Feds Consider Adding Default Docs to Electronic Signature Act

Now under evaluation by the federal government is the question of whether notices of housing foreclosures, repossessions and defaults should be given legal standing if sent out in electronic form.

The Electronic Signature in Global and National Commerce Act of 2000 currently allows documents and contracts (others than those specifically excluded from the law) to have legal standing if they are in electronic form or sent through electronic transmission.

In 2000, Congress required the secretary of Commerce to evaluate over a three-year period whether documents excluded from the law should remain excluded. Adding foreclosure, repossession and default notices into the ESIGN Act could give lenders the ability to use electronic mail to send such notices, which under current laws are considered invalid if they are sent through this delivery system.

The National Telecommunications and Information Administration, Washington, is currently receiving public comment on this issue. The deadline for comment submission is Jan. 14, 2003. The NTIA can be reached through its website at www.ntia.doc.gov. Top mortgage industry leaders strongly oppose having these three servicing notices added to the current law.

"We have not reviewed any proposal or other material addressing this issue, but we do not support changing the law to give legal effectiveness to notices of default, acceleration, repossession, foreclosure, eviction or the right to cure provided in electronic form," said Patti Boerger, a spokesperson for Freddie Mac, McLean, Va. "We believed that such notices should continue to be on paper and be delivered by the U.S. mail system or other permitted delivery service," she added.

John A. Richards, associate general counsel at Fannie Mae, Washington, said, "We think it's certainly an appropriate exemption to ESIGN's applicability. "When ESIGN was under consideration, Congress really wanted to make sure that folks couldn't be hoodwinked out of homes by allegations of electronic foreclosure default notices having been provided. I think a lot of that grew out of plain old uncertainty and discomfort around how the technology would be deployed."

Laura Armstrong, a spokesperson for the Mortgage Bankers Association of America, was not at liberty to comment on the association's position by press time, but did say the association is talking to its members about the issue.

David Whitaker, counsel of the Electronic Financial Services Councils, Washington, said, "Our view is that there is really no demonstrated reason to eliminate the exceptions, which appear to be based on good policy reasons.

"We represent a number of major players in the mortgage industry (which include Fannie Mae, Freddie Mac, GMAC Mortgage Holdings, Horsham, Pa. and Wells Fargo Home Mortgage Inc., Des Moines).

"My understanding is that none of them have any active interest in changing the exception. They don't see any reason to advocate sending foreclosure notices by e-mail." Mr. Whitaker added, "These are not the principle benefits to be gained from electronic commerce, but rather focusing on changing the way disclosures are delivered and the way documents are filed at the county courthouse. These are areas we believe there is a tremendous value to electronic commerce."

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