Electronic Loan Documents FAQ

The validity of electronic signatures (in lieu of ink signatures) is based on the federal Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA), as enacted in the applicable state. ESIGN and the UETA put electronic signatures and electronic records on an equal legal footing with pen and ink signatures and paper records. Most, but not all states, territories, and the District of Columbia have enacted the UETA since 1999, and the federal government enacted ESIGN in 2000. ESIGN pre-empts the UETA, wherever enacted or not enacted, to the extent it is (a) inconsistent with the model UETA promulgated by the National Conference of Commissioners on Uniform State Laws in 1999 or (b) nonexistent. In addition, ESIGN complements the UETA by providing federal law that facilitates the use of electronic federal consumer disclosures in an electronic mortgage transaction.

Please refer to Exhibit 7 in the Freddie Mac Single-Family Seller/Servicer Guide (Guide).  As indicated in the exhibit, the Seller/Servicer need to obtain Freddie Mac approval to deliver loans with eNote, i.e. eMortgages.

Since endorsements do not exist for eNotes, allonges are not applicable to eNotes. For paper Notes, an allonge must be physically attached to the paper Note. So, an allonge on a paper Note cannot be electronically signed.

Freddie Mac has been accepting electronic loan documents and eMortgages since 2005 and continues to support eClosings and eMortgages by being flexible in its requirements and adding resources to assist Seller/Servicer adoption efforts. Freddie Mac is also working with various trade associations, title companies, service bureaus, and other members of the mortgage finance industry, as well as with technology providers. We want to better understand the challenges our Seller/Servicers face in their adoption process and assist them in developing solutions to overcome those challenges.

In an eClosing, most or all of the steps in the closing process take place online, that is, documents are prepared, viewed, signed, stored and transmitted electronically. Generally, both paper closings and eClosings have the same parties, legal documentation and need for valid enforceable mortgage loan documents.

eClosing is defined as a loan closing process in which some or all of the closing documents are signed electronically. If all documents are signed electronically, the process is called full eClosing or complete eClosing. If some documents are signed electronically and some are wet signed, the process is called hybrid eClosing. Freddie Mac supports all these variations. Freddie Mac approval is required if an eNote is included (i.e. eMortgages).

Best practices and security standards for electronic transactions can be found on the Federal Financial Institutions Examination Council Website and the Mortgage Industry Standards Maintenance Organization (MISMO) Website.

We recommend you keep:

• Internal or any vendor documentation confirming system compliance with UETA, ESIGN and other applicable state and regulatory requirements.
• Documentation confirming discussions with internal or external computer/ technology experts and internal or external legal experts regarding systems compliance.
• Confirmation of ongoing effectiveness of controls with routine examinations and testing of security and privacy controls by qualified third parties.
• Other documentation such as a SSAE 16 (SAS 70 Type II) review.
• Any relevant information on all technology providers, including a comprehensive list of your technology providers.

Correspondents and third-party originators must certify to Sellers that their systems have undergone the same due diligence review required for the Seller's systems as outlined in Guide Section 1401.8. Their systems must comply with UETA, ESIGN, and other applicable state and federal regulatory requirements. We encourage Sellers to share their lists of eligible technology providers with correspondents and third-party originators.

Please refer to the eClosing Implementation Roadmap for a step-by-step process to implement an eClosing program. Also review our one-page overview of the process. Please contact the [email protected] with any questions you may have on the roadmap.

Systems that facilitate electronic signatures are needed to conduct eClosings. If the eClosing process includes electronic Note (eNote), then the document generation system must be able to create Version 1.02 MISMO Category 1 SMART documents. In addition, eVaults are required to securely store executed eNotes and interface with the MERS eRegistry.

Above systems can be your own proprietary system or a vendor system. [Freddie Mac approved eMortgage vendors]

For more information on eClosing and eVault system requirements, please refer to Guide Chapter 1402.  Also refer to the Freddie Mac eMortgage System Security Best Practices.

An eMortgage is a loan in which the promissory note has been created, executed, transferred and ultimately stored electronically.  An eMortgage may also have an electronic or paper security instrument and certain other paper or electronic records, which are part of the mortgage file documents.

We have established minimum requirements for our customers which supplement ESIGN and UETA to bolster the validity, effectiveness and enforceability of electric signatures used in eMortgage transactions. Our requirements are described in Guide Chapter 1402.

Approval process requirements can be found at Freddie Mac Review and Approval Requirements

Please refer to Guide Section 1402.7 for the list of mortgages that are not eligible to be delivered as eMortgages.

Yes. Visit our eNote Custodians page for the list of Document Custodians that are ready to provide the eNote custody. If your Document Custodian is not listed and if they are interested in getting approved as an eNote custodian, have them reach out to our eMortgage team at [email protected] for the approval process and requirements.

• Quicker loan funding
• Potential for increased liquidity due to shorter timeframes from origination to sale of the loan in the secondary market
• Eliminates human error risk associated with the manual "stare and compare" certification process.

If a Document Custodian is interested in providing automated eNote certification solution to certify eNotes, Freddie Mac is ready to build system-to-system integration from Freddie Mac’s Loan Selling Advisor® with them to:

• Offer the benefits of automated certification process for Seller/Servicers using third party eNote custodians.
• Eliminate the current bifurcated custody model for eMortgage Seller/Servicers.

We require Warehouse providers to complete and execute Form 994, Warehouse Lender Agreement and Freddie Mac in lieu of Bailee letters. Freddie Mac or a Freddie Mac approved third-party eNote custodian will act as the custodian of the eMortgage for the warehouse provider and the Seller, from the time the eMortgage is delivered to us until we either transfer the purchase proceeds to the warehouse lender according to the wire transfer instructions in the Form 996E, or decline to purchase the eMortgage and return them to warehouse provider.

Standard Freddie Mac servicing requirements apply to eMortgages. However, there are additional requirements that Servicers must comply with including, but not limited to:

• Identifying all Freddie Mac eMortgages in the servicing portfolio.

• Recording all status changes and required actions that occur during the life of the eMortgage in the MERS^® eRegistry.

• Accepting an offer of "Transfer of Control/Location" as required from Freddie Mac, in the event of a foreclosure or eMortgage repurchase or other servicing legal matter.

• Creating an offer of "Transfer of Control/Location" as required to Freddie Mac, in the event of termination of a foreclosure or other servicing legal matter.

• Confirming that the MERS eRegistry accurately reflects Freddie Mac is the "Controller" and "Location" at all pertinent times.

For additional details on servicing eMortgages, refer to Guide Chapter 1402.

Please access the following Freddie Mac web page for a list of these aggregators, servicers, subservicers and warehouse lenders.

• eMortgage Ready Participants

MERS eRegistry (operated by MERSCORP Holdings, Inc.) serves as the system of record to identify the current controller (holder) and location of the Authoritative Copy of an eNote (transferable record). It also helps identify the Servicer, if any, authorized by the controller to make certain updates in the MERS eRegistry.

MERS eDelivery (operated by MERSCORP, Inc.) is used by MERS eRegistry members to deliver documents and data related to an eMortgage from one MERS eRegistry member to another.

If your MERS membership is terminated or if you are unable to record loan events in the MERS eRegistry, the servicing of Freddie Mac's eMortgages will be transferred to an approved eMortgage Servicer.

For details on eMortgage system due diligence, refer to Chapter 1402.

No. A "paper" promissory note may only be wet-ink signed due to restrictions of applicable law. Only eMortgage-related notes may be electronically signed.

Any error (incomplete, incorrect or omission) that will affect the enforceability of the eNote, such as to the following, constitute Major corrections to an eNote:

• MERS MIN
• Note Date
• Note Amount
• Note Rate
• Scheduled First Payment Date
• Loan Maturity Date
• Postal Zip Code*
• Initial Principal and Interest Payment Amount
• Margin Rate Percent
• Per Change Rate Adjustment Effective Date
• Per Change Maximum Increase Rate Percent
• Per Change Maximum Decrease Rate Percent
• Floor Rate Percent
• Ceiling Rate Percent
• Index
• Index Lead Days Count
• Interest Rate Rounding Percent
• Registry Operator Tag
• Street Name
• City Name
• State Name
• Lender’s Name
• Borrower’s printed name below the signature line
• Co-borrower’s printed name below the signature line

Note: If the Postal Zip Code is required to be updated for factors such as re-zoning, post-closing, but before delivery to Freddie Mac, the Seller can use the Minor corrections process described in Guide Section 1402.8 (c)(ii).

A scrivener's or ministerial error such as the following, that do not adversely affect the enforceability of any eNote, constitute Minor corrections to an eNote:

• Street name is present but is misspelled
• City name is present but is misspelled
• State name is present but is misspelled
• Lender’s name is present but is misspelled
• Borrower’s printed name below the signature line is present but is misspelled
• Co-borrower’s printed name below the signature line is present but is misspelled

Note: Multiple scrivener’s or ministerial errors occurring on a single eNote can still be corrected via minor correction process (described in Guide Section 1402.8 (c)(ii)) if each of them individually qualifies for a minor correction. The Seller/Servicer must be cautious about scenarios where such multiple errors may result in an incorrect eNote as the Seller/Servicer is (and remains) solely responsible for the validity, effectiveness and enforceability of any eNote or other Electronic Record and the First Lien status of the eMortgage corrected in this manner.

No, provided that:

• The Servicer has a Subservicing Agreement with a Freddie Mac-approved eMortgage Servicer who will act as the Servicing Agent to service eMortgages.
• The Servicing Agent has an eNote vault system and is a MERS eDelivery and MERS eRegistry participant and can complete all the eMortgage Servicer activities outlined in Guide Chapter 1402.
• The Servicer and Servicing Agent must be willing to foreclose the eMortgage in the Servicing Agent’s name.
• If the security instrument was assigned to the Servicer, then the Servicer must assign the security instrument to the Servicing Agent for the purposes of foreclosing or handling other legal matters.

To originate an eMortgage that was not closed with MERS as the original mortgagee, the Seller must be a MERS system member as MERS membership is required to become a MERS eRegistry and eDelivery participant and conduct the following transactions:

• Register the eNote with MERS eRegistry.
• Conduct Transfer of Control, Location and Servicing to Freddie Mac, Freddie Mac or third-party eNote custodian and the Transferee Servicer (if servicing released) respectively.
• eDeliver the authoritative copy of the eNote to Freddie Mac or the third-party eNote custodian and the Transferee Servicer (if servicing released).

eRecording is the process of electronically recording a copy of a Security Instrument and other recordable documents that were either created as paper documents or electronic documents, with the local public land recording office. Please see Guide Chapter 1401 of the Guide for additional details on eRecording.

More than 95% of the population in the country lives in a county that permits eRecording. The list of counties that permit eRecording is published on the Property Records Industry Association (PRIA) Website.

Electronic notarization is the process by which a notary public applies their electronic signature and electronic notary seal to an electronic document. Remote online notarization is a variation of electronic notarization in that the notary meets the borrower, over a secure audio/video two-way live connection, to complete the electronic notarial act.

Several states have implemented programs that govern electronic notarization and remote online notarization process. The list of states that permit electronic notarization and remote online notarization can be found here. Your legal counsel may also be able to research this for you. Please note that the map may not show all the states that Freddie Mac permits remote online notarization. Please refer to Exhibit 48 for the list of states that are permitted by Freddie Mac. 

Freddie Mac permits remote online notarization process in 46 states, the District of Columbia and Guam. Please refer to Exhibit 48 for the list of states. 

In determining the states to be included in Exhibit 48, a state that has not enacted an express remote online notarization statute is analyzed based on the likelihood that its overall legal structure will recognize RON. The issuance of a governor’s emergency executive order is one of several factors in such analysis. Also, we are actively reviewing any state and federal laws to update the list of States in which RON process is permitted.

Freddie Mac Guide Bulletin 2020-35 requires Sellers to maintain the recording of the notarial ceremony for greater of (a) 10 years, or (b) the time period specified in the RON law(s) of the state in which the notary is licensed. Does this mean that the Sellers are responsible to obtain a copy of the recorded notarization session and retain it in their files?

No. Freddie Mac is not requiring that the Seller must obtain a copy and store it. Sellers can determine whether they will maintain storage of the recording (or a copy of the recording) and/or the RON technology provider will maintain storage of the recording (or a copy of the recording) for the requisite time period.

As part of its RON system requirements, Freddie Mac requires that the RON system provider make arrangements with participating notaries to provide access to Sellers as well as current, and future, Servicers for the requisite time period. Additionally, Sellers are encouraged to identify the RON technology provider performing the RON process in the Mortgage File.

Regardless of the storage method chosen, the current Servicer will be responsible for obtaining the recording of the notarial act upon our request, for the requisite time period and, generally, for meeting its requirements with respect to enforcement.

Yes. Loans closed through the remote online notarization process can include either wet-ink signed promissory Notes (i.e. non-eMortgages) or electronically signed Notes (i.e. eMortgages). Sellers can deliver loans with electronically signed Notes, only if they are approved to deliver eMortgages.

Does Freddie Mac permit Remote Ink Notarization (RIN) loan closings in which the notary public a) witnesses the borrower wet-ink signing of loan documents remotely via an audio/video technology and b) receives the borrower’s signed documents via mail services or some other mechanism to apply their wet ink signature and notary seal?

Freddie Mac permits this process subject to Remote Ink Notarization requirements provided in the Guide Section 1401.24.

This process should not be confused with remote online notarization, as remote online notarization is electronic notarization of electronically signed documents using a two-way secure audio/video live connection in compliance with applicable state laws and Freddie Mac minimum standards published in Guide Section 1401.16.

As stated in Guide Section 1401.24, in states where it is expressly permitted by state law.  States with permanent RIN legislation currently are Alabama, West Virginia, Wyoming. In addition, if RIN is permitted in a state under Governor’s temporary executive order, loans with Note Date on or before the expiration date of that executive order may use RIN.