More About the E-SIGN Act and eSignatures for National Title Companies

Going paperless? Plenty of national title insurance companies have made the switch to eSignatures. Although eSignatures make for a quicker and easier electronic closing process, a financial institution or national title insurance provider must comply with the E-SIGN Act to validate the transaction or documents.

What is the E-SIGN Act?

The E-SIGN Act or Electronic Signatures in Global and National Commerce Act is a requirement for many financial institutions to reach compliance. ESignatures for contracts, transactions, and records are only enforceable, valid, or considered equal to the original paper copy documents if they meet the criteria outlined by the E-SIGN Act. If these documents are to be considered equal to the original, financial institutions must consider E-SIGN compliance.

When must national title insurance companies comply with the E-SIGN Act?

Many national title insurance companies offer escrow services, electronic loan estimates, and closing disclosures, which could require an electronic signature. Before you can start using eSignatures for electronic documents, a financial institution must first ask your customers for permission.

What must you do to comply with the E-SIGN Act?

Before you can start using electronic signatures in place of your customers’ hand-made signature, you must meet the criteria outlined by the E-SIGN Act. The E-SIGN Act requires that before you ask for permission to use eSignatures you must indicate whether the customer has received the proper documents on paper and identify whether it applies to a specific transaction or an ongoing relationship (such as change-in-terms notices and monthly statements).

In addition, the financial institution must also provide the customer with information about the right to withdraw consent and the procedures and consequences (like fees, loss of pricing, a termination of the relationship, or the need to switch accounts) when going about doing this. The financial institution must also inform the customer about the software and hardware requirements needed to update important contact information, and provide the customer with more information on how to access and retain these records.

Last, it is required that a financial institution explains how the customer can obtain paper disclosures (and any fees associated) after giving consent. The consent of a customer’s ability to receive and access the e-signed documents must be confirmed electronically. When it comes to sending the required messages, financial institutions must assure that the customer received these messages but do not have to prove that the customer opened and read the message.

What are the risks with eSignatures?

First, an eSignature is not recognized as valid or protected under law unless it meets the above listed requirements of the E-SIGN act. If it does not meet these requirements, then anything that is signed using an eSignature, such as loan application forms or closing disclosures will not be valid under applicable laws or regulations such as the the Truth in Lending Act or Real Estate Settlement Procedures Act (TILA-RESPA).

To assure compliance, you must offer the customer the right to receive paper records upon request, because your customers cannot be forced to “

go paperless”. If you choose this option, it is possible to charge a reasonable fee to print and deliver the hard-copy documents.

Lenders can save wasted time and money with national title insurance companies that offer esignatures. Bay National Title Company is equipped for digital compliance and faster closings via title insurance technology. Partner with us today.

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