Electronic signatures generally are valid on most loan documents in Illinois, and we do not believe that signing a document after its stated date or with a shortened version of the borrower’s full legal name would invalidate the document. However, special requirements apply to electronic promissory notes that are negotiable instruments, as discussed in more detail below.
The Illinois Uniform Commercial Code (UCC) generally provides that an instrument may be antedated or postdated, and the date stated determines the time of payment — with interest payable from the date of the instrument. The UCC also provides that a signature may be made “manually or by means of a device or machine . . . by the use of any name . . . adopted by a person with present intention to authenticate a writing.” As such, we believe that a note signed one day after its stated date by a shortened version of the borrower’s name still would bind the borrower and be effective as of the stated date.
Additionally, we note that more stringent requirements may apply if you intend to sell the mortgage note on the secondary market. For example, Fannie Mae’s Selling Guide provides that a “borrower’s signature should not contradict the name typed below the signature line on the note.” While slight variations are acceptable, such as a missing initial or the omission of a “Jr” or “Sr,” more significant variations “such as William Smith signing as ‘Skip’ Smith . . . are not acceptable unless the lender obtains a name affidavit from the borrower stating that they commonly use the alternative signature.”
Regarding electronic signatures, the general rule under Illinois law is that they have “the same force and effect under the laws of this State” as wet signatures. Like the federal ESIGN Act, Illinois’s Uniform Electronic Transactions Act (UETA) provides that an electronic signature may not be denied legal effect or enforceability solely because it is in electronic form. The UETA also provides that an electronic record will satisfy a law requiring a record to be retained if it accurately reflects the information in the record and remains accessible for later reference. Consequently, many loan documents may be signed electronically without impacting their enforceability.
However, the UETA generally does not apply to transactions governed by Article 3 of the UCC, which governs mortgage notes that are negotiable instruments, unless the electronic copy of the note meets the enhanced criteria to be considered a “transferable record.” (Certain mortgage notes may not be treated as negotiable instruments under the UCC if they include certain undertakings and conditions outside of the payment of money or contain a conspicuous statement that they are not negotiable.)
To use electronic promissory notes (which we assume would be the case if the note is signed electronically), your bank must have access to electronic storage capabilities that allow you to meet these enhanced criteria:
(1) a single authoritative copy of the transferable record exists which is unique, identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6), unalterable;
(2) the authoritative copy identifies the person asserting control as: (A) the person to which the transferable record was issued; or (B) if the authoritative copy indicates that the transferable record has been transferred, the person to which the transferable record was most recently transferred;
(3) the authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;
(4) copies or revisions that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;
(5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
(6) any revision of the authoritative copy is readily identifiable as authorized or unauthorized.
Accordingly, we believe that an electronic promissory note that meets these criteria would be binding as to a borrower who e-signed it one day after its stated date or with a shortened version of their full legal name.
For resources related to our guidance, please see:
- Illinois UCC, 810 ILCS 5/3-113(a) (“An instrument may be antedated or postdated. The date stated determines the time of payment if the instrument is payable at a fixed period after date.”)
- Illinois UCC, 810 ILCS 5/3-112(a) (“Unless otherwise provided in the instrument, (i) an instrument is not payable with interest, and (ii) interest on an interest-bearing instrument is payable from the date of the instrument.”)
- Illinois UCC, 810 ILCS 5/3-401 (“Signature.
(a) A person is not liable on an instrument unless (i) the person signed the instrument, or (ii) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under Section 3-402.
(b) A signature may be made (i) manually or by means of a device or machine, and (ii) by the use of any name, including any trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing.”)
- 2022 Fannie Mae Selling Guide, B8-3-08 (December 14, 2022) (“A borrower’s signature should not contradict the name typed below the signature line on the note. Slight variations are acceptable—a missing initial, the omission of a ‘Jr’ or ‘Sr,’ or an over- or under-signing (such as a borrower signing as William Thomas Smith when the typed name is William T. Smith, or vice versa). Significant variations—such as William Smith signing as ‘Skip’ Smith, signing with an ‘X,’ or signing under an ‘also known as’ name—are not acceptable unless the lender obtains a name affidavit from the borrower stating that they commonly use the alternative signature.”)
- Financial Institutions Electronic Documents and Digital Signature Act, 205 ILCS 705/10(a) (“If in the regular course of business, a financial institution possesses, records, or generates any document, representation, image, substitute check, reproduction, or combination thereof . . . that accurately reproduces, comprises, or records the agreement, transaction, act, occurrence, or event . . . [it] shall have the same force and effect under the laws of this State as one comprised, recorded, or created on paper or other tangible form by writing, typing, printing, or similar means.”)
- Electronic Signatures in Global and National Commerce (ESIGN) 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.”)
- Uniform Electronic Transactions Act, 815 ILCS 333/7(a) (“A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.”)
- Uniform Electronic Transactions Act, 815 ILCS 333/12(a) (“If a law requires that a record be retained, the requirement is satisfied by retaining an electronic record of the information in the record which: (1) accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and (2) remains accessible for later reference.”)
- Uniform Electronic Transactions Act, 815 ILCS 333/3(b) (“This Act does not apply to a transaction to the extent it is governed by: (1) a law governing the creation and execution of wills, codicils, or testamentary trusts; (2) The Uniform Commercial Code other than Sections 1-107 and 1-206, Article 2, and Article 2A.”)
- Uniform Electronic Transactions Act, 815 ILCS 333/16 (“Transferable records.
(a) In this Section, ‘transferable record’ means an electronic record that: (1) would be a note under Article 3 of the Uniform Commercial Code or a document under Article 7 of the Uniform Commercial Code if the electronic record were in writing; and (2) the issuer of the electronic record expressly has agreed is a transferable record.
(b) A person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred.
(c) A system satisfies subsection (b), and a person is deemed to have control of a transferable record, if the transferable record is created, stored, and assigned in such a manner that:
(1) a single authoritative copy of the transferable record exists which is unique,
identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6),
unalterable;(2) the authoritative copy identifies the person asserting control as: (A) the person
to which the transferable record was issued; or (B) if the authoritative copy
indicates that the transferable record has been transferred, the person to which
the transferable record was most recently transferred;(3) the authoritative copy is communicated to and maintained by the person
asserting control or its designated custodian;(4) copies or revisions that add or change an identified assignee of the authoritative
copy can be made only with the consent of the person asserting control;(5) each copy of the authoritative copy and any copy of a copy is readily identifiable
as a copy that is not the authoritative copy; and(6) any revision of the authoritative copy is readily identifiable as authorized or
unauthorized.(d) Except as otherwise agreed, a person having control of a transferable record is the holder, as defined in Section 1-201(20) of the Uniform Commercial Code, of the transferable record and has the same rights and defenses as a holder of an equivalent record or writing under the Uniform Commercial Code, including, if the applicable statutory requirements under Section 3-302(a), 7-501, or 9-308 of the Uniform Commercial Code are satisfied, the rights and defenses of a holder in due course, a holder to which a negotiable document of title has been duly negotiated, or a purchaser, respectively. Delivery, possession, and indorsement are not required to obtain or exercise any of the rights under this subsection.”)