Selling Guide

Published December 4, 2018

A2-5.1-03: Electronic Records, Signatures, and Transactions (10/31/2017)

This topic contains information on electronic records, including:

Electronic Records

All documents used to originate, service or modify a loan, may be generated, signed, processed, stored or transmitted electronically, provided they are capable of reproduction in paper format except:

  • the promissory note and any related addenda (unless the seller has received special approval to deliver electronic notes (eNotes));

  • any unrecorded ink-signed originals of documents that modify or supplement the security instrument;

  • assignments for MERS-registered loans when MERS is not named as nominee; and

  • unrecorded assignments of loans to Fannie Mae (if the loan is not registered with MERS and the seller, servicer, or document custodian is holding the assignment as a custodial document).

The following table describes Fannie Mae’s requirements for electronic records. An electronic record is a contract or other record that is created, generated, sent, communicated, received, or stored by electronic means. A record is information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

GENERAL REQUIREMENTS FOR ELECTRONIC RECORDS
Topic Description
Permitted format, transmission method and storage protocol
  • Any appropriate electronic format or transmission method for an electronic record other than audio or video recording may be used (except to the extent permitted in connection with electronic notarizations below).

  • Sellers and servicers may use any technology other than audio or video recording for storing electronic records, as long as the electronic records are securely stored and remain accessible by all persons entitled to access them for as long as access is required.

  • Any loan file composed of electronic records must be clearly identified by logical association with Fannie Mae’s loan number.

  • If a seller/servicer chooses to store permitted documents in a format other than paper, it must provide any prospective transferee servicer with information about the methods it uses for document and records storage. If the transferee servicer uses a different storage method, the transferor servicer must work with the transferee servicer to convert the documents and records to a format that is compatible with the transferee servicer’s storage methods.

Compliance with ESIGN, UETA, and applicable laws All electronic records and systems used to generate, process, store or transmit electronic records must comply with
  • the federal Electronic Signatures in Global and National Commerce Act (ESIGN);

  • the Uniform Electronic Transactions Act (UETA) adopted by the state in which the subject property is located; if applicable, and

  • all other applicable federal and state laws.

Enforceability and Accuracy All electronic records must be valid and enforceable and accurately reflect all information and formatting (where the formatting is prescribed by law or material to interpretation of the record) that was in the record as it was presented to intended beneficiaries and signers.
System Requirements All systems generating or storing electronic records must:
  • generate or maintain them as valid and enforceable records,

  • be sufficiently secure to preserve the integrity and authenticity of the records, and

  • protect against loss of unauthorized access to records.

Conversion of documents Sellers/servicers may convert a paper document to an electronic record for storage purposes if it is not one of the documents required to be maintained in its original paper form. Sellers/servicers may destroy the paper document. Similarly, a seller/servicer may convert an electronic record to a paper document for storage purposes or to provide loan modifications to document custodians that are not electronically enabled.
  • When documents are converted to an alternative format, the legibility and integrity of the information and formatting, including indications of alterations (such as erasures and white-outs), in the original document must be preserved.

  • If servicing of a loan is transferred, the servicer must securely transfer all relevant electronic records to the new servicer, along with all information verifying the authenticity, validity and enforceability of the records and any associated signatures.

  • Sellers/servicers must retain documentation that explains the process used to convert paper-based records to electronic formats and specify the date of conversion, method of conversion, and disposition of the original paper records.

For purposes of the preceding table, “electronic records” do not include eNotes. Sellers and servicers are required to obtain special approval in order to deliver or service eNotes. Servicers of eNotes must use an electronic note vault that:

  • integrates with the MERS eRegistry and MERS eDelivery;

  • allows systems integration among the servicer, Fannie Mae, and MERS; and

  • can distinquish between the Authoritative Copy of the eNote and other copies.

See the Guide to Delivering eMortgage Loans to Fannie Mae for additional information about eNotes.

Electronic Signatures

Sellers/servicers may use any form of electronic signature on an electronic record that is valid under applicable law except audio and video recordings, as long as the signature is attached to or logically associated with the record intended to be signed. From time to time, Fannie Mae may require a seller/servicer to use a specific signature format for a particular electronic record or type of record.

The following table describes Fannie Mae’s requirements for electronic signatures.

ELECTRONIC SIGNATURE REQUIREMENTS
Topic Description
Compliance with ESIGN, UETA, and applicable laws All electronic signatures, electronic signature systems, and software must comply with, and be enforceable under
  • ESIGN and UETA adopted by the state in which the signature is applied, and

  • all other applicable federal and state laws.

Attribution and Evidence All electronic signatures must be attributable to an identified signer.

When a record is electronically signed, the seller/servicer must retain, for each electronic signature, evidence of the following:

  • the authenticated identity of the signer and, if applicable, related entity;

  • attribution of the signature to the purported signer;

  • the signer’s express or implied agreement to use an electronic signature;

  • date of the signature; and

  • the method (and, if applicable, eSign vendor) by which the signature was made.

For electronically-signed records for loans purchased or securitized by Fannie Mae, this evidence and documentation must be sufficient to enable Fannie Mae to conduct a thorough quality control review of the loan. For example, the evidence of the borrower’s signature with respect to a verification of employment must allow Fannie Mae the ability to request and receive a reverification of the information from the borrower’s employer.

Electronic Notarizations

Fannie Mae accepts delivery and servicing of loans with electronic documents, including security instruments or mortgage loan modification agreements that have been electronically notarized, either in person or remotely using real-time, two-way audio/video communication. Electronic notarizations (including remote notarizations) may be used with eMortgage transactions as well as ink-signed transactions. Such loans must meet the following requirements:

  • The notarization is performed in accordance with and is legally valid under the laws and regulations of the state in which the notarization is performed, at the time it was performed; and

  • If the electronic notarization is a remote notarization, the following additional requirements must be met:

    • the notary public is licensed and physically located in the state where the notarial act occurred and, where required by law or regulation, is specifically licensed to perform electronic notarizations;

    • the laws and regulations of the state in which the mortgaged property is located either expressly permit the use of remote notarization (such as Virginia and Montana) or expressly accept remote notarizations performed out-of-state in accordance with the laws of the state in which the notarial act is performed;

    • at Fannie Mae's request, the seller agrees to report to Fannie Mae which mortgage loans were remotely notarized; and

    • if the notarized document is a security instrument or an amendment to a security instrument, the remote notarization must comply with the title requirements in B7-2-04, Special Title Insurance Coverage Considerations.

Electronic Transactions with Fannie Mae

Electronic records may be delivered and electronic signatures may be provided by the seller, servicer, or Fannie Mae (or by a third party, when one is involved) as part of a transaction between them.

Every seller/servicer consents to the use of electronic records and signatures in its transactions with Fannie Mae and intends to be bound by the electronic signatures of its representatives as if they were ink signatures on paper.

The following table describes Fannie Mae’s requirements for electronic transactions with Fannie Mae.

REQUIREMENTS FOR ELECTRONIC TRANSACTIONS WITH FANNIE MAE
Topic Description
Transaction-specific Requirements If Fannie Mae requires the seller/servicer to conduct one or more electronic transactions, or a particular kind of transaction, in a particular way (e.g., specific format, signature process or method of delivery), the seller/servicer must conduct the transaction(s) accordingly. However, the seller/servicer is bound by the electronic transaction(s) even if not conducted in an authorized manner.
Responsibilities of Sellers/Servicers
  • The seller/servicer is responsible for all Fannie Mae Losses resulting from its failure or the failure of its technology provider to comply with the requirements of this Guide in generating, signing, processing, storing or transmitting electronic records and electronic signatures.

  • Fannie Mae is authorized to rely conclusively on the accuracy, authenticity, integrity, and validity of electronic records and electronic signatures the seller/servicer transmits to Fannie Mae.

Time of Receipt
  • Unless Fannie Mae specifies otherwise, the rules in Section 15 of UETA will determine whether an electronic record has been sent and received. However, an electronic record will not be considered to have been received by Fannie Mae until it is able to access it during its regular business hours.

  • Fannie Mae will not be responsible for the failure of an electronic record to be timely or accurately transmitted due to any event beyond Fannie Mae’s control or any event that could not be reasonably foreseen at the time of the transmission.

Electronic Transactions with Third Parties

When a seller/servicer electronically engages in a mortgage transaction with a borrower, the seller and the servicer must fulfill all requirements of Section 101(c) of ESIGN to create a binding electronic record or a binding electronic signature with a consumer. Each seller/servicer must retain evidence of its compliance with this requirement.

Under no circumstances may a borrower be required to use electronic records and electronic signatures. For a borrower who chooses not to use electronic records and electronic signatures, the seller/servicer must continue to provide and accept all such documents on paper.

When the servicer issues any disclosure electronically, the individual mortgage loan file also must include evidence of:

  • any required disclosures made before obtaining the borrower’s consent,

  • the borrower’s consent to receiving subsequent disclosure electronically, and

  • evidence of how the servicer “reasonably demonstrated” the borrower’s ability to receive the disclosures for which the consent was provided.

The servicer must not electronically issue a notice of default, acceleration, repossession, foreclosure, eviction or the right to cure to a borrower.

The seller/servicer is required to retain a copy of an electronically executed sales contract, if applicable.

Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2017-09 October 31, 2017
Announcement SEL-2017–05 May 30, 2017
Announcement SEL-2014–10 July 29, 2014
Announcement SEL-2013–03 April 9, 2013
Announcement SEL-2011–11 October 25, 2011