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 UETA put electronic signatures and electronic records on an equal legal footing with pen and ink signatures and paper records. 

Most states, territories, and the District of Columbia have enacted UETA since 1999, and the federal government enacted ESIGN in 2000. ESIGN pre-empts UETA, wherever enacted or not enacted, to the extent it is:

• Inconsistent with the model UETA promulgated by the National Conference of Commissioners on Uniform State Laws in 1999, or
• Nonexistent 
   

In addition, ESIGN complements 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).

No, electronically signed Allonges are not acceptable. For paper Notes, an Allonge must be physically attached to the paper Note. As such, an Allonge on a paper Note cannot be electronically signed. Since endorsements do not exist for eNotes, Allonges are not applicable to eNote.

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 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, meaning that 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. Therefore, eClosings are legally enforceable.

Yes, Freddie Mac supports hybrid eClosing. 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 a full eClosing or complete eClosing. If some documents are signed electronically and some are wet signed, the process is called a hybrid eClosing. Freddie Mac supports all these variations. 

Note: 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 our eMortgage team at [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 an 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 Chapters 1402 and 1302.  
 

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

Yes, there are Document Custodians that support eNote custody. Visit our eNote Custodians page for a list of Document Custodians that are ready to provide eNote custody. If your Document Custodian is not listed and 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.

If your current Document Custodian is not ready to support eNote custody, Freddie Mac can act as your eNote custodian. Freddie Mac certifies eNotes through an automated certification process, which provides the following benefits:

• 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 994SF, Warehouse Lender and Freddie Mac Pledged eMortgage Agreement, 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 Form 996E, Warehouse Provider Release and Transfer, 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 as the "Controller" and "Location" at all pertinent times.

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

Please access the eMortgage Ready Participants webpage for a list of these Aggregators, Servicers, Subservicers and Warehouse Lenders.

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 borrower cannot electronically sign a promissory note that is not an eMortgage. 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 omitted) 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
• 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: If the Postal Zip Code is required to be updated (e.g., 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 does not adversely affect the enforceability of any eNote, constitutes a Minor correction 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 the 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, Freddie Mac does not require an eMortgage Servicer to be a MERS eRegistry participant, 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, is a MERS eDelivery and MERS eRegistry participant and can complete all Mortgage 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.

Yes. To originate an eMortgage that was not closed with MERS as the original mortgagee, the Seller must be a MERS system member because 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).

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) webpage.

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.

In determining the states to be included in Exhibit 48, Permitted States for Remote Online Notarization, 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. We are actively reviewing any state and federal laws to update the list of States in which the RON process is permitted.

Freddie Mac Guide Bulletin 2020-35 requires Sellers to maintain the recording of the notarial ceremony for the 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 Freddie Mac 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.

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.

Remote Ink Notarization (RIN) loan closing is a process 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.