February 4, 2014
The FHA and HUD have issued a press release announcing a wider acceptance of electronic signatures on FHA loan documents.
According to HUDNo.14-11, the FHA is granting “expanded authority to lenders to accept electronic signatures (e-Signatures) on documents associated with mortgage loans. The new policy allows e-Signatures on origination, servicing, and loss mitigation documents, as well as FHA insurance claims, REO sales contracts and related addenda. Current FHA policy allows for electronic signatures only on third party documents such as sales contracts and other documents not controlled by the lender” according to the press release.
“By extending our acceptance of electronic signatures on the majority of single family documents, we are bringing our requirements into alignment with common industry practices,” said FHA Commissioner Carol Galante in the release. She adds, “This extension will not only make it easier for lenders to work with FHA, it also allows for greater efficiency in the home-buying and loss mitigation process”.
Electronic signatures in lending are governed by federal law and any participating FHA lender would need to be in compliance with that law in order to property accept the signatures. The good news is, signing electronically has been expanded for a wide range of FHA loan programs.
“Lenders choosing to employ e-signatures may begin using this policy immediately for single family forward mortgages and FHA’s reverse mortgage products, Home Equity Conversion Mortgages (HECM). Lenders are required to adhere to the Electronic Signatures in Global and National Commerce Act (ESIGN), have specific technology and operational capabilities and controls, documented quality control processes, and the ability to adapt e-Signature to FHA’s existing record retention processes.”
There is a “break-in period” with electronic signatures. The press release indicates that in the earliest days of e-signatures, the mortgage note itself must be signed in the traditional way. However, “FHA plans to begin accepting e-Signatures on forward mortgage notes at the end of the year.” The press release says a new FHA mortgagee letter has been issued to explain how the e-signature program will work. We will cover that in detail in a future blog post.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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