Mortgage Bankers Ask FHA to Permit Use of E-Signatures

by devteam June 3rd, 2011 | Share

The Mortgage Bankers Association has asked the Department ofrnHousing and Urban Development to permit the use of electronic signaturesrn(e-signatures) on all mortgage origination forms required by the FederalrnHousing Administration (FHA.)  Thernrequest was made by Stephen A. O’Connor, MBA’s Senior Vice President for PublicrnPolicy and Industry Relations in a letter sent on Tuesday to Robert C. Ray, HUD’srnAssistant Secretary for Housing and Acting Commissioner of FHA.</p

O’Connor pointed out that e-signatures are now acceptablernunder federal law and that FHA already accepts them for certain purposes.  Permitting more universal use of the devicernwould reduce the volume of lost paperwork, reduce signature fraud and the timernrequired to close a loan, and might ultimately lead to lower borrower costs.</p

According to the letter, much of the work of originatingrnmortgages is already carried out by electronic means.   Borrowersrnsubmit loan applications on-line and supply information to their lenderrnelectronically.  Underwriting andrnprocessing is done by lenders using available on-line tools and necessaryrndocuments such as appraisals, deposit verifications, and credit reports havernlong been requested and received electronically.</p

Cost savings will come from reduced printing and use of mailrncouriers by borrowers and lenders.  Itrnwould also provide consistency and increased flexibility for borrowers whornwould not have to redo documents if they switched from a conventional to a FHArnloan.  Freddie Mac and Fannie Mae havernbeen accepting electronic signatures for several years, O’Connor said, and thisrnwould align FHA with those agencies.  “Conformingrnto accepted industry standards on all documents would expedite the mortgagernprocess, reduce lender costs because processes could be replicated, and fulfillrnconsumers’ growing preference for conducting electronic transactions.”  Also, he said, both the Real EstaternSettlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) acceptrnelectronic records to meet their disclosures requirements.</p

MBA acknowledged concerns that FHA might have regardingrnmortgage fraud but said that there is much about the use of electronics whichrncould mitigate many of the fraud issues that exist in the paper process.  He cited the example of additional borrowerrnauthentication capabilities such as challenge questions which are morernfoolproof than a “notary asking to see a driver’s license.”  Other safeguards such as tape recording andrnaudit trails can safeguard the process and are not only beneficial for thernlender and FHA but provide convenience and protection to the homebuyer.</p

In conclusion, O’Connor said the MBA realizes the intensernprocesses that would be required to facilitate the change and offered the MBA’s assistance inrnimplementing a new program if requested. As a side note, by submitting this request to the FHA using O’Connor’s voice, the MBA appears to be keeping to its promise to build a “revolving door” firewall betweenrnits new president David Stevens and the agency he headed until this past May.  

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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