19 PUB. 12 2022 ISSUE 1 are promissory notes that adhere to the eSignature Laws, both the ESIGN Act and UETA. So, while eNotes are also electronically signed, there are other loan documents (disclosures, for example) that may have eSignatures without having to comply with both eSignature Laws. A lender’s origination process may include eSignatures even if the process does not include eNotes, or the lender may use hybrid closings in which borrowers electronically sign some closing documents while wet-signing other documents, like the promissory note. There are costs involved in the transition to eNotes. Both the MERS eRegistry and eVault providers charge individual loan transaction fees to register an eNote or transfer a loan to an eVault. In addition, eVault providers may have a one-time or annual fee. However, lenders’ overall costs will be lower after adopting eNotes. The FHLBank eNotes acceptance implementation process The eNote requirements for FHLBanks were developed in 2020 to align with those of the other GSEs to ensure there is a single standardized process for lenders to sell, hold, or pledge eNotes. After finalizing the requirements, FHLBanks worked with the MERS eRegistry to establish the FHLBanks as a secured party when lenders pledged eNotes to us as eligible collateral. The final phase of FHLBank San Francisco’s implementation journey began in late 2020 when they launched a pilot project with a member lender that already had the key requirements in place to begin pledging eNotes to us. This seasoned member had: • Selected and implemented its eClosing system; • Become a member of the MERS eRegistry and completed set up and testing with MERS; and • Selected and engaged an eVault provider. The pilot was designed to enable us to develop and test critical procedures for the acceptance of eNotes. These procedures enabled a member to provide detailed reporting of its pledged and de-pledged eNotes and transfer eNotes to our eVault, with FHLBank San Francisco as a secured party. Following the successful conclusion of the pilot, we are now able to accept eNotes for 1-4 family mortgage loans and closed-end second mortgages as pledged collateral from any member ready to pledge them. Lenders embrace eNotes The use of eNotes is rapidly becoming a standard part of the residential lending production process, and more and more lenders are including eNote implementation in expense planning. As of January 2022, 165,729 eNote loans had been registered. There is good reason for the uptick in the adoption of eNotes, as they offer greater convenience for consumers, lower costs for lenders and quicker transfers of ownership. More specifically, the use of eNotes offers the following benefits: • A faster and easier signing process • Earlier loan funding • Flexibility in signing and closing locations • Reduced shipping and storage fees • Fewer signing errors • Less paper • Improved collateral control and audit capabilities • Elimination of lost paper notes Take the next step If your institution has not yet begun pledging eNotes, contact us to explore the opportunity to transition away from wet-signature notes. More information is also available on our eNotes page at fhlbsf.com. Resources include a “What is an eNote?” video, detailed eNotes Collateral Acceptance Requirements and Guidelines, and an eNotes Readiness Checklist. w The use of eNotes is rapidly becoming a standard part of the residential lending production process, and more and more lenders are including eNote implementation in expense planning. As of January 2022, 165,729 eNote loans had been registered.
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