electronic signature

New Penn Financial Announces Closing Portal

Standard

October 3Lender announcements are coming at a fast and furious pace now that we are within days of TRID’s October 3 deadline. Blogging about all of the broadcasts seems to be less than beneficial since most of them are repetitive at this point and since many of the regional lenders making announcements at this late date don’t appear to do business in South Carolina.

A new announcement from New Penn Financial, however, seems noteworthy for two reasons:  (1) this lender advertises it has an office in Murrells Inlet; and (2) the announcement includes news of a new closing portal and “closing agent portal job aid”. You can read the announcement in its entirely here, and follow its link to the “job aid”.

The lender indicates it has implemented the use of SmartGFE and Closing.com to provide more accurate fees to borrowers, and encourages all settlement agents (closing attorneys in South Carolina) to register with Closing.com as soon as possible. The initial and final Closing Disclosures will be sent to settlement agents through the DocuTech Closing Collaboration Portal (ConformX) for review and approval. No advance set-up is required to use this portal.

Interestingly, New Penn indicates it will offer both an E-signature process and a “wet” signature process as delivery and signing methods for the Loan Estimate and the Initial Closing Disclosure.  The memo states the disclosures will be delivered in accordance with CFPB’s timing requirements and that the delivery methods will ensure proof of delivery.

As we have spoken to closing attorneys and real estate agents across South Carolina in preparation for the new rules, there has been much speculation about whether lenders will shorten the six-day requirement by using methods of proof of delivery as an alternative to mail. This indication of an E-signature process would guessingsuggest that it may be possible to shorten the six-day delivery requirement with this particular lender. If other lenders follow suit, real estate professionals will be delighted that the waiting period can be shortened, at least under certain some circumstances.

I’m just guessing here (along with the rest of you), but I anticipate that the last quarter of 2015 may prove to be an interesting transition to our new normal, but after the first of the year, those of us who decide to remain in the closing “game” will have settled into a different, but manageable routine. Best of luck to all of you for getting through the next few months!  And remember, we will get through this together!

Need to Foreclose a Mortgage Securing an eNote?

Standard

Indiana case may provide guidance

South Carolina has no reported opinions concerning mortgage foreclosures involving eNotes, and little authority exists elsewhere on what a holder must prove to successfully foreclose a mortgage secured by an electronic note in a judicial state. Until we see opinions closer to home, an Indiana case may provide the best guidance. Solid evidence of control of the note seems to be the key factor, according to this case.

In Good v. Wells Fargo Bank, 18 N.E.3d 618court money 4 (Ind. App. 2014), Wells Fargo acted as servicer for Fannie Mae, the owner of an eNote that was registered with MERS. The original lender had been Synergy Mortgage Group, Inc.  MERS, as nominee for Synergy, had assigned the mortgage to Wells Fargo.

An officer of Wells Fargo executed an affidavit in support of summary  judgment stating that Wells was the servicer, that it maintained a copy of the note, that its systems provided controls to assure that each note was maintained accurately and protected against alteration, and that the paper copy of the note attached to the affidavit was a true and correct copy.

The affidavit was bolstered by testimony at the bench trial that Wells Fargo controlled the note and was entitled to enforce it as the holder pursuant to 15 U.S.C §7021 (a section of the eSign legislation).  Wells’ underlying position appeared to be that the normal requirements of the UCC-3 governing negotiable instruments (delivery, possession and an endorsement), were not required in the case of an electronic note.

15 U.S.C. §7021 creates the concept of a note as a “transferable record”, a single authoritative copy, which is unique, identifiable, and unalterable. The legislation establishes that the holder must have control of the note in the sense that the system for tracking it must reliably establish that the person seeking to enforce it is the person to whom the record was transferred. Also, the authoritative copy of the record itself must indicate the identity of the most recent transferee.

The Indiana appellate court found Wells’ affidavit insufficient to support a grant of summary judgment on the issue of Wells’ holder status and its evidence on the matter at trial “conclusory”. 

The court said it was unclear from the affidavit whether Wells was claiming to have possession of an endorsed paper copy or the electronic note itself. The affidavit was also found lacking because it did not assert that Wells had control of the record (the eNote), either by maintaining the single authoritative copy in its own system, or by being identified as having control of the single authoritative copy in the MERS system.

The court indicated the eSign statutes require the party enforcing the note to provide reasonable proof of its control of the note through detailed evidence, not merely “conclusory statement”. The court specifically pointed to the lack of evidence in the Wells’ affidavit as it related to a transfer or assignment to Wells Fargo or Fannie Mae of the note from the original lender.

We are likely to see similar cases from other jurisdictions, including South Carolina, with the increasing use of eNotes. Stay tuned!stay tuned