Posted by Mystic on 5/23/09 11:05am
Msg #289726

Esigning Concerns

I did an esigning recently and although I had no trouble following the instructions and completed the esigning easily, I have some basic concerns about several things.
1) All the docs that are required by RESPA are now Esigned, of course. This means that there is never a hard copy, wet ink signature document for the PN, TIL, RTC, etc. I had to put my name in a box that stated that I had left NO hard copies of any of the esigned docs. The borrower saved a pdf file that they can print out, BUT it is clear the lender does not want them to do this as MY instructions said to make sure no hard copies were left with the borrower and specifically to destroy any copies that had been made.
2) In the hard copy set, the borrowers had to sign a doc that had to be notarized, stating that they had received copies of ALL the docs - I guess the pdf file might be construed to suffice, but it was NOT true and the borrowers did not want to sign that doc in its initial capacity. They said 'but we did not get copies of the edocs'. I said they could write on the affidavit a sentence stating that and they did and then signed, but the PDF file is not a COPY and they had hard copies of the other docs that I had made them.
3) They also had to sign a notarized document some alternate "Securitization" form, that says they are responsible for repaying the loan even though there is no hard copy PN anywhere.
4) When we understand the original wet ink signature PN is the security instrument that banks are able to sell immediately and now there is NO physical wet ink signature PN anywhere, it becomes clear that although the banks are selling esigning as a way to save paper and the environment, what is really happening is a response to the recent foreclosure meltdown, that the lenders are protecting the banks from having to be responsible to produce the note if they want to foreclose. If you have followed the events in this industry lately, you know that the original hard copy PN is so important that cases in Chicago area have been overturned due to failure of banks to show proper chain of title and in Florida Federal Courts, the local court rules state that unless the lender can show the original promissory note, they can NOT bring forth a foreclosure case in that state. The banks CANNOT produce the note because they have already sold it in some bundle of mortgage backed securites and it is impossible to locate it physically, but nevertheless, they sell it over and over. "Produce the Note reports" have been all over the News recently, too. With no note at all, the banks can now say there is no note and the borrowers have signed an agreement stating they don't care. I wonder how the banks are going to securitize an edocument, but I am sure they will do so, even though it is totally illegal and a violation of the UCC. The fact that the Deed of Trust is still printed and signed is signficant because the recorders office will not accept an efiling as a recording, they need to see a real original signature document. The PN should contain a real signature as well and is even more important that it physically exist considering how valuable it is and what can be done with it.
5) I also saw in a recent set of documents the first Assignment of Deed of Trust to be signed by the original lender, that I have ever seen. Normally the banks just transfer servicing to other banks and never bother to transfer the assignment of trust until and unless someone has to foreclose. I believe this is in direct response to another RESPA violation that borrowers are using to fight foreclosures.
I know we work 'for the banks', but we need to protect the people we are signing as well somehow and this really bothers me so much that I don't think I will accept any more esigning assignments. I have always had a problem with lenders who insisted that you don't say anything to the borrowers, other than just "SIGN HERE" and I much prefer to work with lenders who do want you to point out the terms of the note to the borrowrs. It seems to me that not doing this is in violation of the number ONE rule of a notary - well maybe number two after validating the identity, but the high up on the list is to make sure the signer KNOWS what they are signing. This is especially important when the PN IS the security instrument.
I wonder what others of you think about this. The only comments I have seen so far about esigning are about the paper saving aspect or how difficult or easy it was to accomplish, but I have not yet seen any that address what this practice really means in the banking industry.

Reply by NCLisa on 5/23/09 11:33am
Msg #289728

First off, a copy can come in many forms, and a digital copy of the documents, is a copy. Whether the note is paper or digital also makes no difference, as a digital signature is just as legal as a wet signature, or even a faxed signature.

An assignment has nothing to do with a foreclosure. An assignment is the sale of the loan or servicing rights to another lender. A substitution of trustee is what happens when the foreclosure process is about to start.

As for e-signings, I point out the terms of the note, I'm in control of the mouse until it is time for them to click on the signature area, and the acceptance area. I go over the note, til, rtc and other fluff docs with the BO's, just like I do the paper docs.

Reply by Mystic on 5/23/09 6:02pm
Msg #289776

I think there is some confusion that maybe I need to clear up here. The NOTE IS the only negotiable instrument. The DOT secures the note, and is what they come after the property if the borrower faile to pay the note, but the note CREATES CREDIT, which the banks can sell many times. These notes are actually physically bundled together and sold in a stack as a mortgage backed security and sent somewhere outside the country, probably places like China. This is why the lenders can never produce the note when asked to do so. The note is money and like any bank asset, can be used to generate even more credit. I think most people don't know that there is no real money and that by signatures on the documents, people create credit. No time to go into the banking system here, but I know it is FRAUD for there to be no physical promissory note with a wet ink signature, and this is the basis of my issue. Think of it this way. A $100 dollar bill - a federal reserve NOTE - can easily be spent anywhere. If you make a cppy of a $100 bill, even a certified copy, in color that looks exactly like a real one, you will still not be able to spend that copy anywhere. Likewise, suppose all you have is a digital rendering of a copy of that note? Can you hand someone a disk with that file on it and use that as if it were the $100 bill. NO. The NOTE is the SECURITY. The Deed just backs up the Security. This is why it is VITAL that there be a real Promissory note with wet ink signature.

Reply by PAW on 5/23/09 9:21pm
Msg #289788

>>> The NOTE is the SECURITY. The Deed just backs up the Security. This is why it is VITAL that there be a real Promissory note with wet ink signature. <<<

Sorry, but the Note is nothing more than a promise to repay some amount of money. The security that allows the lender to extend a huge amount of credit to the borrower, is the property. The instrument that secures the promise is a Mortgage or Deed of Trust.

It is vital to have a signed Note and Mortgage/DOT. It doesn't have to be an inked signature (aka "wet" signature), it can be a digital encrypted signature applied electronically. When a copy is made of an e-signed document, the encrypted signature is not copied. Therefore, only the originally e-signed electronic document 'file' exists and can be produced.

I can only assume that you do not fully understand e-signings, e-notarizations and e-recordings, which relay on digital encrypted "signatures" that more than identify the signer and is 'legal' in all states. I suggest you Google "digital signature" and read up on it. You can start with Wkipedia (http://en.wikipedia.org/wiki/Digital_signature) and David Youd's explanation (http://www.youdzone.com/signature.html)

Reply by PAW on 5/23/09 12:13pm
Msg #289734

First, electronic document copies are just as legal and binding as paper documents. Reg Z specifically states (concerning the RTC) that two copies must be provide except in the case of electronically delivered documents, then only one copy is required.

A borrower can do anything they so desire with the documents. They can print them, if delivered electronically, they can copy them, they can even provide them to anyone they so desire. A lender cannot force a borrower NOT to print a copy.

As far as bankruptcy and foreclosure proceedings go, an electronically signed instrument carries the same weight as a wet signed instrument. Imo, lenders "losing" Notes and mortgages is less apt to occur in an electronic environment than in a paper environment.

Whether or not an e-signed and e-notarized document can be recorded is up to individual recording offices. Some offices can accept and record Level III (completely paperless) electronic documents. Many can accept and record Level II electronic documents and many more can handle Level I.

Reply by Ocean Pacific Notary Services, Inc. on 5/25/09 5:29pm
Msg #289845

Thanks PAW - you have it down on the s-signs.

FYI ...on the Fiserv platform for Flagstar, the NOTE CAN ONLY BE e-signed, not wet signed (or ink signed). Once it is e-signed, then it is registered through MERS. This is something new even to me, as most DOT/Mortgages are registered through MERS. If notary prints out note and has it ink signed, it is not valid.

It appears that AMTRUST has opened the doors and that many more lenders are going to be doing e-signs as they are viritually paperless and can be done quickly. AND we find that the notary does not have to wait on docs.

Reply by ReneeK_MI on 5/23/09 1:11pm
Msg #289738

just a little bit tangled ...

Just to untangle a couple things that might set things more clear in your head ...

1. The "Security Instrument" is the Mtg/DOT. It secures the Note.

2. The e-signed Note IS a signed & binding Note, it's not imaginary and it really does "exist". The reason for the e-signing process is to simplify the SELLING of loans (i.e. Notes) by using (what many had hoped would be...) a more/less uniform platform between lenders & the investors buying them. It is merely sold to the public as a means of being Green or making things 'more convenient' for them, but that's a snow-job.

That e-Note (if you will ...) is far less likely to be lost than a hard-copy/wet-signed one. It will stay within that e-pkg and be e-sold digitally, without ever seeing the light of a non-e-day...if those are real e-words.

3. The lost Notes & the foreclosures of those that you're talking about involve MERS, mostly. MERS (Mortgage Electronic Registration System) was/is widely used INSTEAD of, and as a REPLACEMENT for the old-fashioned use of the "Assignment". Used to be that every time a loan was sold, an Assignment had to be recorded putting the new lien-holder on public record AS the lien-holder. As loans were sold over and over - the recording of all those, plus the fees, just got out of hand. So, MERS (you'll see this referenced on the front of most mtg/DOT's, with a MERS #) gives each Mtg/DOT a registration number and MERS keeps track of who the current lien-holders are.

MERS ...um ....didn't keep all of them straight. Lenders/Investors got sloppy (likely assuming MERS was handling it all). It became a take-off of "Whose on First ..."

Reply by MW/VA on 5/23/09 1:49pm
Msg #289742

Re: just a little bit tangled ...

Thanks for the great info Lisa, Paul, & Renee. You have really helped to clear up a lot of the e-sign "mystery" for many.

Reply by Mystic on 5/23/09 6:15pm
Msg #289778

Re: just a little bit tangled ...

Since it is digitally signed, who can keep track of how many institutions are claiming possession of the same security, though? The digital copy can exist all over the place.

This is just a response by the banking industry to the requirement by the public to 'prove your claim and produce the note if you want to foreclose.' I totally agree that it is less likely to lose a digital document, but it is also far more likely to be replicated all over the place and mean nothing, appearing on everybody's books instead of the current servicer. It is making it easier for lenders now because they can say there never was a hard copy PN.

If the altenate security Instrument affidavit in that loan set obligates the borrower to pay the note even though there is no "Note", why have a "Note" at all. That security instrument should suffice.

Reply by NCLisa on 5/23/09 6:38pm
Msg #289779

Re: just a little bit tangled ...

You can not make a copy of a secure digital file like you can a word document. It has layers and layers of security and encryption. MERS has an e-vault to store e-notes for loans that they are responsible for.

Reply by PAW on 5/23/09 9:35pm
Msg #289789

Re: just a little bit tangled ...

Your statement just confirms my suspicion that you don't fully understand digital signatures. See my response above and follow the links.

But just to respond to your statement, "it is also far more likely to be replicated all over the place and mean nothing..." You can make a copy of a digital document or even change a digital document. But once it is done, the copy or altered copy is no longer digital signed. There are safeguards in place within the encryption algorithms that ensure that the document cannot be copied or altered without detection. Therefore, there would not be copies (that are digitally signed) all over the place.

>>> If the altenate security Instrument affidavit in that loan set obligates the borrower to pay the note even though there is no "Note", why have a "Note" at all. That security instrument should suffice. <<<

The Note (the legal evidence of a debt) is what binds the borrower to repaying the lender. You can certainly have a Note that does not have any security, called an "unsecured loan" where the lender simply loans the funds on good faith and the borrowers promise to repay. With huge amounts of money at stake, lenders want, and get, collateral for their loan. That's where the security instrument comes into play. The Mortgage/DOT does not obligate the borrower to repay the loan. The security instruments spells out the recourse the lender can take if the borrower defaults on the loan, using the object of the security instrument (the property) as collateral.

Reply by CNaylor on 5/25/09 12:57pm
Msg #289838

Re: just a little bit tangled, and a bit more ...

I'm going to pop in on the middle of this, with out any specific information to quote and or back up my statement.

There must be a middle ground in reality between your two posts. While I would agree there probably aren't indefinite copies due to encryption protections, I also doubt there is a "single" legal copy either.

Why, redundant backups. Most banks maintain multiple off site storage locations. Reasons numerous, starting with electrical failure/spike issues, physical structure damage (earthquake, tornado, fires), to computer specific issues like hard disk failure, and at the extreme end - military devices like EMI technology, and a host of other reasons.

To beleive that a bank would sit on such information on a single hard drive, tape back up, or any other single source is a bit naive. This would be as likely as a bank having all of it's cash sitting in a single vault. It's just not the case.

Reply by Bob_Chicago on 5/24/09 11:06am
Msg #289802

I have done a few e-signs and, frankly, fail to see the

point.
First let me say that I know as much abut digital security as I know
about brain surgery, but every other week you hear about some kid hacking into
paypal, credit card info, and even the Pentagon.
Seems to me that if it is in a computer someplace, some guy can get in
and steal , change or delete the info.
They do not save time or much paper.
Seems to be a gimmick, that , I hope, never catches on.
One lender that I do signings for, has a new doc, authorizing them to digitize
certain dox after the closing. I imagine that they scan in w-9s, compliance agrmts,
name and occupancy affidavits, etc. and then shred the originals. This makes sense to me
BTW , sign of the times. One lender that will remain nameless. but are really quick when
they make loans, used to put two, nice ,blue pens into the loan pkgs that they pre-sent
to the bwrs. Nice wide barrel, rubber grip with lenders name and ph #.
Had one recently, with h & W signers. Opened sealed lender pkg and found one
generic, bic stic type blue pen. Guess they wanted bwr to share and pass it back an
forth. Pulled out my own blue, rubber grip pens, and then retreived them after the signing.