ALTA® Alert 2000-2: E-Commerce
June 21, 2000
Federal Electronic Signatures Legislation to be Signed by the President
The House and Senate have passed and the President is expected to sign legislation which essentially pre-empts state laws to provide for the validity and enforceability of inter-state contracts which use electronic signatures and "records." Electronic records simply means a contract or other record which is created, generated, sent, communicated, received, or stored by electronic means.
Real Property Specific provisions: The legislation includes, as ALTA originally sought, a provision which specifically states that transferrable records "relates to a loan secured by real property." In addition, the bill provides that notarization requirements are met if an electronic notarization, together with all other information required to be included by statute, regulation or rule of law, is attached to or "logically associated with the signature or record." This is also a provision which ALTA members originally lobbied. In addition, the legislation gives those in control of electronic records the same rights as holders in due course under the Uniform Commercial Code, which will facilitate efficiencies in mortgage origination and sale processes.
Consumer Provisions: Consumer disclosures can be provided electronically if the consumer consents to the process, or confirms his or her consent electronically, and is notified of the hardware and software requirements for access to and retention of the electronic records and any fee charges that might be applicable for paper copies. Consumers must be notified if a change in the hardware or software requirements needed to access records creates a material risk that they would not be able to access records. Default, acceleration, foreclosure and eviction notices would still have to be provided in paper form.
Applicability to Insurance: Because insurance is state-regulated, the legislation makes clear that the new Federal legislation will apply to the business of insurance, including title insurance. Title insurance agents are not liable for any deficiency in the electronic procedures if they are not negligent, were not engaged in the development or establishment of the electronic procedures, and did not deviate from the procedures.
State effect: The Electronic Signatures Act sets standards that apply to all 50 states, but defers to states that adopt the Official Text of the Uniform Electronic Transactions Act (UETA). UETA is model legislation that provides for the uniform acceptance of electronic signatures and records, and real estate contracts among others. State laws and regulations may modify or supersede the Federal Act if they are consistent with UETA, or specify technology neutral alternative procedures. In addition, states may want to enact legislation providing for validity of intrastate electronic contracts. The Federal bill does not limit or supersede any requirement by a Federal or State regulatory agency that records be filed in specified standards or formats. It also provides that performance standards issued by these entities may be specified, but may not be technology specific. States may require records to be retained in tangible printed form only if there is a compelling governmental interest relating to law enforcement or national security.
Effective Date: In general, the legislation is effective October 1, 2000. Consequently, conventional mortgages (those purchased by Fannie Mae and Freddie Mac) can be completed electronically after that date.) The provisions applicable to Federal loan guarantees and insurance, such as FHA insured and VA guaranteed loans, are effective one year after enactment-in all probability June, 2001. With respect to State law requirements for records retention, the statute is generally effective March 1, 2001, although it may be delayed under certain circumstances until June 1, 2001.
For additional information contact Ann vom Eigen, Legislative Counsel 800-787-2582, ext 214.
If you have questions, please call 1-800-787-ALTA, extension 214 for Ann vom Eigen, Legislative Counsel (firstname.lastname@example.org ) or send an e-mail to GovernmentAffairs@alta.org or contact us via www.alta.org