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Electronic Signatures and Transactions FAQs

Freddie Mac's Sellers are permitted to conduct electronic transactions using electronic versions of certain loan documents in the initial loan origination process as outlined in the Single-Family Seller/Servicer Guide (Guide), Chapter 3. These transactions allow you to take advantage of the operational efficiencies and quicker processing that electronic transactions provide.

The electronic signature and transaction Q&A provides guidance and recommended best practices to Freddie Mac Sellers when incorporating electronic signatures and/or transactions into loan origination processes.

  1. What is an eMortgage? 
  2. What is an eClosing? 
  3. Can I deliver eMortgages to Freddie Mac? 
  4. What forms can be signed electronically? 
  5. New Guide Exhibit 7 does not include verification forms, such as the verification of employment (VOE), verification of assets (VOA), or verification of deposit (VOD). Are these forms permitted as electronic records? 
  6. My organization currently doesn't accept electronic signatures on any of our loan origination documents, but we are interested in changing that. Can Freddie Mac provide guidelines to help us select a technology vendor? 
  7. Freddie Mac’s Guide Chapter 3 requires Sellers to conduct due diligence reviews on the systems we use and to verify that the systems are in compliance with our written minimum security standards. What resources are available to provide guidance on recommended security standards? 
  8. What information should I keep in our due diligence file? 
  9. We conduct business with several Correspondents and third-party originators that want to use a vendor that our organization hasn't reviewed. Is this permitted? 
  10. How do we know if our consumer lending disclosures comply with all federal (Truth-in Lending Act and Regulation Z) and state laws, regulations, and rules? 
  11. Our in-house legal counsel has limited experience with ESIGN and UETA. Are we required to use outside counsel? 
  12. Does the technology vendor also have to conduct a legal preview? 
  1. What is an eMortgage?
    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.
  2. What is an eClosing?

    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.
  3. Can I deliver eMortgages to Freddie Mac?
    Freddie Mac Sellers interested in using eMortgages are required to obtain a negotiated term of business to deliver eMortgages and must contact their Freddie Mac representative to obtain approval to use eMortgages for loans sold to Freddie Mac.
  4. What forms can be signed electronically? 
    Please refer to Guide Exhibit 7, Electronic Loan Documents, for a list of the forms eligible for electronic transactions.
  5. New Guide Exhibit 7 does not include verification forms, such as the verification of employment (VOE), verification of assets (VOA), or verification of deposit (VOD). Are these forms permitted as electronic records?
    Yes, our requirements for verifications can be found in Guide Chapter 37.20. Sellers may permit borrowers to electronically sign verification forms. Vendors used for electronic verification also must comply with the requirements outlined in Guide Chapter 37.20.
  6. My organization currently doesn't accept electronic signatures on any of our loan origination documents, but we are interested in changing that. Can Freddie Mac provide guidelines to help us select a technology vendor?

    Sellers are responsible for selecting a vendor system but must conduct the necessary due diligence to determine that the vendor and its system comply with Guide Chapter 3.

    While Freddie Mac does not endorse any specific technology vendor, we recommend that Sellers use the following guidance on vendor criteria:

    • Is able to demonstrate system compliance with the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act (ESIGN).
    • Has the capability to enforce business rules to ensure compliance with business, legal, and regulatory requirements.
    • Offers a complete inventory of standard document packages for all major lending areas and all product types.
    • Provides transaction-level tracking and reporting on file status.
    • Incorporates strong encrypted user authentication, as well as the option to restrict access to specific IP addresses, protect access to accounts, and data.
    • Provides a paper option if/when a document cannot be delivered electronically.
    • Has a full production disaster recovery and redundancy plan.
    • Provides a full document audit trail.
  7. Freddie Mac's Guide Chapter 3 requires Sellers to conduct due diligence reviews on the systems we use and to verify that the systems are in compliance with our written minimum security standards. What resources are available to provide guidance on recommended security standards?

    Two organizations have best practices and security standards for electronic transactions:

    • The MISMO®, eMortgage Workgroup has published the MISMO Guide on eSigned PDF Guidelines, which provides guidance on both the direct implementation of electronic signatures in a PDF document and on the general format and structure of PDF files themselves. These guidelines can be found on the MISMO website.
    • Best practices from the Federal Financial Institutions Examination Council (FFIEC), can be found at: http://ffiec.gov.
  8. What information should I keep in our due diligence file?

    We recommend you keep and store any relevant information on all technology providers, including a comprehensive list of your technology providers. We also recommend you keep and store:

    • Vendor documentation stating compliance with UETA, ESIGN, and state/regulatory requirements.
    • Confirmation of ongoing effectiveness of controls with routine examinations and testing of security and privacy controls by qualified third parties.
    • Other documentation from the software vendor, such as a SSAE 16 (SAS 70 Type II) review.
    • Documentation related to discussions with internal or external computer, technology and legal experts regarding systems compliance with UETA and ESIGN and state/regulatory requirements.
  9. We conduct business with several Correspondents and third-party originators that want to use a vendor that our organization hasn't reviewed. Is this permitted?
    All Correspondents and third-party originators must certify to Sellers that their systems have undergone the same due diligence required for the Seller's systems as identified in Guide Chapter 3 and their systems comply with UETA, ESIGN, and state/regulatory requirements. We recommend lenders proactively share lists of reviewed/eligible technology providers with correspondents and third-party originator partners.
  10. How do we know if our consumer lending disclosures comply with all federal (Truth-in Lending Act and Regulation Z) and state laws, regulations, and rules?
    Contact your technology provider(s) to ensure that all disclosures comply with applicable federal and state laws. Your technology providers may be able to share any legal reviews they have performed that provide evidence that their systems meet these requirements. If not, you will need to undertake your own legal review.
  11. Our in-house legal counsel has limited experience with ESIGN and UETA. Are we required to use outside counsel?
    If your in-house counsel is not familiar with either ESIGN, or UETA, then you must consult outside counsel that is capable of ensuring your systems comply with these applicable laws. Many firms can review the technology and provide an analysis stating that the technology is compliant with both laws. While a detailed legal analysis is not necessary, it is considered a best practice.
  12. Does the technology vendor also have to conduct a legal preview?

    If the systems used by a Seller to allow borrowers to electronically sign loan documents are provided by a vendor, either the Seller or the vendor can conduct a legal review demonstrating compliance with UETA/ESIGN.  There is no need for both the Seller and vendor to conduct the legal review.

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