FHA Expands Use of Electronic Signatures

Last week, the Federal Housing Administration (FHA) issued Mortgagee Letter 2014-03, which announced that FHA would begin accepting electronic signatures for FHA Single Family Title I and II Mortgages and Home Equity Conversion Mortgages. Prior to the issuance of the letter, FHA allowed electronic signatures only in the case of third party documents (see FHA Mortgagee Letter 2010-14). Now, electronic signatures will also be accepted on the “Authorized Documents” outlined below. The mortgagee will be required to comply with all requirements of the federal ESIGN Act as well as additional requirements outlined below.

FHA will allow electronic signatures on certain “Authorized Documents.” These “Authorized Documents” include: (1) All documents that are included in the case binder for mortgage insurance, with the exception of the note; (2) Any documents required for servicing or loss mitigation services related to FHA-insured mortgages; (3) All documents associated with the filing of a claim for FHA benefits, including the “Single Family Application for Insurance Benefits; and (4) The HUD REO Sales Contract and related addenda.

The use of electronic signatures will be voluntary; however, any mortgagee wishing to use such signatures must comply with the standards outlined in the the new Mortgagee Letter as well as the ESIGN Act. These requirements include the following: (1) The mortgagee must be able to show that the signer had intent to sign the document; (2) The mortgagee must require a separate action by the signer that shows an intent to sign in each location where a signature or initials are required; (3) The mortgagee must confirm the identity of the individual by authenticating the data supplied by the individual with an independent source of data; (4) The mortgagee must keep evidence, such as a PIN or password, that establishes the signature is the individual's signature; (5) Mortgagees must use a system that ensures the security of all information; and (6) Mortgagees must ensure that documents signed cannot be altered.

The provisions of this Mortgagee Letter go into effect immediately.