FAQs: eClosings & eMortgages

An eClosing is the act of closing a mortgage loan electronically. This occurs through a secure digital environment where some or all of the closing documents are accessed and executed electronically.

This can be a hybrid process in which certain key documents, such as the promissory note and security instrument, are printed to paper and wet-signed, while other documents are signed electronically.

eClosings result in eMortgages only if the promissory note is signed electronically.

The term "eMortgage" generally refers to the use of electronic processes and signatures in the mortgage production process. Specifically, it refers to electronically-signed closing documents paired with an original electronic promissory note (eNote) signed on an eClosing platform and registered with the MERS eRegistry^® upon execution.

Here are some of the reasons lenders may choose to implement eClosing/eMortgage. These digital mortgage technologies can help lenders:

• Shorten a loan’s life cycle, from closing to delivery into the secondary market.

• Streamline operations and improve processes associated with tracking, managing, reviewing, and delivering paper closing documents.

• Fund faster with the delivery of an eNote.
• Optimize use of capital due to faster turnaround times.
• Reduce operational errors.
• Have fewer missing signatures, documents, and files.
• Improve data quality and validation.
• Make it easier for borrowers to review their loan documents prior to closing.
• Offer a more informative and efficient closing process.
• Implement a faster and easier signing process.

The Mortgage Industry Standards Maintenance Organization^® (MISMO) eMortgage Community of Practice was formed in 2001 to develop standards for efficient eMortgage processes, transactions, and XML data protocol.

Fannie Mae leverages MISMO specifications for producing and executing eNotes. The MISMO eMortgage Guidelines and Recommendations are available at mismo.org.

Yes. Per the Selling Guide, we accept eSignatures on most documents used to originate or service a loan. However, lenders seeking to service or deliver eNotes must seek prior approval. See the Selling Guide for specific exceptions. Refer to Selling Guide section A2-4.1-03, Electronic Records, Signature, and Transactions.

Both federal and state legislation form the legal basis for eNotes and eSignatures. In 2000, Congress passed the Electronic Signatures in Global and National Commerce Act (ESIGN). Forty-seven states, Washington, D.C., and the U.S. Virgin Islands have adopted state laws modeled on the Uniform Electronic Transactions Act (UETA). The remaining three states (WA, IL, and NY) each have their own statutes regarding electronic signatures. Please consult your legal advisor for more details about these laws.

In order to be truly paperless, the mortgage or security instrument must be electronically notarized prior to recording. The ESIGN Act has provisions regarding electronic notarization (eNotarization).

The Property Records Industry Association (PRIA) provides helpful information by state. Lenders should consult with their legal counsel to ensure compliance with requisite (or governing) statutory authority on eNotarization.

To determine if your jurisdiction allows eRecording, please consult with the recording official of your jurisdiction or visit the eRecording County List published by the Property Records Industry Association (PRIA).

Fannie Mae can neither endorse technology vendors nor establish compliance checks for technology solution provider systems. This includes correspondents and third-party originator systems.

However, we do include a list of technology solution providers that have conducted technical integration testing with Fannie Mae. Please note that it is up to the lender to ensure that specific providers meet relevant legal and regulatory requirements.

Lenders must choose a solution that fits their respective needs and adheres to the representation and warranty framework and Selling Guide.

Fannie Mae will accept delivery of loans with security instruments (and amendments to security instruments) that have been remotely notarized if the laws and regulations of the state in which the mortgaged property is located either expressly permit the use of remote notarization or expressly accept remote notarizations performed out-of-state in accordance with the laws of the state in which the notarial act is performed. Requirements for remote notarizations are detailed in the Selling Guide, section A2-4.1-03, Electronic Records, Signatures. The remote notarization policy and requirements include minimum technology standards and other terms and conditions that lenders should be aware of when delivering a remote online notarized loan.

Loans with a security instrument (and/or amendments to the security instruments) that have been remotely notarize require a Special Feature Code (SFC) of 861 at delivery.

Fannie Mae does not explicitly state when documents must be executed. However, Fannie Mae requires that the “NOTE DATE” at the top of the note be consistent with the date on the Security Instrument. Lenders should consult with their Legal and Compliance teams to discuss any concerns.

Yes. Fannie Mae will accept wet-signatures and electronic signatures on the same document, except on the Promissory Note. If the document requires notarization (e.g., security instrument), both forms of signature must be notarized, resulting in multiple notary stamps on the document, and the document must be accepted and recorded in the relevant jurisdiction, if applicable. RON SFC 861 must be used if RON is utilized.

Information on the requirements for delivering eMortgages to Fannie Mae can be found in the Selling Guide. For a breakdown of eMortgage topics and sections in the Selling Guide please view the eMortgage Selling Guide Resource.

Most conventional first mortgages can be delivered as eMortgages. This includes fully amortizing fixed-rate and adjustable-rate monthly payment mortgages as well as fixed-rate and adjustable-rate bi-weekly payment mortgages. We accept both Whole Loan and Mortgage-Backed Security (MBS) executions.

Some products that require additional or special purpose legal documents (such as co-op properties mortgages secured by Puerto Rico properties, and New York CEMA refinances) may not be delivered as eMortgages. Texas 50(a)(6) loans are also not eligible to be signed electronically and sold to Fannie Mae.  Please consult the Selling Guide and the Guide to Delivering eMortgage Loans to Fannie Mae for additional information.

A lender delivering an eMortgage would follow this general process:

• The eNote and possibly other documents are signed electronically through use of an eClosing system.
• The documents are sealed by the eClosing system tamper seal.
• The eNote is registered on the MERS^® eRegistry within one business day.
• The lender transmits the eNote and other investor documents using MERS^® eDelivery to Fannie Mae’s eVault. For example, if a POA was used to execute the eNote, a copy of the certified POA must be transmitted for Fannie Mae’s eVault via MERS® eDelivery along with the eNote.
• The lender initiates a transfer of Control & Location to Fannie Mae via the MERS^® eRegistry.
• The lender submits delivery data to Fannie Mae, including the eNote Indicator in the loan delivery file (designating an eMortgage).
• If all requirements are met, the loan is certified and funded.

The MERS eRegistry^® is the system of record identifying the owner and location of the eNote. The MERS eRegistry^® allows eNotes to be registered and uniquely identified for tracking and verification.

Yes. Lenders must become MERS^® members to use the MERS eRegistry^®. Lenders can request a membership application from MERS^® by calling 1-800-646-MERS or downloading the application from mersinc.org. Access to the MERS eRegistry^® requires system integration and a testing cycle.

• Lenders: Must register with MERS^®. They are required to register the eNote on the MERS eRegistry^® immediately after closing.
• Servicers: Must register with MERS^® so their MERS^® Organization ID can be reflected on individual loan records within MERS eRegistry^®, enabling them to perform loan status updates. By registering with MERS^® and acquiring eVault connectivity to the MERS eRegistry^®, servicers are able to accept control of an eNote in the event of foreclosure, or initiate a transfer of servicing update to the eRegistry in the event of a servicing transfer. Servicers should contact MERS^® for more information (mersinc.org).
• Warehouse lenders: Must register with MERS^® and have access to an eVault for communicating with the MERS eRegistry^®. Once an eNote is registered with MERS^® by the originator, the lender will then transfer control of the eNote to the warehouse lender until delivery into the secondary market.

A "Bailee" is an individual who temporarily gains possession, but not ownership, of a good or other property. The Bailee is entrusted with the possession of property by another individual known as the bailor.

A Bailee Letter is a communication that notifies the recipient of a promissory note that a third party has a security interest in the note. The letter allows interested investors to review the note, while protecting the security holder's interest in the note.

In lieu of a Bailee Letter, we utilize a bilateral funding and custodial agreement between Fannie Mae and the warehouse funding provider. The warehouse funding provider executes an agreement for each MERS^® Org ID that is used to represent its security interest on an eNote.

The Funding Agreement serves the following roles:

• Acts as a master bailee agreement for eNotes transferred to us by the warehouse provider on behalf of the lender.
• Allows us to control the eNotes as designated custodian for the warehouse bank as a secured party and designee for the lender until purchased.
• Requires us to return control to the warehouse bank (or add them back to the eNote as the Secured Party), should we decide not to purchase the loans.

Fannie Mae has developed technology to auto-certify eNotes delivered to Fannie Mae.  eNotes are machine-readable XML documents which permit key data to be extracted and compared directly to loan data submitted to Fannie Mae, providing lenders the custodial certification required for delivery. The eNote Indicator in the Uniform Loan Delivery Dataset (ULDD) file reflects the presence of an eNote which triggers that auto-certification process.
 
Fannie Mae’s auto-certification capability provides several benefits including exact data match, 24/7 availability, unlimited processing, and greater visibility on the eNote transfer status. There is no cost to use auto certification.

Approved eMortgage sellers/servicers must be activated for this functionality before eligible eNotes delivered to Fannie Mae will pass through auto certification.

We maintain a list of approved servicers on the Fannie Mae eClosings and eMortgages page and are actively working with new servicers for eNote approval. We are happy to work with your servicing partner(s) to help them become approved to service eMortgages.

Standard servicing requirements in Fannie Mae's Servicing Guide apply when servicing eMortgage loans. In addition, servicers must identify their eMortgages on their servicing systems.

Servicers must have access to an eVault (either their own or through a third party) which is fully integrated with the MERS eRegistry^® to enable them to record payoffs, charge-offs, or loan assumptions for eMortgage loans. Prior to transferring servicing portfolios that contain eMortgages, the transferring servicer must ensure that the transferee servicer knows that there are eMortgages in the portfolio and is able to service them.

Servicers must follow the loss mitigation guidance in Fannie Mae’s Servicing Guide to assist borrowers facing default or in default.

Unlike paper notes which often required Servicers to be in possession of the original note for legal actions, enforcement of eNotes may instead require a transfer of “Control” in the MERS eRegistry.  Fannie Mae’s Servicing Guide includes complete requirements on requesting a transfer of Control from Fannie Mae.  Additional information on eNote Foreclosure process is included in the eMortgage Foreclosure Educational Job Aid.

No.  The custodian does not require an approval for eMortgages specifically, but it does need to be a Fannie Mae approved custodian.  Fannie Mae maintains an eVault and we provide view-access to our seller’s custodian in order to certify any eMortgage documents which may require manual review.  Sellers should confirm that their custodian is setup to access Fannie Mae’s eVault.

Currently we serve as the custodian for all eNotes we purchase.

Fannie Mae has implemented an automated certification for most eNotes by systematically comparing information from the eNote to the loan delivery data. Lenders still need to designate an approved document custodian to certify certain loan products that are not eligible for auto-certification.

Sellers should continue to identify the custodian they utilize for paper Notes as the custodian in the ULDD file.  For eNotes which cannot be auto-certified by our system, the seller’s custodian will complete a manual review by accessing documents in Fannie Mae’s eVault.

Yes.  Loans in an MBS pool are certified at the loan-level (either by a custodian or automatically); and therefore, can be comingled in a pool. There are no special considerations for auto-certification of MBS Pool eNotes.

No. Fannie Mae does not charge our customers for use of its eVault or related transactional costs; nor do we charge for the auto-certification of eNotes.  If an eNote is not eligible for auto-certification and needs manual certification, the customer’s custodian may have its own fee. Servicers are required to have access to their own eVault for servicing eMortgage loans.

Yes. Fannie Mae requires warehouse banks to utilize an eVault which has been tested with Fannie Mae, and to execute our eNote Transfer of Control and Location and Custodial Agreement prior to delivery of eNotes to Fannie Mae. 

Yes. For eNotes which are auto-certified by Fannie Mae’s system, Fannie Mae does not transmit loan data to the Seller’s custodian for certification.  Because some of our Sellers rely upon this data transmission for the creation of a loan file with the custodian, if you intend to continue to utilize a custodian for other loan documents for eMortgages, you may need to discuss the setup process with your custodian partner.

No. Fannie Mae does not currently permit Consolidation, Extension, and Modification Agreement (CEMA) Notes to be executed electronically.  However, if a borrower with an existing eNote is interested in completing a refinance using a NY CEMA, servicers should refer to Fannie Mae’s Servicing Guide for detailed requirements.