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Focus on Countrywide: Senior Vice President Joseph Harvey

National Mortgage Professional
Apr 30, 2002

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.
Apr 30, 2002
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