FHA makes positive e-signatures change; Free kick; ERM webcast

by Ricardo Piñeres, Regulatory Compliance Counsel

With all of the new compliance requirements that have accompanied the start of 2014, it is easy to get trapped in a vortex of negativity.  Credit unions are struggling to keep up with the growing regulatory burdens, and many in our industry have suggested that instead of just adding new regulations, regulators should be looking to modernize some of their more outdated requirements.  Well, for those that have been clamoring for a step in the direction of modernity, I bring good news.  At the end of last month, the FHA announced that it would finally expand the list of documents for which it will accept electronic signatures!

Prior to this announcement, FHA only accepted e-signatures on third-party documents (i.e. sales contracts and other documents not under the lender’s control).  In addition to third-party documents, the new policy states that e-signatures are valid on the following documents:

  • Origination;
  • Servicing;
  • Loss mitigation;
  • FHA insurance claims;
  • REO sales contracts; and
  • Related addenda.

Lenders that choose to accept e-signatures may begin taking advantage of the FHA’s new policy immediately on both single family forward mortgages and reverse mortgages.  For the time being, the FHA will not be accepting e-signatures on the mortgage note, itself.  It is expected that they will begin accepting e-signatures on forward mortgage notes by the end of the year.

In order to take advantage of the FHA’s new policy, all lenders that submit electronically-signed documents must have specific technology and operational capabilities and controls, documented quality control processes, and the ability to adapt the electronic signature to FHA’s existing record retention processes.  Furthermore, any lender that chooses to take advantage of the FHA’s new policy must still comply with all of the requirements of the E-SIGN Act.  For more information on the requirements, credit unions should view FHA’s Mortgagee Letter 2014-03.

While this may not do much to ease the ever-growing regulatory burden on credit unions, it is heartening to see a government entity seeking to improve its processes.  I applaud the FHA for making it easier for lenders to work with them, and hope that they continue to streamline their processes.  Not only will this help lenders, but ultimately, it will help consumers seeking to take advantage of the FHA’s products.

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