NMP - December 2016 - 26


By Jonathan Foxx

DECEMBER 2016 n National Mortgage Professional Magazine n

NationalMortgageProfessional.com

26

E-sign and Enforcing Electronic Signatures
Question: We recognize the
requirements of E-Sign. One
subject of discussion has been
its role in contractually binding
our financial institution in
mortgage loan originations,
especially in the area of
consumer disclosures. How valid
are electronic signatures? Can
electronic signatures be used to
enforce contracts?
Answer
The Electronic Signatures in Global
and National Commerce Act (ESign) was designed to allow
greater flexibility to implement
electronically signed transactions.
Its requirements have been used
more and more since E-Sign's
inception in 2000. E-Sign specifies
that an electronic record or
transaction may not be rendered
invalid solely on the basis of its
electronic or digital nature, but it
makes no guarantees about the
overall enforceability of such
electronic contracts.
An electronic record is only
enforceable if it meets the criteria
specified in relevant contract laws
as well as the language of E-Sign.
It is worth noting that E-Sign
applies to interstate or government
interactions. With respect to in-

state transactions, these are
bound either by the Uniform
Electronic Transactions Act (UETA)
or the governing state laws
relevant e-Signature laws-which, in
some states, are actually more
strict than E-Sign or UETA.
For an electronically signed
document to be enforceable in
court, it must meet certain
requirements for legal contracts in
addition to the electronic signature
guidelines specified in the
appropriate laws (such as E-Sign
and UETA). According to E-Sign,
an electronic signature is "an
electronic sound, symbol, or
process, attached to or logically
associated with a contract or other
record and executed or adopted
by a person with the intent to sign
the record."
In contract law, signatures serve
the following general purposes:
1. Evidence: Authenticates
agreement by identifying the
signer with a mark attributable
to the signer that it is capable of
authentication.
2. Ceremony: Act of signing calls
attention to the legal
significance of the act,
preventing inconsiderate
engagements.
3. Approval: Express approval or

authorization per terms of
agreement.
To elucidate on factors involving
authentication, broadly,
authentication is defined as
evidence that a given record,
contract, or form is a genuine,
unaltered written representation of
an agreement approved by two or
more parties, whether in paper or
electronic form.
An authentic document contains
no evidence of fraud or tampering,
such that it may be reasonably
concluded that the parties in
agreement did indeed assent to
the enclosed terms. Assent is
evidenced by an attributable,
authenticated signature. To be
authenticable, the transaction must
contain enough information
uniquely attributable to the user
that fraud, forgery or validity can
be reasonably proven.
For an electronic transaction to

withstand scrutiny in court, it must
meet the definitions and criteria
stated above; that is, it must be
capable of authentication and nonrepudiation, call attention to the
document's legal significance (viz.,
creation of the electronic
signature), and demonstrate
approval of the terms of the
agreement.
Some electronic signature
technologies sufficiently meet
these criteria and some do not.
Therefore, it is very important for
businesses and government
agencies to choose their electronic
signature technology carefully or
risk making agreements that
cannot be enforced.
If interested in a review of your
electronic signature technology,
please contact us. We have
subject matter experts who can
review the technological and
regulatory compliance
requirements of E-Sign

Jonathan Foxx is managing director of Lenders
Compliance Group, the first and only full-service,
mortgage risk management firm in the United States,
specializing exclusively in outsourced mortgage
compliance and offering a suite of services in residential
mortgage banking for banks and non-banks. If you would
like to contact him, please e-mail
Compliance@LendersComplianceGroup.com.



Table of Contents for the Digital Edition of NMP - December 2016

Contents
NMP - December 2016 - Cover1
NMP - December 2016 - Cover2
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