from Local Attorney, Michael H. Wasserman

Thursday, February 13, 2014

FHA OKs expanded use of E-Signatures in Loan Process

By Michael H. Wasserman

Closing on residential properties in Chicago generates a lot of paperwork. Particularly if when mortgage financing is involved. Part of my job as an attorney for home and condo buyers is to help with loan application/documentation and to review the at-closing loan package with them. The number of documents presented at closing seems to grow every year. It can take a while to slog through the reams of disclosures, authorizations and certifications most lenders send to the closing table. Pens run out of ink. Rest breaks are often needed. Stacks of paper get pushed from one end of the table to the other and then back again.

The two most typical reactions to all of the signing are (A) recognition of all the trees that "give their lives” in service to the lenders and title companies, and (B) Hopes / wishes for paperless closings.

The mortgage financing process for some home buyers is getting a bit "less inconvenient" and a step closer to paperless.  Effective immediately, FHA is accepting e-signatures more broadly from the lenders it works with - and their borrowers/applicants. This offers some wonderful convenience and efficiencies in an otherwise inconvenient, aggravating and grossly inefficient process.

FHA joins The Federal Home Loan Mortgage Corporation (FHLMC) which already allows e-signature on initial loan documents.

Plainly, there are a great many documents that must be generated to apply for, process, and document residential mortgage loans. Historically, the initial paperwork were mailed / delivered to borrowers who had to "wet sign" and return hard copies of the documents. Even when emailed to consumers, the process still requires pen-to-paper impressions. E-signature of course obviates the need to print documents and is a whole lot quicker/easier.

FHA's announcement applies to all origination and third party documentation for single family properties, and significantly. also include REO (bank owned) transactions.

Best of all, we are told that starting next year, FHA will also allow E-signatures on mortgage loan Notes (The Actual Loan Agreement). This may well open the way again to E-closings.

 Change takes time so I fully expect that for the foreseeable future, we will still spend most of our time at closings reviewing and wet-signing paperwork the old fashioned way, but the trend towards paperless continues and is something to look forward to.