Yours Electronically, The Mortgagee:States Embrace the Uniform Electronic Transactions ActAleksander DardeliUniform Electronic Transactions Act, UETA, E-Sign
Furthering a national trend to give full legal effect to
electronic transactions, 22 states have adopted the Uniform
Electronic Transactions Act (UETA). UETA's overarching goal is to
facilitate commerce and governmental transactions by legitimating
the use of electronic records and signatures and promoting
uniformity in controlling law among the states. UETA applies only
to electronic records and signatures to the extent that they relate
to interactions among people concerning business, commercial and
governmental affairs.
According to UETA, when state law requires that a record be in
writing, retained for inspection or audit, or furnished to any
party, an electronic record capable of retention will satisfy the
requirement. Similarly, electronic signatures may substitute for
manual signatures.
While encouraging commerce, UETA carves out important rights for
consumers and industries alike. UETA is triggered by an agreement
between parties to conduct and document certain transactions by
electronic means. Any party that agrees to conduct one electronic
transaction by electronic means has an unwaivable right to refuse
to conduct additional electronic transactions. If a sender inhibits
the ability of a recipient to store or print an electronic record,
the electronic record has no effect against the recipient. Several
UETA provisions, including how to determine the time of sending and
receiving records, may be varied by agreement.
UETA requires state agencies to determine whether and to what
extent they will send, accept, create, store or rely upon
electronic records and electronic signatures.
UETA's reach is curtailed in two significant ways. First, UETA
does not displace substantive state law. If any state law requires
a record to be posted or displayed in a specified manner,
communicated by a specified method, or contain information
according to a specified format, then a party must comply with the
specifications provided in that law. Additionally, state law
governs the meaning and effect of "signing" and the rules of
attribution. Second, all the states that have adopted UETA exclude
certain enumerated transactions from UETA's application. Reflecting
the legislative priorities of each adopting state, these exclusions
range from trusts and estates to entire articles of the Uniform
Commercial Code to notices of default including, but not limited
to, acceleration, repossession, eviction, foreclosure or the right
to cure. Nevertheless, with the exceptions of Iowa, Kentucky and
Minnesota, the adopting states have not excluded mortgages from
UETA's scope.
In material aspects, UETA parallels its federal counterpart, the
Electronic Signatures in Global and National Commerce Act. However,
UETA is broader in scope. Unlike E-Sign, it addresses the issue of
record attribution--that is, determining who places a signature on
an electronic record and whether that person is authorized to do
so. Also, it deals with the question of when an electronic record
is sent or received.
UETA is expected to increasingly impact mortgage lending,
brokering and servicing as the mortgage banking industry goes
online. Essentially, it will enable the industry to more
effectively capitalize on the growing practice of conducting
transactions over the Internet. It also creates new possibilities
for cutting record retention costs and boosting transaction volume
through the speed of Internet technologies.
UETA's significance was underscored recently in Fannie Mae's
initial guidance to help lenders develop information systems and
procedures capable of originating and servicing electronic
mortgages for eventual delivery to Fannie Mae. The guidance
combined the thrust of E-Sign and UETA with Fannie Mae's own
concerns regarding the expected mushrooming of electronic or
paperless mortgages. Essentially, the guidance cautioned lenders
that any electronic mortgage that will be delivered to Fannie Mae
must comply with E-Sign, UETA or both, and all other applicable
laws and regulations including current Fannie Mae mortgage
eligibility criteria and guidelines. Enacted in 22 states and
introduced in seven others, UETA may become as common as the
Uniform Commercial Code.
Aleksander Dardeli is an associate with Lotstein Buckman
LLP. He may be reached at (202) 237-6000, ext. 126.
