Presently, all mortgages must conform to the standard required by the
Federal National Mortgage Association's (FNMA - FannieMae) guidelines.
The original document must be paper and be properly recorded according
the requirements of the state and county in which the transaction
occurs.
FannieMae is the largest secondary mortgage buyer in the United
States.
A registry for electronic (paperless eNote) mortgage notes is
currently in development, pursuant the terms of the Uniform Electronic
Transactions Act (UETA) and the federal Electronic Signatures in
Global and National Commerce Act (E-SIGN), but has not yet been
created. The UETA has not been adopted in all states yet. Therefore,
the mechanisms for a paperless-only mortgage do not exist.
The original can be scanned, of course, and the scanned image stored
in electronic format for later access and reproduction, but the basic
document must be retained. This has been done in many US counties.
FAQ Mortgage Industry Primer
http://www.fanniemae.com/faq/industry.jhtml?p=FAQ
SAMPLE MORTGAGE NOTE and INSTRUCTIONS FROM FANNIEMAE
Single-Family Guides online via AllRegs
http://www.efanniemae.com/singlefamily/forms_guidelines/selling_servicing/guides.jhtml?role=gs
(Follow the links for document custodians. There is a splash page with
the terms of use that intervenes.)
"Mortgage (Or Deed of Trust) Note (09/09/99)
The document custodian must receive the original note for each
mortgage listed on the Schedule of Mortgages (Form 2005). If the
lender has exhausted all reasonable means of obtaining the original
note or an original duplicate note, Fannie Mae may authorize the
lender to substitute a Lost Instrument Bond, a Lost Instrument
Affidavit, or similar substitute documentation for a missing note. In
such cases, Fannie Mae will provide a special Custodial Agreement
(which specifies the documentation that must be delivered to, and
reviewed by, the document custodian) for both the lender and the
document custodian to execute. The document custodian's review of each
note must determine that
• the document is an "original" that has been signed by all of the
borrowers;
• all blanks have been filled in or crossed out (by inserting XXXXX);
• any "white-outs" or changes to the document or to the information
inserted in the blanks have been initialed by the borrowers. (If the
delivery involves a seasoned mortgage and the borrowers did not
initial changes to the document, the lender should make a reasonable
effort to obtain their initials. However, if that is not possible, the
lender should give the custodian a letter explaining why the
borrowers' initials were not obtained, which the custodian should
retain as a custody document). [Page : 10]
- If changes that materially affect the terms of the note are not
initialed by the borrowers -- such as changes to the original loan
amount, interest rate, monthly payment, or maturity date, or deletion
of one of the mortgage covenants -- the document is not acceptable.
- If changes that do not affect the terms of the note materially are
not initialed by the borrowers, the document will still be acceptable,
provided the lender gives the document custodian a letter attesting to
its efforts to contact the borrowers (which should be retained as a
custody document). However, the document custodian may accept a
document without an attestation letter if the only change that needs
initialed is a zip code correction;
• the note has been signed by the borrowers and the signatures do not
contradict the names typed below the signature lines. If the
signatures vary from the typed names, the degree of variance
determines whether the document is acceptable for certification.
- Slight variations -- such as a missing middle initial or the
omission of "Jr." or "Sr." -- are acceptable. Other acceptable
variations include a borrower's over or undersigning of the document,
such as the borrower signing as William Thomas Smith when the typed
name is William T. Smith or vice versa.
- Significant variations -- such as William Smith signing the document
as "Skip" Smith, signing with an "X", or signing under an "also known
as (AKA)" name -- generally are not acceptable. However, if the lender
provides the name affidavit that it obtained from the borrower, the
document custodian may certify the adequacy of the documentation. (The
custodian should attach the name affidavit to the note);
• the note and the security instrument have the same date. (Since the
custodian generally will not have the security instrument, this can be
verified by comparing the date on the note to the "date of mortgage"
field on the Schedule of Mortgages.);
• the original, recorded power of attorney (or a certified copy of the
document submitted for recordation) is included, if an
attorney-in-fact executed the note on a borrower's behalf. (When a
certified copy is included, the lender must send the custodian the
original recorded document as soon as it is received from the
recorder's office.);
• the original, recorded Modification Agreement (or a certified copy
of the document submitted for recordation) must be attached to the
note, if the mortgage has been modified. (When a certified copy is
included, the lender must send the custodian the original recorded
document as soon as it is received from the recorder's office.); and
[Page : 11]
• the note is endorsed in blank and without recourse, in the format
shown below. (A blank space should appear on the line between "Pay to
the order of" and "Without Recourse." It is not necessary to actually
insert a visible line.)
PAY TO THE ORDER OF
WITHOUT RECOURSE LENDER'S NAME (Authorized Signature) NAME OF
AUTHORIZED SIGNER TITLE OF AUTHORIZED SIGNER
- The endorsement generally must appear on the note; however, when
there is not enough space available on the note, an allonge may be
used for the endorsement, as long as that is acceptable practice in
the jurisdiction in which the security property is located. When an
allonge is used, both the allonge and the note must include references
to the other document and the allonge must be permanently attached to
the note (not placed separately in the document file);
- If an unsigned endorsement has been crossed through, the custodian
does not need to have the lender initial the change;
- Any previous endorsements must also have been "without recourse,"
should be generally in the format shown on Page 10 above (although
some or all of the endorsements may show the assignee's name instead
of having a blank line), and indicate the name and authorized
signature of the prior noteholders; and
- The signature on the last endorsement to the note generally must be
an original signature. However, Fannie Mae permits facsimile
endorsements of notes for jurisdictions in which the lender determines
their validity and enforceability. The custodian should ask the lender
to provide a copy of an attorney's opinion on the use of facsimile
endorsements for a particular jurisdiction."
National eNote Registry
Requirements Document
Version 1.0
Mar 7, 2003
http://www.mbaa.org/technology/lib/eNote_Registry0307.pdf
"2. Concept Overview
a. The National eNote Registry is a compliance vehicle to satisfy
certain requirements imposed by the Uniform Electronic Transactions
Act (UETA) and the federal Electronic Signatures in Global and
National Commerce Act (E-SIGN) so that the owner of an eNote (the
Controller) would have legal rights similar to those that a “Holder in
Due Course” has with a paper negotiable promissory note. An eNote
issued in compliance with Section 16 of UETA or Title II of E-SIGN is
called a Transferable Record (TR). Specifically, Section 16 of UETA
and Title II of E-SIGN require that the party in control of the
Authoritative Copy (AC) of the TR at any given point in the life cycle
of an eNote can be readily identified."
UETA Online
http://www.uetaonline.com/
UNIFORM ELECTRONIC TRANSACTIONS ACT (1999)
http://www.law.upenn.edu/bll/ulc/fnact99/1990s/ueta99.htm
"3. Real Estate Transactions. It is important to distinguish between
the efficacy of paper documents involving real estate between the
parties, as opposed to their effect on third parties. As between the
parties it is unnecessary to maintain existing barriers to electronic
contracting. There are no unique characteristics to contracts relating
to real property as opposed to other business and commercial
(including consumer) contracts. Consequently, the decision whether to
use an electronic medium for their agreements should be a matter for
the parties to determine. Of course, to be effective against third
parties state law generally requires filing with a governmental
office. Pending adoption of electronic filing systems by States, the
need for a piece of paper to file to perfect rights against third
parties, will be a consideration for the parties. In the event
notarization and acknowledgment are required under other laws, Section
11 provides a means for such actions to be accomplished
electronically.
With respect to the requirements of government filing, those are left
to the individual States in the decision of whether to adopt and
implement electronic filing systems. (See optional Sections 17-19.)
However, government recording systems currently require paper deeds
including notarized, manual signatures. Although California and
Illinois are experimenting with electronic filing systems, until such
systems become widespread, the parties likely will choose to use, at
the least, a paper deed for filing purposes. Nothing in this Act
precludes the parties from selecting the medium best suited to the
needs of the particular transaction. Parties may wish to consummate
the transaction using electronic media in order to avoid expensive
travel. Yet the actual deed may be in paper form to assure compliance
with existing recording systems and requirements. The critical point
is that nothing in this Act prevents the parties from selecting paper
or electronic media for all or part of their transaction."
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