We are considering implementing a process for borrowers to electronically sign mortgage loan documents. Freddie Mac requires us to obtain wet ink signatures on notes and mortgages, but we would like to have borrowers sign certain disclosures electronically. Do we need to send borrowers an Electronic Signatures in Global and National Commerce Act (E-Sign Act) disclosure and E-Sign policy?

Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA.

Yes, we believe you should send borrowers an E-Sign Act disclosure before they execute disclosure documents electronically. However, we do not believe you also are required to send borrowers a separate E-Sign policy if your E-Sign disclosure contains the statutorily required information.

The E-Sign Act permits “the use of electronic records to satisfy any statute, regulation, or rule of law requiring that such information be provided in writing, if the consumer has affirmatively consented to such use and has not withdrawn such consent.” Before obtaining consent, a financial institution must provide the consumer with a clear and conspicuous statement informing them of certain information, such as any right or option to have the record made available in a nonelectronic form and the right to withdraw consent to receive electronic records. There is no requirement to also provide your E-Sign policy if your disclosures include all the required information.

The Illinois Financial Institutions Electronic Documents and Digital Signature Act similarly requires financial institutions to obtain affirmative consent and to provide consumers with a clear and conspicuous statement containing the same information required by the E-Sign Act.

Additionally, the Illinois Electronic Commerce Security Act (ECSA) generally provides that an electronic signature may not be denied legal effect, validity, or enforceability solely because it is in electronic form. While the ECSA does not apply to “negotiable instruments and other instruments of title wherein possession of the instrument is deemed to confer title” unless certain conditions are met, we do not believe loan disclosure documents are subject to those conditions.

For resources related to our guidance, please see:

E-Sign Act, 15 USC 7001(c)(1) (“(1) Consent to electronic records. Notwithstanding subsection (a), if a statute, regulation, or other rule of law requires that information relating to a transaction or transactions in or affecting interstate or foreign commerce 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; . . .”)

E-Sign Act, 15 USC 7001(a)(1) (“A signature, contract, or other record . . . may not be denied legal effect, validity, or enforceability solely because it is in electronic form.”)
Illinois Financial Institutions Electronic Documents and Digital Signature Act, 205 ILCS 705/10(c) (“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; . . .”)

Illinois Electronic Commerce Security Act, 5 ILCS 175/5-110 (“Information, records, and signatures shall not be denied legal effect, validity, or enforceability solely on the grounds that they are in electronic form.”)
Electronic Commerce Security Act, 5 ILCS 175/5-120(a) (“Where a rule of law requires a signature, or provides for certain consequences if a document is not signed, an electronic signature satisfies that rule of law.”)
Electronic Commerce Security Act, 5 ILCS 175/5-120(c)(3) (“The provisions of this Section shall not apply: . . . to any record that serves as a unique and transferable instrument of rights and obligations including, without limitation, negotiable instruments and other instruments of title wherein possession of the instrument is deemed to confer title, unless an electronic version of such record is created, stored, and transferred in a manner that allows for the existence of only one unique, identifiable, and unalterable original with the functional attributes of an equivalent physical instrument, that can be possessed by only one person, and which cannot be copied except in a form that is readily identifiable as a copy.”)