can be delivered to Fannie Mae as eMortgages?

Most conventional first mortgages can be delivered as eMortgages. This includes fully amortizing fixed-rate and adjustable-rate monthly payment mortgages, and fixed-rate and adjustable-rate bi-weekly payment mortgages.

Some products that require additional or special purpose legal documents (such as HomeStyle® Construction-to-Permanent mortgages, co-op properties and mortgages secured by Puerto Rico properties) may not be delivered as eMortgages. Please consult the Selling Guide and the eMortgage Guide for additional information.

What are the steps of an eMortgage delivery process?

A lender delivering an eMortgage would follow this general process:

  • eNote and possibly other documents are eSigned by borrower and notary through use of an eClosing system.
  • The eClosing system tamper seals the documents.
  • eNote is registered on MERS eRegistry within one business day.
  • Lender transmits eNote and other investor documents using MERS eDelivery.
  • Lender initiates a transfer of Control & Location via the MERS eRegistry.
  • Lender submits delivery data to Fannie Mae including Special Feature Code 508 (eMortgage).
  • Loan is certified and funded, assuming all requirements are met.

Does Fannie Mae allow third parties to act as custodians of eNotes?

We currently act as custodian for all of the eNotes we purchase, but rely upon third-party custodians to certify eNotes at delivery.

For Whole loan deliveries:

  • We currently require that lenders use our designated document custodian (Bank of New York Mellon) for certification of eNotes.

For MBS deliveries:

  • We consider requests for approved document custodians to complete the certification of an eNote that is being issued in MBS pools.

What is the MERS eRegistry?

The MERS eRegistry® is the system of record identifying the owner and location of the eNote. The MERS eRegistry allows eNotes to be registered and uniquely identified for tracking and verification. Fannie Mae's eMortgage Delivery technology (eMD) and processes are integrated with the MERS eRegistry.

Are lenders required to use and be setup for the MERS eRegistry when delivering eMortgages to Fannie Mae? Yes. Lenders must become a MERS member to use the MERS eRegistry. Lenders can request a membership application from MERS by calling 1-800-646-MERS or downloading the application from www.mersinc.org. Access to the MERS eRegistry requires system integration and a testing cycle.

Which parties are required to register with MERS?

Lenders: Must register with MERS. They are required to register the eNote on the MERS eRegistry immediately after closing. To deliver eMortgages to Fannie Mae, lenders must use MERS eDelivery to deliver the eNote and then initiate a request with the MERS eRegistry to transfer ownership of the eNote.

  • Servicers: Must register with MERS so their MERS Organization ID can be reflected on individual loan records within MERS eRegistry, enabling them to perform loan status updates. By registering with MERS and acquiring eVault connectivity to the MERS eRegistry, servicers are able to accept control of an eNote in the event of foreclosure, or initiate a transfer of servicing update to the eRegistry in the event of a servicing transfer. Servicers should contact MERS for more information (www.mersinc.org).
  • Warehouse lenders: Must register with MERS and have access to an eVault for communicating with the eRegistry. Once an eNote is registered with MERS by the originator, the lender will then transfer control of the eNote to the warehouse lender until delivery into the secondary market.

What is a Bailee and Bailee Letter?

A "Bailee" is an individual who temporarily gains possession, but not ownership, of a good or other property. The Bailee is entrusted with the possession of property by another individual known as the bailor.

A Bailee Letter is a communication that notifies the recipient of a promissory note that a third party has a security interest in the note. The letter allows interested investors to review the note, while protecting the security holder's interest in the note.

Can a Bailee Letter be submitted by a warehouse bank for an eNote?

In lieu of a Bailee Letter, we utilize a tri-party funding agreement between the lender, Fannie Mae, and the warehouse funding provider.

The Funding Agreement serves the following roles:

  • Acts as a master bailee agreement for eNotes transferred to us by the warehouse provider on behalf of the lender.
  • Locks down the wiring instructions, should we purchase the loans.
  • Allows us to control the eNotes as designated custodian for the warehouse bank as a secured party and designee for the lender until purchased Requires us to return control to the warehouse bank, should we decide not to purchase the loans.

Servicing

Which servicers support eNotes?

We have published a list of approved servicers on the eClosings and eMortgages page, and are actively working with new servicers for eNote approval.

Minimum requirements for servicing eNotes are published in the Guide to Delivering eMortgage Loans to Fannie Mae, and includes having access to an eVault with connectivity to the MERS eRegistry in order to maintain eNotes and effect status updates.

We are happy to work with your servicing partner(s) to help them become approved to service eMortgages.

How are eMortgages serviced?

Standard servicing requirements apply when servicing eMortgage loans. In addition, servicers must identify their eMortgages on their servicing systems.

Servicers must have access to an eVault (either their own or a third party's) which is fully integrated with the MERS eRegistry to enable them to record payoffs, charge-offs, or loan assumptions for eMortgage loans. Prior to transferring servicing portfolios that contain eMortgages, the transferring servicer must ensure that the transferee servicer knows that there are eMortgages in the portfolio and is able to service them.

In the event of a foreclosure, there are special loss mitigation procedures servicers must follow, such as contacting their Fannie Mae Servicing Consultant and working with our designated attorneys.

Does Fannie Mae purchase eMortgages (eNotes)?

Yes. We are actively purchasing eNotes that meet our published guidelines, through both Whole loans and MBS executions.

We purchased the first two eMortgages on the secondary market in 2003, and continue to purchase eNotes every day. Our updated guidelines are detailed in our eMortgage Guide to Delivering eMortgage Loans to Fannie Mae.