The Federal Housing Administration (FHA) announced that as of January 30, 2014, it is granting expanded authority to lenders to accept electronic signatures (e-Signatures) on documents associated with mortgage loans. Origination, servicing, and loss mitigation documents, as well as FHA insurance claims, HUD REO sales contracts and related addenda can now be signed using e-Signatures. Current FHA policy allows for e-Signatures only on third party documents such as sales contracts and other documents not controlled by the lender.
FHA Commissioner Carol Galante said that “By extending our acceptance of electronic signatures on the majority of single family documents, we are bringing our requirements into alignment with common industry practices. This extension will not only make it easier for lenders to work with FHA, it also allows for greater efficiency in the home-buying and loss mitigation process”.
Lenders choosing to employ e-Signatures may begin using this policy immediately for single family forward mortgages and FHA’s reverse mortgage products (Home Equity Conversion Mortgages). Lenders are required to adhere to the Electronic Signatures in Global and National Commerce Act (ESIGN), have specific technology and operational capabilities and controls, documented quality control processes, and the ability to adapt e-Signatures to FHA’s existing record retention processes. It appears that both Digital Ink® and DocuSign® will meet the FHA policy’s authentication and attribution requirements if Identity Verification is used.
The new FHA policy should help streamline the origination process and reduce document submission time frames for borrowers seeking options to avoid foreclosure. Initially, e-Signatures will not be accepted on the mortgage note itself, however, FHA states it plans to begin accepting e-Signatures on forward mortgage notes at the end of the year.
A Mortgagee Letter (document 14-03) detailing FHA’s extended acceptance of e-Signatures is posted on the HUD website.
For more information on the use of e-Signatures in real estate transactions generally, see C.A.R.’s Legal Q&A Electronic Signatures and Records in Real Estate Transactions available on the Legal Section of www.car.org.