Freddie Mac and Electronic Mortgages: Questions and Answers
- What is an eMortgage?
- What is an eClosing?
- What industry organizations is Freddie Mac working with to facilitate electronic mortgages?
- Does Freddie Mac recommend specific vendor tools to conduct electronic mortgage transactions?
- How does an electronic mortgage closing differ from a paper-based closing?
- What is the legal basis for accepting electronic signatures in lieu of wet signatures?
- Is Freddie Mac purchasing electronic notes?
- What other documents will Freddie Mac accept electronically?
- What is Freddie Mac's view of electronic signatures?
- What do I need to do to ensure that Freddie Mac will buy a mortgage secured in part or in full by electronic documents?
- What topics does Freddie Mac's eMortgage Guide address?
- Will Freddie Mac act as the electronic custodian of the eNotes?
An eMortgage is a mortgage that was originated using an electronic note, called an eNote. An eMortgage also may have an electronic or paper security instrument and certain paper or electronic records, which are part of the mortgage file.
An eClosing is a process where the borrower signs some or all of the closing documents electronically and creates a legally binding Mortgage loan. A loan that goes through an eClosing process is not an eMortgage, unless the promissory Note is an Electronic Record (Transferable Record) signed by the borrower with an Electronic Signature. eMortgages, however, are not permitted under the Guide, and require a separate, express and specific negotiated agreement with Freddie Mac.
Freddie Mac is working with industry leaders that share our vision of an efficient, low-cost, and easier mortgage financing process for America's home buying families. We enjoy a wide variety of relationships with lenders, servicers, trade associations, title companies, service bureaus, and other members of the mortgage finance industry, as well as with technology providers who are increasingly essential to conducting electronic mortgage transactions. We are also working with industry electronic commerce groups such as the Mortgage Banker's Association's Mortgage Industry Standards Maintenance Organization (MISMO) and the Standards and Procedures for Electronic Records and Signatures (SPeRS).
Freddie Mac does not recommend specific vendor tools and supports an open standards policy for electronic mortgage tools development. Our hope is that companies will bring forward new and progressive solutions that improve quality, streamline processes, reduce costs, and enhance the mortgage finance experience for the homeowner.
The parties involved, legal documentation, and the need for signatures do not change. What does change is that everything happens online – documents are prepared, viewed, signed, and transmitted electronically by all parties in the transaction.
The acceptance of electronic signatures in lieu of wet signatures is based on a federal law and a state model Act. The Electronic Signatures in Global and National Commerce Act (E-SIGN) and the model Uniform Electronic Transactions Act (UETA), put electronic signatures and electronic records on an equal legal footing with pen & ink signatures and paper. Most states, territories, and the District of Columbia have enacted the UETA, and the federal government enacted E-SIGN in 2000. E-SIGN pre-empts the UETA, wherever enacted, to the extent it is inconsistent with the model UETA promulgated by the National Conference of Commissioners on Uniform State Laws in 1999. In addition, E-SIGN complements the UETA by providing federal law that facilitates the use of electronic federal consumer disclosures in an electronic mortgage transaction.
Yes. Freddie Mac is currently purchasing electronic notes. Sellers interested in selling electronic notes to Freddie Mac should contact their Freddie Mac representative to discuss their eligibility.
For Sellers approved to sell electronic notes, all loan documents can be electronically created and electronically signed.
For other Sellers, please refer to Guide Exhibit 7, Electronic Loan Documents, for the forms eligible for electronic transactions. Freddie Mac plans to permit lenders to submit other electronic documents as we develop appropriate controls. Contact Freddie Mac if you are interested in creating any other loan documents electronically and using electronic signatures on those documents.
Freddie Mac believes that authentic electronic signatures from duly authorized individuals that comply with E-SIGN and UETA are as enforceable as authentic pen and ink signatures from duly authorized individuals that comply with applicable law. In either case, a signature (pen & ink or electronic) must be capable of being legally attributable to the signer. We have established some minimum requirements for electronic signatures. It is our belief that such minimum standards will assist our customers making the required representations and warranties regarding electronic signatures to Freddie Mac. Freddie Mac's electronic signature requirements are described in detail in our eMortgage Guide, updated August 2014.
First, Freddie Mac Seller/Servicers, and custodians will be required to represent and warrant their compliance with Freddie Mac's requirements as set forth in our eMortgage Guide, including compliance with all applicable laws. The eMortgage Guide provides guidance for Seller/Servicers that wish to originate mortgage loans using electronic records and electronic signatures in lieu of paper documents and written signatures, and sell these electronic mortgages to Freddie Mac. The eMortgage Guide, along with other "Purchase Documents," address Freddie Mac's requirements for everything from creation to storage of electronic records used in connection with the creation of single-family mortgage loans eligible for sale to Freddie Mac.
Freddie Mac's eMortgage Guide provides Freddie Mac Seller/Servicers and custodians with Freddie Mac's current requirements, as well as guidance as they make decisions regarding the use and implementation of electronic documents. It offers details about our requirements for the use of electronic documents in creating and storing electronic mortgages. Freddie Mac's publishing of the eMortgage Guide demonstrates our continued support of the mortgage industry's goal of moving from paper documents to electronic documents in a manner that is prudent and consistent with safety and soundness.
Topics in the eMortgage Guide include:
- Representations, warranties, and contract terms
- Eligibility requirements for industry participants
- Document format and delivery
- Instructions for obtaining and securing electronic signatures
- Electronic certification and records management
- Transfers of Servicing
Will Freddie Mac act as the electronic custodian of the eNotes?
eNotes must be stored in Freddie Mac’s proprietary eNote Vault, unless otherwise negotiated.