As current regulations continue to change, one topic that has moved to the forefront among mortgage bankers is eSignatures. A normal assumption in reference to eSignatures is that any signature obtained in a legal and binding face-to-face meeting is comparable to eSignature. However, in the electronic world, things are very different.
As can be seen throughout the industry, the term eSignature is used most often for three distinctly different items, which are an acknowledgement, an acknowledgement with a name being placed on a page, or a true certified watermarked and vaulted electronic signature. Although the first two may currently conform to the initial disclosure regulatory requirements, they are not a true legal and binding signature. An acknowledgement in most cases does not have the security built around it, which, in turn, confirms that the individual completing the process is actually the person of record. It simply provides a verification that an electronic document is delivered to a specified e-mail address, or even that a person has opened the e-mail to review it.
Additionally, acknowledgements may have credentials built into the delivery mechanism that requires the recipient to go through a simple process to open the documents, similar to buying tickets online to an event. In either case, the actions do not certify that the individual obtaining the information is, in fact, the person of record, only that someone is using the computer and opened a file.
A true eSignature has a very secured process. This process is transaction-specific, borrower-specific, and certifies that each borrower is in fact the person of record. This certification ensures companies that the information they have transmitted is being received, reviewed, and signed by the actual borrower or co-borrower and not another member of the family or unrelated individual.
A true eSignature process takes into account a number of different factors and not just the input of randomly selected letters and numbers that anyone opening an e-mail can enter. A secured and certified eSignature goes as far as to perform the transaction differently for the borrower and co-borrower, making each signing ceremony independent of the other, while allowing the lender to know a specific individual has completed the process.
After the eSignature process is completed, the documentation is sent to a tamper-proof eVault for delivery. Under this type of process, the eSignature is as legal and binding as any signature notarized face-to-face. Because the documents are immediately sent to the eVault, they are much more secure than those going through a manual process and hand-delivered to a lender. From the eVault, documents can be electronically transmitted to the Mortgage Electronic Registration Systems (MERS) for registration or delivered to a secondary market investor which has the assurance the eSigned certified documents are genuine.
As the eSignature debate moves to a complete eMortgage climate, it is vital that companies understand the difference between an electronic acknowledgement and a true eSignature. Choosing the wrong electronic source may result in legal and monetary problems due to lack of adherence to federal, state and local statues, as well as investor requirements surrounding the electronic signature process.
Ed F. Wallace Jr., Ph.D. is the chief integration officer for Docu Prep Inc., a nationwide provider of closing documents and initial disclosure services, including secure electronic delivery tools, loan analysis testing, and dynamic selection of documents, bar coding, secured and certified eSignatures and eMortgages via LOS interfaces, Web services and standalone systems. He may be reached by phone at (801) 574-2919.
