Fannie Mae and Freddie Mac each put out bulletins providing temporary guidance on how to proceed in light of the rapidly evolving situation regarding COVID-19. Among other things, the bulletins address the use of electronic records and signatures and the closure of land recoding offices around the country.
In its bulletin, Fannie Mae stated: “As a reminder, unless originated as an electronic note in accordance with Selling Guide A2-5.1-03, we require that the original promissory note be in the possession of the document custodian when it certifies the loan for our purchase. See Selling Guide A33-05 and E-2-01; and the Requirements for Document Custodians, Sections 2.2 and 8.1 for additional detail. We require the original note to be in the possession of the document custodian before purchase of the loan to minimize transit risk and to protect our legal rights in the loan under applicable law.
“In addition, the Selling Guide A2-5.1-03 describes all of our other policies related to electronic records, signatures, and notarizations,” the bulletin continued. “Note that electronic signatures are permitted under the terms of the Selling Guide but promissory notes may not be signed electronically unless the promissory note is an electronic note sold in accordance with A2-5.1-03. Lenders that are approved to deliver eMortgages may refer to the Guide to Delivering eMortgages to Fannie Mae for additional information.”
Freddie Mac noted in its bulletin that seller/servicers currently may take full advantage of electronic records and signatures in connection with their origination process. This includes those used with borrowers and with related third parties, including the use of electronic real estate purchase and sale agreements, as well as electronic initial and final disclosures.
“Freddie Mac also permits seller/servicers to use electronic signatures and records as part of the closing process, and, in many instances, to conduct electronic closings in which even the note is created and signed electronically (i.e., ‘eMortgage’ closings), as detailed in Chapter 1402. In order for eMortgages to be eligible for sale to Freddie Mac, there is a specific approval process the seller/servicer must follow, but in most instances such approvals are forthcoming within a week after seller/servicer integration with approved systems and the MERS eRegistry.”
Addressing the closure of land record recording offices, Freddie Mac stated: “We understand that land record recording offices are closed in many areas due to public health directives associated with COVID-19 and that such closures present challenges for sellers to comply with title requirements in Chapter 4702. We are working to address these challenges, but in the meantime, we want to remind sellers that the 2006 ALTA Loan Policy or an equivalent title product, which we require to be delivered with every mortgage, contains a ‘Covered Risk #14’ that covers matters arising between closing and recordation of the security instrument. So long as there is no exception for this coverage under Schedule B of the policy, we will accept it.”
Fannie Mae stated: “We understand that recording offices are closed in certain areas due to public health directives associated with COVID-19 and that such closures present challenges for lenders in complying with title requirements in Selling Guide Chapter B7-2. We are working to address these challenges, but in the meantime, we want to remind lenders that we accept lender’s policies of title insurance written on the 2006 ALTA loan title insurance form or a local equivalent. Covered Risk 14 in the 2006 ALTA form includes ‘gap.’ ”