Presenting a live 90-minute webinar with interactive Q&A. Today s faculty features:

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A E-Signatures and Electronic Loan Documentation in Real Estate Finance: ESIGN and UETA, Interplay With UCC Enforceability, Authentication and Admissibility; MERS and Transferability TUESDAY, FEBRUARY 20, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Margo H.K. Tank, Partner, DLA Piper, Washington, D.C. R. David Whitaker, Partner, DLA Piper, Chicago The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 1.

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5 E-SIGNATURES AND ELECTRONIC LOAN DOCUMENTATION IN REAL ESTATE FINANCE: ESIGN, UETA AND THE INTERPLAY WITH UCC Margo H.K. Tank Partner Strafford -- Live and On Demand CLE Tuesday, February 20, 2018 R. David Whitaker Partner Tuesday, February 20,

6 Digital Mortgage Landscape: Overview of Special econsiderations Special econsiderations for Digital Mortgages we will discuss: The Statutes: ESIGN, UETA and Federal preemption Presentation of Documents Timing Delivery Retention Rights Electronic Promissory Notes (enotes) Special rules for transfer, ownership and custody Special language requirements for enotes Mortgages/Deeds of Trust enotarization erecordiing Tuesday, February 20,

7 Uniform Electronic Transactions Act (UETA) An Overview State law solution for electronic records and signatures Created by the National Conference of Commissioners on Uniform State Laws (NCCUSL) Overlay statute 48 U.S. Jurisdictions States add non-uniform provisions Authorizes replacing writings with electronic records Authorizes electronic signatures Tuesday, February 20,

8 The Federal ESIGN Act An Overview A Federal solution: It covers state and federal laws It is an instant 50 state baseline for the use of electronic signatures and records It provides specific requirements for consumer transactions It sets boundaries for regulatory authority It is technology neutral Preempts inconsistent state laws Tuesday, February 20,

9 General Rule of Validity ESIGN and UETA The general rule of validity is that a signature, contract, or other record related to any transaction in or affecting interstate or foreign commerce may not be denied legal effect, validity, or enforceability solely because it is in electronic form. The admissibility of an electronic record cannot be denied solely because it is in electronic form. ESIGN and UETA only affect laws imposing writing or signing requirements and do not affect: Substantive protections of any law, including consumer protection laws; or The content, timing or format of disclosures required by law. Tuesday, February 20,

10 Electronic Signatures: The Legal Definition ESIGN and UETA give legal force and effect to electronic signatures. The law defines an electronic signature as: an electronic sound, symbol or process attached or logically associated with a contract or other record, and Executed or adopted by a person with the intent to sign the record. Examples of sounds and symbols: Typed names, PIN, Password, a click, a digitized picture of handwritten signature, or a digital signature Example of process Tuesday, February 20,

11 Implementing Electronic Records and Signatures: Consent Consent required: Both UETA and ESIGN are opt-in statutes For business-to-business transactions, and consumer transactions under UETA, consent may be Express Inferred from the circumstance For consumer transactions under ESIGN, consent must be express in most circumstances Tuesday, February 20,

12 Electronic Retention of Records: ESIGN and UETA ESIGN and UETA allow copies of contracts and state and federal disclosures to be retained electronically so long as the contract or other record: Accurately reflects the information set forth in the contract or other record; Remains accessible to all persons who are entitled to access by statute, regulation, or rule of law, for the period required by such statute, regulation, or rule of law in a form that is capable of being accurately reproduced for later reference, whether by transmission, printing, or otherwise Electronic records meeting this test can satisfy original requirements Consequences for failure to retain appropriately Impaired enforceability May not satisfy regulatory writing, delivery or signing requirements May not be admissible in court Tuesday, February 20,

13 ESIGN or UETA Which Law Applies? It is likely that both ESIGN and UETA will apply to the transaction. ESIGN allows state to modify, limit or supersede section 101 of ESIGN: By adopting the official version of UETA or By adopting a state alternative that is consistent with ESIGN. Tuesday, February 20,

14 ESIGN Retention Standards Federal and State regulators can establish record retention performance standards for: Accuracy; Record Integrity; and Accessibility. Performance standards should generally be technology neutral Performance standards can impose greater costs or impose higher burdens on erecords over paper records if the requirement: Serves an important government objective; and Is substantially related to achieving that objective Tuesday, February 20,

15 ESIGN Paper Requirements Federal and State agencies cannot impose or reimpose a requirement that a record be in tangible printed or paper form Unless Compelling government interest relating to law enforcement or national security; and The requirement is essential to attaining such interest. Tuesday, February 20,

16 Digital Mortgages: Moving Toward Full Implementation Overarching focus in 2018 is moving away from understanding legal framework and to implementation Digital Mortgage implementations are complex, requiring compliance with federal, state, and local laws, evolving industry standards and secondary market investor requirements Questions become: How reliable are electronic signatures? How to identify and mitigate electronic transaction risks? Will subsequent transaction parties or the government accept electronic signatures and records? What about enotarization and erecording? What about vendor due diligence? Do I build or buy? How do I assess and manage incoming vs. outgoing electronic signatures? Tuesday, February 20,

17 Digital Mortgage Landscape: General Many lenders are doing at least one phase of an Digital Mortgage transaction Applications Disclosure delivery Closings Secondary market and custody Fannie and Freddie are buying enotes Investor and other third-party agreement terms and instructions for Digital Mortgages Vendors for authentication, signatures, application disclosure delivery, evaults, recording, notarization, etc. Tuesday, February 20,

18 Digital Mortgage Landscape: General MERS eregistry is actively tracking the ownership and the transfer of those interests in enotes As of February ,489 eregistrations enotes registered in 2017: 2,372 Companies registering enotes in 2017: 22 Companies with access to the MERS eregistry: 70 Tuesday, February 20,

19 Digital Mortgage Landscape: enotarization Legal Foundation for enotarization UETA Section 11 If a law requires a signature or record to be notarized, acknowledged, verified, or made under oath, the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable law, is attached to or logically associated with the signature or record ESIGN 15 U.S.C. 7001(g) Adopts UETA rule for transactions in or affecting interstate or foreign commerce URPERA Section 3(c) A requirement that a document or a signature associated with a document be notarized, acknowledged, verified, witnessed, or made under oath is satisfied if the electronic signature of the person authorized to perform that act, and all other information required to be included, is attached to or logically associated with the document or signature. A physical or electronic image of a stamp, impression, or seal need not accompany an electronic signature Tuesday, February 20,

20 Digital Mortgage Landscape: enotarization Long-distance Video enotarization Virginia Notary Act Code of Virginia Title 47.1 Montana Revised Uniform Law on Notarial Acts Montana Code Annotated et seq. Additional laws adopted in Texas and Nevada Iowa adopts statute rejecting remote notarization Revised Uniform Law on Notarial Acts (2010) Section 11 (Recognizes legality of documents notarized under laws in other states) U.S. Constitution Full Faith and Credit Clause Freddie Mac FAQ Statement In states that permit remote electronic notarization, loans in which the borrower s electronic signature on an electronic Security Instrument or other electronic documents is remotely and electronically notarized are eligible for sale to Freddie Mac. The notary public must be licensed and domiciled in the state in which the mortgaged premise is located and the electronic notarization law was enacted. NASS Remote Notarization Task Force Tuesday, February 20,

21 Digital Mortgage Landscape: erecording Graphic courtesy of the Property Records Industry Association (PRIA) Tuesday, February 20,

22 Digital Mortgage Landscape: erecording Over 1887 counties are now permitting erecording in some form Over 82% of the U.S. population resides in counties where erecording is available In 2017, an estimated 20 million documents were recorded electronically erecording means different things in different recording offices The major obstacle to continued growth is the uncertainty around enotarization, and especially remote enotarization Statistics courtesy of Mark Ladd at Simplifile and the Property Records Industry Association (PRIA) Tuesday, February 20,

23 Digital Mortgage Landscape: Transferable Records/eNotes Transferable Record (15 U.S.C. 7021(a); UETA 16(a)) Would be a note under UCC 3 if on paper Issuer expressly agrees is a transferable record Related to a loan secured by real property (ESIGN only) Possession Control (15 U.S.C. 7021(b)-(f); UETA 16(b)-(f)) Control: a person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred Tuesday, February 20,

24 Digital Mortgage Landscape: Transferable Records/eNotes 6 part test: A single authoritative copy of the transferable record exists which is unique, identifiable and except as otherwise provided in paragraphs 4, 5, and 6, unalterable; The authoritative copy identifies the person asserting control as The person to which the transferable record was issued; or If the authoritative copy indicates that the transferable record has been transferred, the person to which the transferable record was most recently transferred; The authoritative copy is communicated to and maintained by the person asserting control or its designated custodian; Copies or revisions that add or change an identified assignee of the authoritative coy can be made only with the consent of the person asserting control; Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and Any revision of the authoritative copy is readily identifiable as authorized or unauthorized Tuesday, February 20,

25 Digital Mortgage: Key Issues to Address Electronic Delivery Closing Selling to Investors Custody Tuesday, February 20,

26 Questions? Margo H.K. Tank Partner R. David Whitaker Partner Tuesday, February 20,

27 DLA Piper is a global law firm operating through various separate and distinct legal entities. Attorney Advertising DLA Piper LLP (US) Tuesday, February 20,