E-Signatures Withstand Scrutiny from Auditors
For the most part, a significant portion of the mortgage industry is waiting for case law that upholds UETA and E-SIGN laws that stipulate that electronic signatures are legal and binding before adopting e-mortgages. Mortgage Strategies Group here has made some inroads in this area, as their use of e-signatures has been both challenged and upheld.
Mortgage Strategies uses e-signatures on their 1003s and initial disclosures. Recently the e-signatures provided were challenged as an auditor initially concluded that the e-signature was not binding and later changed that opinion to support the authenticity of e-signatures.
"We've been using e-signatures via eLynx technology for almost two years," said Mark Skinner, CIO at Mortgage Strategies Group. "It fits our business model. Our customers come to us via the Internet so it's nice to go back to them via the Internet. A lot of them like the point-and-click signing of the disclosures over waiting for the FedEx package.
"Also, when you get the packages back from FedEx sometimes we'd find that they weren't completely signed and we'd have to resend them," he noted. "There's also a time factor because our overnight packages take seven days to get back. When we tell the borrower they're going to get a package five minutes after we get off the phone, they're attentive to it and don't put it off and sign it later.
"We've actually done electronic presentation of closing docs but not signing," said Mr. Skinner. "We're a correspondent lender and our investors don't have an electronic process that we can jump on. We've had borrowers view the closing documents online but the signature was done on physical paper in the presence of a notary. In fact, we just signed up with an investor that accepts an electronic note and we will use that functionality when transacting with them hopefully on the very first loan we send them."
For over a year their procedures went unchallenged until one day the regulator stepped in to dispute their e-signature policy. "We're in 42 states plus the District of Columbia," said Mr. Skinner. "We've been audited like everybody else. In one case our initial auditor said that they require an original signature on all their documents. We submitted that the electronic signature is the original signature. The auditor wrote up the problem and sent it to his supervisory for consideration. In the end, the auditor accepted the e-signature as the legal signature.
"Lenders should take a hard look at their operation and ask themselves why they aren't doing this," he said. "In terms of savings, we do a lot of business in California but it costs in excess of $20 per FedEx package to California and another $20 to get it back. That's $40 round trip for something I do for under $10. "Unfortunately this isn't as significant because there's no case that resulted," he said.
While this still isn't the case law that the industry is waiting for, it is further proof that e-signatures are legal and binding. "This is indicative of an auditor realizing the benefits and the technology surrounding an e-mortgage and understanding that this is a secure form of transferring title from one individual to another," added Jordan Brown, CEO of MarketWise Advisors, a consulting firm based in Ponte Verde Beach, Fla. "Others will follow.
"The point to be learned here is that the mortgage industry is evolving and the ultimate edge that technology can give to lenders is the e-mortgage. While it may be the bleeding edge today, it will become the norm and those lenders that innovate today will benefit from lower cost and from having electronic processes." (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com