The U.S. Department of Housing and Urban Development (HUD) announced on Jan. 30 that the Federal Housing Administration (FHA) will be accepting more mortgage loan-related documents with electronic signatures (e-signatures).
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.
“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. “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.”
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.
The FHA says the e-signatures policy will help streamline the origination process and help reduce document submission timeframes for borrowers seeking options to avoid foreclosure. Initially, e-signatures will not be accepted on the mortgage note itself. FHA plans to begin accepting e-signatures on forward mortgage notes at the end of the year.
A mortgagee letter detailing FHA’s extended acceptance of e-signatures is posted on the HUD website
The Consumer Financial Protection Bureau (CFPB) applauded HUD’s decision, stating that the bureau is looks for ways to improve the mortgage closing process.
“We commend HUD for taking this important step toward improving the mortgage closing experience for consumers,” said CFPB Director Richard Cordray. “Buying a home is one of the biggest financial decisions most people will make in their lifetimes, but navigating the complicated closing process can be a challenge. Electronic closing processes have the potential to reduce errors, limit unexpected surprises, and create more time and opportunity for consumers to review critical documents with the tools they need to make informed decisions. HUD’s decision to accept electronic signatures for FHA loans can help jumpstart the move towards a more seamless, paperless, and consumer-friendly process.”
HUD’s announcement follows a key circular released by the Department of Veterans Affairs in August of 2013 clarifying that electronic signatures are acceptable for use in conjunction with the VA home loan program. The CFPB said it appreciates the productive and ongoing collaboration with VA, HUD and other agencies to find new ways to help improve the mortgage closing process.