Can we email the required notice that must be sent under the Mortgage Escrow Account Act when a loan reaches 65% of the original loan balance and the borrower is entitled to terminate their escrow account? If the notice must be mailed, can it be included as a separate document with another mailing or periodic statement?

Yes, when a borrower’s loan reaches 65% of their original loan balance and you have a valid email address on file, we believe you may use email to notify them of their right to terminate their escrow account. As a best practice, we recommend obtaining the borrower’s consent to receive electronic mail before sending any notice via email.

Section 5 of the Mortgage Escrow Account Act provides that a “mortgage lender must notify the borrower” that they may terminate their escrow account when their mortgage is reduced to 65% of its original amount and certain other conditions have been met. Since the law does not specify how the notification must be sent, we believe you may use email or include the notice with a mailing that includes other information.

The Illinois Financial Institutions Electronic Documents and Digital Signature Act and federal E-Sign Act each state that when a law requires that information be provided or made available to a consumer in writing, the use of an electronic record satisfies that requirement if the consumer has affirmatively consented to such use and has not withdrawn consent. Similarly, the Uniform Electronic Transactions Act provides that if parties have agreed to conduct a transaction by electronic means and a law requires information to be delivered in writing, the requirement may be met with an electronic record. However, these laws also layer on disclosure requirements and other conditions for obtaining a consumer’s affirmative consent before providing information required to be in writing to the consumer in electronic form.

Because Section 5 of the Mortgage Escrow Account Act does not specify that the notice must be in writing, we do not believe that the Illinois Financial Institutions Electronic Documents and Digital Signature Act and E-Sign Act’s affirmative consent requirements would apply. That said, we believe it would be a best practice to obtain a borrower’s consent to receive electronic mail before sending them the Section 5 notice by email and to monitor such emails for bounce-backs or other indications that the email address on file is invalid.

By contrast, note that Section 11 of the Mortgage Escrow Account Act requires an initial notice to be furnished in writing — “Notice of the requirements of the Act shall be furnished in writing to the borrower at the date of closing.” Consequently, if you choose to send this notice by email, you would need to follow all of the requirements for obtaining consumer consent under the Illinois Financial Institutions Electronic Documents and Digital Signature Act and E-Sign Act.

For resources related to our guidance, please see:

Illinois Mortgage Escrow Account Act, 765 ILCS 910/5 (“When the mortgage is reduced to 65% of its original amount by payments of the borrower, timely made according to the provisions of the loan agreement secured by the mortgage, and the borrower is otherwise not in default on the loan agreement, the mortgage lender must notify the borrower that he may terminate such escrow account or that he may elect to continue it until he requests a termination thereof, or until the mortgage is paid in full, whichever occurs first.”)

Illinois Financial Institutions Electronic Documents and Digital Signature Act, 205 ILCS 705/10(c)(1) (“If a statute, regulation, or other rule of law requires that information relating to a transaction or transactions in or affecting intrastate commerce in this State be provided or made available by a financial institution to a consumer in writing, the use of an electronic record to provide or make available that information satisfies the requirement that the information be in writing if:

(A) the consumer has affirmatively consented to the use of an electronic record to provide or make available that information and has not withdrawn consent;

(B) the consumer, prior to consenting, is provided with a clear and conspicuous statement:

(i) informing the consumer of: (I) any right or option of the consumer to have the record provided or made available on paper or in nonelectronic form, and (II) the right of the consumer to withdraw the consent to have the record provided or made available in an electronic form and of any conditions, consequences (which may include termination of the parties' relationship), or fees in the event of a withdrawal of consent;

(ii) informing the consumer of whether the consent applies: (I) only to the particular transaction that gave rise to the obligation to provide the record, or (II) to identified categories of records that may be provided or made available during the course of the parties' relationship;

(iii) describing the procedures the consumer must use to withdraw consent, as provided in clause (i), and to update information needed to contact the consumer electronically; and

(iv) informing the consumer: (I) how, after the consent, the consumer may, upon request, obtain a paper copy of an electronic record, and (II) whether any fee will be charged for a paper copy;

(C) the consumer:

(i) prior to consenting, is provided with a statement of the hardware and software requirements for access to and retention of the electronic records; and

(ii) consents electronically, or confirms his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent; . . .”)

E-Sign Act, 15 USC 7001(c)(1) (“ . . . if a statute, regulation, or other rule of law requires that information . . . be provided or made available to a consumer in writing, the use of an electronic record to provide or make available (whichever is required) such information satisfies the requirement that such information be in writing if

(A) the consumer has affirmatively consented to such use and has not withdrawn such consent;

(B) the consumer, prior to consenting, is provided with a clear and conspicuous statement

(i) informing the consumer of (I) any right or option of the consumer to have the record provided or made available on paper or in nonelectronic form, and (II) the right of the consumer to withdraw the consent to have the record provided or made available in an electronic form and of any conditions, consequences (which may include termination of the parties' relationship), or fees in the event of such withdrawal;

(ii) informing the consumer of whether the consent applies (I) only to the particular transaction which gave rise to the obligation to provide the record, or (II) to identified categories of records that may be provided or made available during the course of the parties' relationship;

(iii) describing the procedures the consumer must use to withdraw consent as provided in clause (i) and to update information needed to contact the consumer electronically; and

(iv) informing the consumer (I) how, after the consent, the consumer may, upon request, obtain a paper copy of an electronic record, and (II) whether any fee will be charged for such copy;

(C) the consumer (i) prior to consenting, is provided with a statement of the hardware and software requirements for access to and retention of the electronic records; and (ii) consents electronically, or confirms his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent; . . .”)

Uniform Electronic Transactions Act, 815 ILCS 333/8(a) (“If parties have agreed to conduct a transaction by electronic means and a law requires a person to provide, send, or deliver information in writing to another person, the requirement is satisfied if the information is provided, sent, or delivered, as the case may be, in an electronic record capable of retention by the recipient at the time of receipt. An electronic record is not capable of retention by the recipient if the sender or its information processing system inhibits the ability of the recipient to print or store the electronic record.”)

Illinois Mortgage Escrow Account Act, 765 ILCS 910/11 (“Notice of the requirements of the Act shall be furnished in writing to the borrower at the date of closing.”)