MISMOe Mortgage Guidev 2

MISMO® Guide
eMortgage Guide
Version 2.0
Final Release
April 27, 2006
MISMO eMortgage
Workgroup
eMortgage Guide:
A guidance paper by the
MISMO eMortgage Workgroup
Abstract
This MISMO® eMortgage Guide, published by MISMO®, Inc., a wholly owned

subsidiary of the Mortgage Bankers Association, is a mortgage industry reference tool,
providing information on various aspects of eMortgage technology, business, processes,
and supporting law.
* * * The information provided is educational in nature, providing general information

about legal, financial, technological and other considerations associated with eMortgages.
It is not intended as legal or other professional advice. You should consult an appropriate
professional with any specific questions.
© 2006 MISMO®. All rights reserved.
This work may not be reproduced or transmitted in any form or by any means, electronic
or mechanical, including photocopying, recording, or by an information storage and
retrieval system without permission in writing from MISMO. Please contact
info@mismo.org for more information.
MISMO® is a registered service mark of the Mortgage Bankers Association.

Table of Contents
1 About This Guide...................................................................................................... 4

1.1 Summary ............................................................................................................. 4
1.2 Purpose................................................................................................................ 4
1.3 Scope................................................................................................................... 4
2 Executive Summary .................................................................................................. 5
3 Benefits....................................................................................................................... 6
4 Legal ........................................................................................................................... 9
5 Key Concepts........................................................................................................... 21
5.1 MISMO XML Data Standards.......................................................................... 22
5.2 eDocs Concept .................................................................................................. 24
5.3 eSignature Concept ........................................................................................... 27
5.4 MISMO ePackage Concept............................................................................... 30
5.5 MERS® eRegistry Concept ............................................................................... 31
5.6 eDoc Delivery Concept..................................................................................... 33
5.7 Electronic Vault Concept.................................................................................. 36
6 Industry Processes .................................................................................................. 37
6.1 eDisclosure Processes ....................................................................................... 39
6.2 eCredit Report Processes .................................................................................. 46
6.3 e-Appraisal Processes ....................................................................................... 50
6.4 Flood Zone Determination and Insurance Processes ........................................ 60
6.5 eNote Processes ................................................................................................ 63
6.6 eSecurityInstrument Processes.......................................................................... 66
6.7 eTitle Report and Insurance Processes ............................................................. 70
6.8 eClosing Processes............................................................................................ 73
6.9 eNotary Processes ............................................................................................. 76
6.10 eRecording Processes........................................................................................ 78
6.11 eDoc Custody Processes ................................................................................... 81
6.12 eLien Release Processes ................................................................................... 83
6.13 Fraud Detection Processes ................................................................................ 86
7 Appendix.................................................................................................................. 88
7.1 FAQ................................................................................................................... 88
7.2 Reference Links ................................................................................................ 90
7.3 Glossary ............................................................................................................ 91
7.4 Index ................................................................................................................. 95
About This Guide
1 About This Guide

1.1 Summary
The MISMO eMortgage Guide, published by the Mortgage Industry Standards

Maintenance Organization, Inc. (“MISMO”), a wholly owned subsidiary of the Mortgage
Bankers Association, is a mortgage industry reference tool – a detailed guide to the
various aspects of eMortgage technology and business. MISMO is dedicated to
developing, promoting, and maintaining, through an open process, voluntary electronic
commerce procedures and standards for the commercial and residential mortgage industries.
1.2 Purpose
The MISMO eMortgage guide is intended to educate the mortgage industry community
about the business and (high-level) technical aspects of eMortgage implementations and
their potential benefits. It provides guidance on how to get started with your own
eMortgage system implementation, and describes general industry-acceptable guidelines
for eMortgages that mortgage industry participants may elect to apply across related
mortgage processes. This guide provides general information about the legal framework
surrounding eMortgage implementation. It is educational in nature and is not intended as
legal advice. Professional advice should be sought in connection with any specific efforts
to implement eMortgages.
1.3 Scope
The MISMO eMortgage Guide describes and explains industry-standard concepts,

definitions, and high-level processes. It is not intended to be a technical implementation
guide. It also does not provide information about any specific company’s internal
processes, patented concepts, business logic, algorithms, or other proprietary details.
Neither does it provide legal advice. Rather, this guide provides general information
about the legal framework surrounding eMortgage implementation. Professional advice
should be sought in connection with any specific implementation of eMortgages.
eMortgage Guide Version 2.0 Page 4

Copyright MISMO®, Inc. 2006
Executive Summary
2 Executive Summary
The mortgage industry continues to evolve to an electronic mortgage environment. Since
2001, the mortgage industry has been working cooperatively within the Mortgage
Industry Standards Maintenance Organization, Inc. (MISMO) to define key processes,
transactions, and XML data standards to exchange the mortgage data and documents
electronically. This collaborative work led to the formation of a suite of eMortgage
concepts and voluntary standards, described in this eMortgage Guide.
Today’s origination process usually involves the electronic generation of loan documents,
which are then printed on paper for borrowers to sign. The paper documents are then
manually shipped back, typically imaged, indexed, stored in electronic document
repositories, and exchanged after origination. The data that is exchanged electronically
must be certified against the data on the paper documents. Thus, while imaging can
provide significant benefits, manual processes and physical shipping are still required.
The eMortgage framework and standards take these processes to the next level, into a
fully paperless environment. eMortgage documents are generated, transferred, signed,
sealed, registered, and stored electronically, eliminating the need for printing, imaging,
shipping, couriers, data re-entry, manual data certification, and other costly steps of
today’s mortgage processes. The data in these electronic documents can be verified and
trusted, because the documents are digitally signed to reveal any tampering.
This guide provides an overview of the eMortgage landscape as it exists today, including:
• Benefits of eMortgages,
• Key industry standards and concepts,
• Underlying legal framework and concepts,
• General guidance for key processes, and
• Sources of additional information to get started.
The mortgage industry is slowly but steadily moving forward on eMortgage development
and implementation because the resulting paperless processes will provide significant
savings of time and money for business and ultimately for consumers. MISMO standards
are critical to achieving eMortgage adoption across the industry. During the transition
from paper to eMortgages, both individual loans and loan pools will be hybrid, using
combinations of paper, imaging, and electronic documents. This guide provides a
reference tool to help you move forward toward a true eMortgage environment.

Benefits
3 Benefits
The MISMO standards and resulting eMortgage system implementations can benefit all
participants in the mortgage lending environment including the borrower, real estate
agent, mortgage broker, mortgage lender (retail, wholesale, correspondent, direct), loan
servicer, investor, title company, service provider (document prep, title, flood, credit,
fraud, appraisal), notary, county recorder, and others. As mortgage lenders develop and
execute their corporate strategies, it is very important to understand that the business
benefits available from eMortgage technology are being leveraged by many institutions
today. The purpose of this section of the eMortgage Guide is to document the eMortgage
benefits and to provide a general description of how those benefits are achieved.
Although the supporting MISMO standards and other technologies are equally
significant, the electronic document (eDoc) concept is the key point for executives and
managers in mortgage banking to grasp in order to leverage this pivotal eMortgage
business opportunity. After the legal framework (ESIGN and UETA) for eMortgages
was established in 2000, MISMO developed the technical specification required to create
digital documents that could be legally exchanged across the industry to replace their
paper counterparts. The digital document specifications based on MISMO eDoc concepts
are being used today by technology vendors, lenders, and other parties throughout the
mortgage industry.
The fundamental idea embodied by the eDoc concept is the encapsulation of the
document data with a corresponding digital view of the document to replace the paper
documents we know today. This secure digital object (the data combined with the
document view) can then be managed, validated, and manipulated electronically. Once
your process is improved using the data enabled eDocs, workflow systems can be
configured to automatically validate the data, to review against business rules, and to
execute the transaction logic necessary to complete mortgage banking processes
electronically. (Please note that more detailed discussion of the eDoc concept is available
in Section 5.2 of this eMortgage Guide.
Mortgage Electronic Registration Systems, Inc. (MERS) will be another key element of
any eMortgage strategy. MERS is a mortgage industry utility that eliminates the need to
prepare and record assignments of mortgages when trading mortgage loans. Borrowers
name MERS as mortgagee and nominee for the lender on deeds of trust and mortgages
that are recorded in the public land records. Lenders then register the loans on the
MERS® System and electronically track changes in servicing and investor ownership
rights over the life of the loan. MERS also operates the MERS® eRegistry which is the
system of record for the mortgage industry to identify the current Controller (holder) and
Location (custodian) of the Authoritative Copy of an electronic promissory note.
The MISMO eDoc concept, combined with MISMO data transaction standards, the
MERS® eRegistry, and other eMortgage technologies, provide many benefits for every

Benefits
process we know today in mortgage banking. Key benefits to consider as your company
begins to implement eMortgage technology are:
• Significant reductions in cycle time for all processes. With the reduction in cycle
time, associated benefits can include higher customer satisfaction, lower costs,
and higher quality from the mortgage processes. The magnitude of the possible
eMortgage benefits cannot be matched by other, less-comprehensive technologies.
• Increased data integrity as the data and document become one in the eDoc format.
This data can be used throughout the process, eliminating unnecessary re-keying
of loan data.
• Cost savings in system integration. Using the MISMO data standards greatly
reduces development time and maintenance of proprietary system-to-system
interfaces.
• Reduced risk – quality control and regulatory checks can now be performed
electronically, throughout the life of the loan. This electronic integration of
compliance throughout the mortgage banking process (not as its own silo) may
virtually eliminate the need for such functions as the post-closing audit.
• Increased value of eMortgage assets, as investors also accrue the benefits
described above, when they receive electronic delivery of product.
As examples of how you can use eMortgage technology today, let’s consider the
opportunities presented below to use the MISMO eMortgage standards in your
origination and servicing processes.
Opportunity Benefits
eCompliance Replaces manual quality control and compliance checks with
automated checks throughout the process, which will improve loan
quality and shorten cycle times.
eDisclosure Eliminates manual preparation and shipping of application and
initial disclosure packages to/from the borrower(s).
eNote Eliminates shipping, manual data reentry, manual data
certification, and imaging of the investor collateral packages.
With intelligent workflow, the eNote also enables a significant
reduction in the closing and funding cycles.
eClosing Eliminates the manual presentation of closings and shortens cycle
time of overall closing processes; data is shared by all in the
service supply chain, which eliminates redundant data entry and
errors.
eDelivery Reduces document management overhead, shortens cycle times,
and improves overall process efficiencies with secure electronic
delivery of mortgage-related documents.
eRecording Improves the real estate recording process, reduces overall cycle
time for all participants and reduces the costs for both county
recorders and their customers.
eServicing Lowers costs and improves customer service for all business

Benefits
partners as companies begin to leverage the MISMO standards to

move Investor Reporting, Delinquency Reporting, and other
traditional servicing tasks to a collaborative Internet environment.
In conclusion, extensive benefits and cost savings may be achieved by moving to the
eMortgage environment. These benefits and cost savings can be attained incrementally
as we evolve from paper to hybrid to a fully electronic and paperless mortgage
environment. Each business has the opportunity to re-examine its processes to take
advantage of efficiencies permitted by the MISMO eMortgage standards. The MISMO
eMortgage Workgroup has published an eMortgage Cost Benefits White Paper and
interactive cost-benefit analysis worksheet template on www.mismo.org, to allow you to
calculate your own potential eMortgage ROI.

Legal
4 Legal
Introduction
Many existing mortgage industry processes are based on the legal and regulatory
framework that is uniquely applicable to residential mortgage loan origination. As the
industry moves forward toward an electronic environment, a new, and equally unique
framework is evolving. This chapter provides a summary of the legal context for
eMortgage transactions. The content of this chapter is for informational purposes only
and should not be considered legal advice generally or with respect to any specific facts
or circumstances.
The following diagram illustrates the legal compliance reference points that should be
considered in the implementation of any electronic mortgage loan origination process.
ECOA
Pre-Closing State
FCRA Fair Lending Disclosures
ECOA
ECOA
Flood Insurance
TILA Advance HUD-1

State Disclosures [High
Cost, Atty Selection TILA
Notice, Insurance [Section 32/Reverse
disclosures, Anti- Mortgage]
Coercion]
Closing Disclosures/Documentation
HMDA
Capture CRA
TILA
BSA TILA RESPA
Origination Process
Pre-Qualification Application Processing Closing Post-Closing
PRIVACY
JV/AfBA
ESIGN/UETA Consent
Disclosures ESIGN/UETA Consent
UETA/URPERA
ESIGN/UETA Consent
/State
Recording
Statutes
Uniform Electronic Transactions Act Summary
The National Conference of Commissioners on Uniform Laws (NCCUSL) promulgated

the Uniform Electronic Transactions Act (UETA) in 1999 as a model act for adoption by
the states. UETA represents the first effort at providing uniform rules to govern
transactions in electronic commerce. Since UETA’s introduction, almost every state,
including the District of Columbia, has adopted some version of UETA although some

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states have included non-uniform provisions. The objective of UETA is to ensure that
transactions in the electronic marketplace are as enforceable as transactions memorialized
on paper with manual signatures without changing any of the substantive rules of law that
apply and without imposing specific technology requirements for verification of identity
or the integrity of the document itself. UETA applies only to transactions in which each
party has agreed by some means to conduct them electronically.
The basic rules are in Section 7 of UETA (Legal Recognition of Electronic Records and
Electronic Signatures). The most fundamental rule in Section 7 provides that a "record or
signature may not be denied legal effect or enforceability under state law solely because
it is in electronic form." The second most fundamental rule says that "a contract may not
be denied legal effect or enforceability solely because an electronic record was used in its
formation." The third most fundamental rule states that any law that requires “a writing”
will be satisfied by an electronic record. And the fourth basic rule provides that any
signature requirement in the law will be met if there is an electronic signature.
UETA establishes the concept of “transferable records” in Section 16. “Notes” under
Article 3 (Negotiable Instruments) and “Documents” under Article 7 (Warehouse
Receipts, Bills of Lading, and Other Documents of Title) of the Uniform Commercial
Code (UCC) are “transferable records” under UETA when in electronic form. Promissory
notes may be negotiable instruments. The quality of negotiability relies in part upon the
note or document being the single, unique embodiment of the obligations and rights in
the note or document. Maintaining the “unique token” quality for electronic promissory
notes is the subject of Section 16. A transferable record exists when there is a single
authoritative copy of that record existing and unalterable in the "control" of a person.
Section 16(d) of UETA provides that a person in "control" is a "holder" for the purposes
of transferring or negotiating that record under the UCC. If a state has enacted UETA, it
will be the governing law in the state regarding the enforceability of electronic
transactions. States may amend UETA, as they deem appropriate, so that state enactment
of UETA has not resulted in a national standard for real estate finance professionals to
follow. See the next section for how UETA relates to federal ESIGN legislation.
ESIGN Summary
On June 30, 2000, Congress enacted the Electronic Signatures in Global and National
Commerce Act (ESIGN), to facilitate the use of electronic records and signatures in
interstate and foreign commerce by ensuring the validity and legal effect of contracts
entered into electronically. Congressional action reflected concerns over the pace of
enactment of UETA by the states and the continued enactment of state laws either
modifying UETA or establishing new regulatory regimes. For states that have enacted a
uniform version of UETA, the provisions of ESIGN may be superseded in whole or in
part. Regardless, most of the provisions in ESIGN mirror provisions contained in UETA.
However, in order to preserve the underlying consumer protection laws governing
consumers' rights to receive certain information in writing, ESIGN imposes special

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requirements on parties that want to use electronic records. For more information on
these requirements, see the Consent Requirements section below.
Consent Requirements under ESIGN and UETA
Under ESIGN and UETA, a party must agree to use electronic records and/or signatures
with respect to a specific transaction or group of transactions.
Nothing in ESIGN or UETA requires a party to use electronic records and/or electronic
signatures in a transaction with another party. Generally, the agreement to use electronic
records and/or signatures can be evidenced by an express or implied agreement between
the parties to conduct business electronically, except if there is a federal law requiring a
writing.
Before a party can electronically provide information required to be “in writing” to a

consumer, the provisions of ESIGN (or in some cases the state UETA) require the party
to provide specific ESIGN consent disclosures to the consumer, and require the consumer
to affirmatively consent to receive the information electronically.
Section 101(c)(1)(C)(ii) of ESIGN requires businesses to obtain from consumers
electronic consent or confirmation to receive information electronically that the law
requires to be delivered in writing (e.g., Truth in Lending disclosures). Before consent
can be given, a consumer must be provided with information regarding:
any right or option to receive a disclosure in paper form;
whether the consent applies only to a particular transaction or to categories of
records that may be provided during the course of the parties' relationship;
the right to withdraw consent to have records provided electronically, including
any conditions, consequences, or fees associated with doing so. The institution
must describe the procedures for withdrawing consent and for updating
information needed to contact the consumer electronically;
how, after the consent, the consumer may obtain a paper copy of a record upon
request; and
the hardware and software requirements for access to and retention of the
electronic information.
ESIGN requires that consumers express their consent electronically, or confirm their
consent electronically, in a manner that reasonably demonstrates that the consumer will
be able to access required notices or disclosures electronically. If, after consent is
provided, a change is made in the hardware or software requirements needed to access or
retain the electronic disclosures and the change creates a material risk that the consumer
will not be able to access or retain an electronic disclosure that was the subject of the
prior consent, the consumer must be provided with an appropriate notice of the change
and must re-consent electronically in a manner that reasonably demonstrates the
consumer’s ability to access the electronic notice or disclosure within the changed
hardware or software environment.
Under ESIGN and UETA, an issuer (borrower) must expressly agree to treat an
electronic record as a transferable record.

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An electronic form of promissory note cannot qualify as a “transferable record” under

ESIGN or UETA unless the issuer of the electronic promissory note has expressly agreed
that it is a transferable record. This express agreement can be obtained separately from
the transferable record or be contained within the transferable record itself. For example,
Fannie Mae and Freddie Mac have developed an eNote clause for their Uniform
Instruments in electronic form. The new clause must be included in eNotes intended to
be sold to Fannie Mae or Freddie Mac and contains specific language whereby the issuer
(borrower) agrees that the eNote is a valid transferable record.
Establishing Control of a Transferable Record
An important aspect of the secondary mortgage market is the mortgage industry’s ability
to sell mortgage notes. As mentioned above, ESIGN and UETA create a parallel
structure for the transfer and negotiability of an electronic promissory note to a third
party so that a third party transferee has the rights and defenses analogous to those held
by a “holder,” or a “holder in due course,” under the UCC. The key to the transferability
of an electronic record under ESIGN and UETA is “control,” which can be thought of as
the equivalent of possession in the paper world. ESIGN and UETA provide that 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.
Control can be shown if the system meets the list of safe harbor requirements under
Section 16(c) of UETA and Section 201(c) of ESIGN, as described below.
A single authoritative copy of the record exists that is unique, identifiable, and
unalterable (with limited exceptions).
To qualify as an authoritative copy, an electronic promissory note must be unique,
identifiable and unalterable (with limited exceptions). An electronic promissory note can
be unique by having a specific characteristic that distinguishes it from other copies. The
characteristic can be provided by technology, by process, or by agreement. For the
electronic promissory note to be identifiable, the system being used or the agreement
between the parties needs to specify or describe the unique feature that identifies the
authoritative copy and how that unique feature can be accessed or confirmed. The
electronic record must be unalterable, except with the permission of the person asserting
control.
The authoritative copy identifies the person asserting control as either the person to
whom the transferable record was issued or the person to whom the transferable record
was most recently transferred.
The authoritative copy must be tied to a system or process for identifying the current
party in control of the record. This can be accomplished through the use of a trusted third
party registry, such as the MERS® eRegistry. For example, the MERS® eRegistry was
designed as an industry utility serving as the central location to identify the current
person in control of and the location of the authoritative copy of the electronic
promissory note. Language, such as Fannie Mae and Freddie Mac’s eNote clause, is

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included in the electronic promissory note referencing the MERS® eRegistry or another
trusted third party registry, as the system for identifying the person in control of the
electronic promissory note.
The authoritative copy is communicated to and maintained by the person asserting

control or its designated custodian.
The person asserting control of the authoritative copy or her designated custodian would
be equivalent to the person who is authorized to possess the physical promissory note in a
paper environment. As a result, the person asserting control or its custodian must have
access to the authoritative copy and be able to maintain the authoritative copy without the
ability for others to duplicate or acquire the authoritative copy without their permission.
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.
ESIGN and UETA permit an authoritative copy to be revised in order to add or change its
identified assignee, but only with the consent of the person asserting control.
Each copy of the authoritative copy and any copy of a copy is readily identifiable as a
copy that is not the authoritative copy.
All copies of the authoritative copy of the electronic promissory note need to be readily
identifiable as such. This can be accomplished by inserting language into the electronic
promissory note that gives third parties notice that they may not be viewing the
authoritative copy of the note and that they would need to check a designated third party
registry (i.e., the MERS® eRegistry) in order to determine the actual location of the
authoritative copy. Fannie Mae and Freddie Mac drafted the eNote clause for their
Uniform Instruments to meet this requirement.
Any revision of the authoritative copy is readily identifiable as an authorized or

unauthorized revision.
Revisions to an authoritative copy, such as modifications to an electronic promissory
note, must be identifiable as authorized or unauthorized revisions. This can be
accomplished using a trusted third party registry, such as the MERS® eRegistry.
Whenever a modification is created and agreed upon by the person in control and the
obligor(s) to the electronic promissory note, the modification can be registered on the
third party registry in such a way that it is associated with the original electronic
promissory note. Any persons that check the registry will be put on notice that a
modification to the electronic promissory note exists.
eNotarization
Notaries in the United States entered a new era in 1999 when UETA was published.
UETA specifically allows for the use of electronic signatures by notaries:
Section 11. Notarization and Acknowledgment. If a law requires a

signature or record to be notarized, acknowledged, verified, or made under
oath, the requirement is satisfied if the electronic signature of the person

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authorized to perform those acts, together with all other information

required to be included by other applicable law, is attached to or logically
associated with the signature or record.
Additionally, ESIGN closely tracks UETA, including the provision on use of electronic
signatures by notaries:
Subsection 101(g). Notarization and Acknowledgment. If a statute,

regulation, or other rule of law requires a signature or record relating to a
transaction in or affecting interstate or foreign commerce to be notarized,
acknowledged, verified, or made under oath, that requirement is satisfied
if the electronic signature of the person authorized to perform those acts,
together with all other information required to be included by other
applicable statute, regulation, or rule of law, is attached to or logically
associated with the signature or record.
The legislative history of ESIGN indicates that 101(g) is intended to remove any
requirement of a stamp, seal, or similar embossing device as applicable for electronic
notarizations. This notation recognizes that the notary’s seal may be represented simply
as “information” (textual or otherwise) on an electronic document, as long as that data
conforms to existing state laws concerning the information that must be conveyed by the
notary’s seal. However, the fact that ESIGN itself does not address the seal issue
specifically raises interpretative issues that many real estate and legal professionals
would like to see clarified by statute.
State Laws and Regulations Enabling eNotarization

States have adopted or are currently working on adopting legislation to support electronic
notarization, including clarification of the status of seals. NCCUSL’s draft of the
Uniform Real Property Electronic Recording Act (URPERA) [Sec. 3(c)], which some
states have already adopted, effectively duplicates the UETA and ESIGN language
regarding the use of electronic signatures by notaries and specifically adds a provision
that the notary’s seal need not display as a physical or visual image on an electronic
document being recorded.
These legislative efforts will bring clarity to the legal effect of electronically notarized
documents and will establish the rules, procedures, and guidelines that govern notary
practice in the electronic age. Parties interested in eNotarizaton should determine whether
their state has, or will implement laws or regulations governing eNotarization.
Additional guidance can also be found through state or national notary professional
organizations.
eRecording
Implementation of electronic recording (eRecording) necessarily implies that the real

estate document being submitted for filing in the public land records is a valid electronic
document and that the receiving body is authorized and willing to accept the electronic

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record for recording. Fortunately, the broad nature of ESIGN and UETA permits real
estate documents to be in electronic format, to contain electronic signatures, and to be
accepted for filing in the event county recorders choose to do so.
ESIGN and UETA’s general rules of validity similarly provide that, with respect to a
“transaction,” a record or signature may not be denied legal effect or enforceability solely
because it is in electronic form. Both ESIGN and UETA define a “transaction” as an
action or set of actions relating to the conduct of business, consumer, commercial affairs
between two or more persons, and in the case of UETA, the definition of “transaction”
additionally covers governmental activities. In addition, ESIGN’s definition of
“transaction” specifically includes the sale, lease, exchange, or other disposition of any
interest in real property. Real estate documents, such as deeds of trusts and mortgages,
often have to be notarized or acknowledged under applicable state law. ESIGN and
UETA provide that this requirement can be met if the electronic signature of the notary or
other authorized person is attached to or logically associated with the electronic real
estate document. Therefore, ESIGN or UETA do not specifically preclude real estate
documents from being in an electronic format or having electronic signatures.
ESIGN and UETA, whichever is applicable, are written broadly enough to allow a county
recorder the choice of accepting electronic real estate documents for recording.
ESIGN and UETA do not mandate that county recorders accept electronic real estate
documents for recording. However, since ESIGN and UETA provide that electronic
records and electronic signatures are legally equivalent to paper records and ink
signatures, a county recorder can choose to accept electronic real estate documents for
recording, subject to any record standards or format requirements issued by a federal or
state regulatory agency or self-regulatory organization.
State attorneys general and the Property Records Industry Association (PRIA) have
differing opinions on whether ESIGN and UETA give county recorders sufficient
authority to accept electronic real estate documents, including scanned documents, for
recording.
Several state attorneys general (“AGs”), including those in California, New York and
Texas, have issued opinions in recent years maintaining that ESIGN and UETA, without
additional state law, do not require a county recorder to accept electronic documents,
including documents with electronic signatures, for recording. The AGs’ opinions
stipulate that electronic real estate documents are legal and enforceable between the
parties to a particular transaction. However, the opinions point out the difference
between enforcing the underlying real estate document between parties and the distinct
activity, under state statutes that require the filing of paper documents with “live”
signatures, of accepting an electronic document for recording in the public land records to
give third parties notice of rights in a parcel of real property.
There is also controversy regarding whether scanned documents (i.e., paper documents
converted to electronic form) meet state requirements that an “original” document or
document containing an “original signature” be presented for recording. California, New
York and Texas attorneys general have asserted that scanned documents and/or scanned
signatures are only copies of original documents or signatures.

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PRIA and the Electronic Financial Services Council (EFSC) have taken the position that
ESIGN and UETA do provide a clear basis for recordations of electronic real estate
documents. With regard to scanned images, PRIA and EFSC maintain that the definition
of “electronic” includes a scanned image. This opinion is supported by the UETA
commentary which makes it clear that “electronic data interchange, electronic mail, voice
mail, facsimile, telex, telecopying, scanning and similar technologies” would qualify as
electronic.
As a result of these differing views, mortgage lenders should consult with the particular
counties and the state attorney generals’ offices in the states in which they wish to
submit electronic or scanned documents for recording to ensure the recognition of the
validity of electronic real estate document filings.
URPERA and other state laws clarify the authority of county recorders to accept
electronic real estate documents for recording.
To clear up this confusion as to whether electronic real estate documents can be accepted
for recording, including the ability to accept scanned documents and to establish
electronic recording standards for county recorders to follow, NCCUSL published
URPERA in August 2004. If adopted by a state, URPERA will give county clerks and
recorders the legal authority to prepare for and develop systems to accept electronic
recording of real property instruments. Similar to ESIGN and UETA, URPERA
reiterates that electronic documents and electronic signatures will satisfy any laws
requiring a document to be an “original” or “in writing” and laws requiring a document to
contain original or written signatures, notarizations and acknowledgments for recording
purposes. URPERA also provides that a state electronic recording commission or a state
agency responsible for setting electronic recording standards must consider the standards
and practices of other jurisdictions and the standards promulgated by national standard-
setting bodies (e.g., PRIA), in addition to considering the needs of counties and views of
interested persons. A few states, such as Virginia, have already adopted URPERA and
several other states have bills on URPERA pending.
Additionally, states such as California and Colorado, have adopted separate electronic
recording statutes that provide for the acceptance of electronic real estate documents,
including, in some cases, digitized images of electronic real estate documents, for
recording.
Title Insurance Coverage for eMortgages
The American Land Title Association (ALTA) is circulating a draft of a new Loan Policy
accessible at www.alta.org/forms/ALTALoanDraft.pdf. The draft policy includes several
references to electronic loan obligations (See Covered Risk 2(a)(iii); Conditions
Paragraph 1(d) definition of "indebtedness" and 1(e) definition of "Insured" and 1(j)
definition of "Mortgage"). Please note that these references are designed to emphasize
coverage that is already embodied in the existing ALTA policy under the Insuring Clause
2, “Defects, liens and encumbrances affecting title.”

Legal
Electronic Delivery of Consumer Disclosures
The delivery of required consumer disclosures in an electronic mortgage lending

environment presents a unique challenge. Not only do some disclosures require an
ESIGN consent before they are provided electronically, creditors will still need to keep in
mind that neither ESIGN nor UETA affect any statutory or regulatory requirement
regarding the content, proximity or format of any warning, notice, disclosure or other
record required to be posted, displayed or publicly affixed. For example, if a required
notice must appear immediately above the consumer’s signature line, it must continue to
be positioned in the same manner within the electronic form of the document (e.g.,
appearing immediately above the portion of the screen where the consumer places her
electronic signature). Additionally, creditors will need to ensure that the method in
which they choose to provide disclosures electronically will meet any required
communication, timing, verification or acknowledgment of receipt (if required), storage
and retention requirements.
ESIGN contains additional conditions on providing disclosures electronically, such

prohibiting oral consumer disclosures, except as otherwise provided under applicable
law. Additionally, ESIGN does not allow the consumer to consent to receive in
electronic form any notice of acceleration, repossession, foreclosure, eviction, or right to
cure relating to a credit contract secured by the consumer’s primary residence.
For compliance guidance on the electronic delivery and retention of consumer

disclosures, mortgage lenders should look to federal agency issuances, such as the interim
final rules (although they are not mandatory) amending Regulation B and Regulation Z
(as discussed below) and advisory letters issued by the Comptroller of the Currency on
Electronic Consumer Disclosures and Notices (AL 2004-11) and Electronic Record
Keeping (AL 2004-9).
Summary of the Board of Governors of the Federal Reserve System’s (FRB) Interim
Final Rules
In order to establish uniform standards for the electronic delivery of disclosures required
under Regulation Z (Truth in Lending) and Regulation B (Equal Credit Opportunity Act),
the FRB released interim final rules in 2001. Since then, the FRB has withdrawn the
mandatory compliance date on the interim final rules, but has subsequently advised that
compliance with the interim final rules will satisfy the statutory requirements for
consumer disclosures under ESIGN. Below is a summary of some of the provisions in
the interim final rules that may have applicability in a mortgage lending transaction.
Electronic Delivery Provisions within Regulation Z and Regulation B
Requirements for Electronic Communication

Legal
Regulation Z and Regulation B define “Electronic Communication” as a message

transmitted electronically between a creditor and consumer in a format that allows visual
text to be displayed on equipment, for example, a personal computer monitor. Generally,
a creditor may provide, by electronic communication, any disclosure required by
Regulation Z or Regulation B to be in writing. Before a creditor can provide such
disclosures electronically, a creditor is required to obtain a consumer’s affirmative
consent to receive such disclosures electronically pursuant to ESIGN.
For purposes of either Regulation Z or Regulation B, a consumer’s electronic address is

an e-mail address that is not limited to receiving communications transmitted solely by a
creditor. For consumer disclosures that require an ESIGN affirmative consent, a creditor
shall either (1) send the disclosure to consumer’s electronic address; or (2) make the
disclosure available at another location (i.e., Internet Web site) and alert the consumer of
disclosure’s availability through a notice sent to the consumer’s electronic address. In
either situation, the creditor is required to make the disclosure available for at least 90
days from the date disclosure first becomes available or from the date of the consumer
notice, whichever is later.
If an electronic disclosure is returned to creditor undelivered, the creditor is required to

take reasonable steps to redeliver the disclosure using information from its files. If the
regulation requires a consumer to sign or initial a particular disclosure, then an electronic
signature, as defined by ESIGN, would satisfy this requirement.
For disclosures provided on a creditor’s equipment (i.e., a computer terminal in creditor’s

lobby, ATM at a public kiosk, etc.), the creditor must ensure the equipment satisfies
requirements to provide timely disclosures in a clear and conspicuous format that
consumer may keep. For example, if disclosures are required at time of the on-line
transaction, the disclosures must be sent to consumer’s e-mail address or be made
available on an Internet Web site, unless the creditor provides a printer that automatically
prints the disclosures.
Applicability to Delivery of Regulation Z Disclosures
ESIGN Consent Required for Transaction-Specific Regulation Z Disclosures

With respect to ESIGN’s consent requirements, Regulation Z makes a distinction
between disclosures that relate and not relate to a transaction. For transaction-specific
disclosures required to be in writing (i.e., rescission notices), an affirmative ESIGN
consent is required from the consumer before the creditor can deliver such disclosures
electronically. However, certain disclosures are specifically not considered related to a
transaction (i.e., early adjustable rate mortgage (ARM) disclosures, early home equity
disclosures, credit advertisements, etc.). Such disclosures can be provided electronically
without the consumer’s affirmative ESIGN consent.
Early Home Equity and Early ARM Disclosures

With respect to early disclosures required by Regulation Z, a consumer must be able to
access the disclosures (including FRB’s home equity brochure, if applicable) at the time

Legal
the blank application or reply form is made available by electronic communication, such
as on a creditor’s Internet Web site. With respect to early home equity disclosures, a
creditor can provide these on a Web site using a link to prevent the applicant from
bypassing the disclosures before submitting the application. If a link is not used,
application or reply form must clearly and conspicuously refer the consumer to the fact
that rate, fee, and other cost information either precedes or follows the application or
reply form. As an alternative to a link, a creditor can provide the early home equity
disclosures by ensuring that the disclosures automatically appear on the computer screen
when the application or reply form appears. A creditor is not required to confirm that the
consumer has read the disclosures or the home equity brochure.
Notice of Right to Rescind

In any transaction or occurrence subject to rescission under Regulation Z, a creditor shall
deliver two copies of the notice of right to rescind to each consumer entitled to rescind
(one copy to each if the notice is delivered by electronic communication as provided in
12 C.F.R. §226.36(b)). If e-mail is used, the creditor can comply if one notice is sent to
each co-owner of the secured property. However, each co-owner must consent to receive
electronic disclosures and each must designate an electronic address for receiving the
disclosure.
Applicability to Delivery of Regulation B Disclosures
Regulation B Disclosures Given At Time of Application

With respect to Regulation B, if certain disclosures are provided on or with the loan
application, the disclosures are not subject to the affirmative consent requirement under
ESIGN. Common Regulation B disclosures that may be provided on or with the
electronic loan application without affirmative consumer consent are the notice of right to
receive a copy of the appraisal and the information requested for monitoring purposes.
If the creditor allows an applicant to apply on-line, the applicant must be required to
access any disclosure required at application before the consumer submits the application.
For example, a creditor can utilize a link to prevent the applicant from bypassing the
disclosures before submitting the application or a creditor can have the disclosures appear
automatically on the computer screen. In either case, the creditor is not required to
confirm that the applicant has read the disclosures.
Appraisals and Adverse Action

The commentary to Regulation B provides that disclosures provided by e-mail are timely
based on when the disclosures are sent. With respect to disclosures posted at an Internet
Web site, such as adverse action notices or copies of appraisals, disclosures are timely
when the creditor has (1) made the disclosures available on the Web site and (2) sent a
notice alerting the applicant that the disclosures have been posted. For example, under 12
C.F.R. § 202.9, a creditor must provide a notice of action taken within 30 days of
receiving a completed application. For an adverse action notice posted on the Internet, a
creditor must post the adverse action notice and notify the applicant of its availability
within 30 days of receiving the applicant’s completed application.

Legal
Conclusion
A legal infrastructure exists for creating valid and enforceable electronic loan obligations.
For residential loans, state and federal statutes validating electronic loan obligations must
be integrated with the existing myriad of laws governing mortgage lending. This
integration of technology provides new opportunities to ensure compliance with existing
law and provide more information to consumers. While this summary does not cover
every legal topic raised by eMortgage implementation, it provides a starting point for
discussion in institutions considering eMortgage-related projects. The SPeRS Handbook
provides a more detailed discussion of many of the points set forth this section.

Key Concepts
5 Key Concepts
The eMortgage framework and standards are based on key industry standard concepts
that allow the mortgage documents to be generated, transferred, signed, sealed,
registered, and stored electronically, eliminating the need for printing, imaging, shipping,
couriers, data re-entry, manual data certification, and other costly steps of today’s
mortgage processes.
This chapter provides a high level summary of the key building blocks that support the
eMortgage framework and standards. The following is a list of key concepts in this
chapter:
• MISMO XML Standards

• MISMO eDocument
• MISMO ePackage
• MERS® eRegistry
• Electronic Vault
• eSignature
The eMortgage framework and standards will continue to evolve together with the
mortgage industry and electronic commerce. Additional key concepts may be leveraged
to support the evolution to a completely paperless mortgage environment or more
efficient processes that reduce time, cost, and risks.
For more details, please visit the MISMO website at www.mismo.org.

MISMO XML Data Standards
5.1 MISMO XML Data Standards
MISMO was founded in 2000 to develop voluntary XML data standards for mortgage
industry transactions. These standard transactions greatly reduce the time and effort
required for business partners to create new data interfaces with each other.
XML (and closely related standards like XHTML and XML Digital Signature) was
chosen for several reasons:
• It is the standard language for describing data in e-commerce and Internet
applications
• It is extensible, allowing business partners to add their own custom data elements
to a standard transaction without “breaking” the standard
• It is low-cost – many XML tools and utilities are free or nearly free, and even
commercial tools cost far less than (for example) data mapping tools for the ASC
X12 standard of the Accredited Standards Committee.
MISMO consists of both process-area workgroups for specific mortgage process area
transactions and centralized workgroups whose work spans all of the various process
areas.
MISMO has developed a Logical Data Dictionary (LDD) which now holds over 3,500
unique data tags. All of the MISMO process-area workgroups, which develop
transactions for specific business process areas like Origination, Underwriting, Tax, Title,
Flood, and more, share the same common pool of data elements defined in the LDD.
This ensures that a specific data element will have the same agreed-upon definition in
every MISMO transaction that uses it.
The LDD is maintained by the Core Data workgroup (“Core Data”), which reviews all
new or updated process-area transactions. Core Data reconciles these transactions against
the LDD, and ensures that existing data elements are re-used wherever possible, rather
than introducing a new data element that has a similar or overlapping meaning.
The Architecture workgroup and its Core Structures subgroup maintain architectural
consistency for all of the MISMO transactions, by making decisions on overarching
issues such as the move from XML DTD (Document Type Definition) to XML Schema.
The eMortgage Workgroup operates cooperatively with all of the MISMO process-area
workgroups, and Core Data and Architecture, to develop voluntary guidelines,
specifications, and XML transactions which enable a fully paperless electronic mortgage
process, from application through delivery to secondary market investors and loan
servicing. The eMortgage Workgroup builds on the MISMO process-area DTDs, like
the Closing DTD, adding the data elements and structure necessary to support SMART
Doc™ implementations of the many paper forms and documents that make up the loan
package.

MISMO XML Data Standards
The eMortgage Workgroup has published a number of documents to provide an

implementation framework for eMortgages, including:
• SMART Doc™ Specification

• SMART Doc™ XML DTDs
• SMART Doc™ Implementation Guide
• ePackaging Specification
• ePackaging Implementation Guide
• eMessaging Specification
• eMessaging Implementation Guide
• Electronic Vault Implementation Guide
MISMO also has close relationships and alliance agreements with other related industry
groups, including:
• ALTA (American Land Title Association, www.alta.org)

• PRIA (Property Records Industry Association, www.pria.us)
• SPeRS (Standards and Procedures for electronic Records and Signatures,
www.spers.org)
• SISAC (Secure Identity Services Accreditation Corporation, www.sisac.org), a
wholly owned not-for-profit subsidiary of the Mortgage Bankers Association
• Appraisal Institute
• NAR (National Association of Realtors, www.realtor.org)
• CMSA (Commercial Mortgage Securities Association, www.cmbs.org)
Simplified MISMO Organization

eDocs Concept
5.2 eDocs Concept
Introduction
An electronic document (eDoc) is intended to provide an equivalent to a paper document

without a need for printing. The desire for a paperless environment has been a key driver
in the evolution of the eDoc formats from imaging to electronic records. Legislatively,
ESIGN and UETA similarly define an electronic record as a record "created, generated,
sent, communicated, received, or stored by electronic means."
Evolution
The current origination processes involve electronic generation of loan documents and
printing them on paper for borrowers to sign. Unfortunately, most of the paper
documents are manually shipped back, typically imaged, indexed, stored in electronic
document repositories, and exchanged after origination. Because executed documents are
imaged, electronically exchanged data needs to be certified against the data on the
documents. Thus, while imaging can provide significant benefits, manual processes and
physical shipping are still required.
The MISMO eMortgage standards create the foundation for moving these processes to
the next level – a completely paperless processing environment. The eDocs are
generated, transferred, signed, sealed, registered, and stored electronically without a need
for printing and imaging. The benefits ultimately include elimination of manual
shipping, courier expense, data re-entry, data certification, and many other manual steps
throughout the mortgage process. The data in the electronic documents can be trusted
because the documents are electronically sealed to provide evidence of tampering.
Key Points
The MISMO eMortgage Guidelines and Specifications include electronic document

format guidelines that support the industry’s evolutionary progress from imaging to
electronic records and assist the industry in achieving incremental benefits along the way.
The guidelines are focused on five key SMART™ document format characteristics which
are Securable, Manageable, Archivable, Retrievable, and Transferable, thus creating a
SMARTTM electronic document. The guidelines also include the following document
format requirements:
• Information describing the document.

• Visual representation of the document.
• Data embedded in the document.
• Transparent linking of the data and visual representation.
• Electronic signatures in the document.
• Tamper-evident security in the document.

eDocs Concept
• Audit trail of changes in the document.
MISMO electronic document standards include the MISMO SMART Doc™

Specification. This format supports XHTML, SVG, and other visual representation
formats within an XML document framework. The SMART Doc specification allows
electronic documents to be created as image only, data only, or image coupled with data.
The SMART Doc Specification and Implementation Guide are published on
www.mismo.org.
MISMO electronic document standards also support the PDF standard. The standard is a
proprietary, open standard: proprietary, in the sense that it is copyrighted and controlled
by Adobe; but open in the sense that anyone may implement software that creates,
manipulates or reads PDF documents. There are many products, both commercial and
open-source, that implement the PDF standard to create and manipulate PDF formatted
documents. The PDF standard has evolved through several versions, the latest being
PDF Version 1.6. PDF documents are ‘final-form’ documents that can be thought of as
‘electronic paper:’ PDF documents are rendered the same on all computer platforms and
on paper. Thus a PDF document displayed on a computer screen is identical to a printed
paper copy of the document: fonts, line breaks, paragraph breaks, page breaks are the
same. Consistent rendering is important for legal and records reasons.
Today, PDF is already a de-facto standard electronic document format and widely
adopted across the financial industry and the government sectors in the United States. In
the mortgage industry, PDF is currently used to deliver electronic documents to the
closing agent for printing. PDF is also used for electronically signed appraisal
documents, preliminary title commitments, disclosures, and other mortgage related
documents. PDF supports all of the key document format requirements (above),
including the use of MISMO and PRIA XML data standards within a PDF document.
The specification is publicly available at
http://partners.adobe.com/public/developer/pdf/index_reference.html
Conclusion
In summary, the MISMO eDoc standards provide tremendous business value because the
data is part of the electronic document and can be processed electronically; documents
built on the standards can be electronically signed, tamper-evident seals can provide
greater integrity to the documents, and the eDocs can be registered electronically.
Therefore, the manual data re-entry and certification processes can be eliminated and
replaced with automated processes.
Usability, simplicity, and low cost of electronic document formats will drive their
adoption as long as the legal and operational requirements are satisfied. Today, the
mortgage industry widely uses PDFs and is adopting XHTML SMART Doc™ forms as
well as XML-enabled PDF documents. These formats may continue to dominate
electronic documents adoption going forward.

eDocs Concept
References:
• U.S. Courts - Electronic Case Files
http://www.uscourts.gov/cmecf/cmecf_about.html
http://pacer.psc.uscourts.gov/cmecf/developer/bkforms/DEfaq.pdf
• The Government Paperwork Elimination Act
http://www.archives.gov/records-mgmt/policy/electronic-signature-technology.html
• The National Archives - Permanent Electronic Records
http://www.archives.gov/records-mgmt/initiatives/pdf-records.html
• The United Nations – eDoc Standards
http://www.unece.org/etrades/unedocs/referenceimpl_ac.htm

eSignature Concept
5.3 eSignature Concept
Introduction
An electronic signature (eSignature) is intended to provide an equivalent to the “wet

signature” traditionally used to sign paper documents. ESIGN and UETA define an
electronic signature as an electronic sound, symbol, or process attached to or logically
associated with a record and executed or adopted by a person with the intent to sign the
record.
Key Points
We already use eSignatures in our daily lives when we shop on the Internet or buy
groceries in a store. The following are the most common types of eSignatures that are
used today.
• Click-through signature: Click on the “I agree” button or other similar process

resulting in an electronic symbol
o We use it to buy stocks or order goods on the Internet. We also use it as
part of our internal business and human resources processes.
• Handwritten electronic signature: Image of a handwritten signature (also
known as a holographic signature)
o Many retail stores have adopted it to sign credit card receipts. Also, some
Motor Vehicle Departments affix an image of your signature on your
driver’s license.
• Digital signature: Created by generating a unique numerical (hash) value of the
document and encrypting it with the private key of the signer
o Computer systems use digital signatures for secure communication
processes. Digital signatures may also be used for consumer transactions,
and consumer adoption may increase over time based on usability, cost,
and other factors.
Any eSignature method is appropriate for electronic mortgage transactions as long as it is

compliant with the rules and policies appropriate for that transaction. SPeRS,
government agencies, and other entities have provided eSignature guidance since the
passing of the UETA and ESIGN legislation.
The following is a very high-level summary of SPeRS standards that provides basic
compliance guidance:
• Authentication & Authority: Relationship and credentials.

o Examples:
Notaries perform an independent authentication process during the closing
process because they review a signer's credentials such as a driver's license and

eSignature Concept
screen signers for willingness and awareness. The notary processes also may
include a journal to record the notary transaction.
In addition, user ID and password or other confidential details are recommended
to complete the authentication steps and create a more secure eSignature
environment.
• Consent to Use Electronic Records and Signatures
o Obtaining the borrower’s affirmative consent to use electronic records and
signatures.
o Providing the ESIGN Consumer Consent Process disclosures.
o Strategies for meeting the ESIGN “reasonable demonstration”
requirement.
• Agreements, Notices and Disclosures
o Principles for delivering, displaying and presenting records and
information.
o Acknowledging access and delivery.
o Indicating agreement to notices and disclosures.
o Methods of displaying notices and disclosures.
• Electronic Signatures
o Establishing intent to sign.
o Associating an electronic signature with a record.
o Attributing a signature: Process or signature that associates signer’s
identity with the signature.
• Record Retention
o Compliance with federal, state, investor, and other requirements.
ESIGN and UETA do not specify what the eSignature should look like or what
technology to use. However, the ESIGN and UETA electronic signature definitions are
focused on three types of signature formats: process, symbol, and sound. From a
technical point of view, all electronic signatures require a process and must result in an
electronic symbol or sound that is logically associated with the electronic record or
embedded in the electronic record. This is the same for the digital signatures,
handwritten signatures, “click-through,” or others because a valid symbol or sound
cannot be created without an appropriate process at least internally to a system that
generates or adds the symbol or sound. In addition, all eSignature methods must have an
appropriate authentication process. The same eSignature method may have a stronger or
weaker authentication process based on needs and procedures. Digital certificates or user
IDs for “click-through” can be issued with varying levels of data and verification of
credentials based on needs and procedures.
The original SPeRS comparison on eSignature methods intentionally excluded

authentication steps, instead discussing authentication in a separate section. This,
however, should not be interpreted to mean that public key infrastructure (PKI) is the
only secure and acceptable solution, because the authentication step is a requirement for
any type of eSignature method. The level of authentication may depend on security
requirements and may vary across different transaction types.

eSignature Concept
Conclusion
Usability, simplicity, and cost of eSignature methods will drive their adoption as long as
security and legal requirements are satisfied. Today, we use click-through on the Internet
and electronically handwritten signatures in stores. These methods may continue to
dominate electronic transactions going forward.
References:
• U.S. Department of Education. Standards for electronic signatures in electronic student loan transactions.
www.ifap.ed.gov/dpcletters/attachments/gen0106Arevised.pdf
• SPeRS: Standards and Procedures for Electronic Records and Signatures. v1. 2003

MISMO ePackage Concept
5.4 MISMO ePackage Concept
The MISMO ePackaging specification provides a flexible yet simple mechanism to

collect a set of files (typically electronic documents like SMART Documents). The
ePackage may then be used for a variety of purposes like storage, transport, and more. It
does not provide for messaging aspects such as addressing and receipt confirmation but is
only concerned with bundling multiple files together in a consistent fashion.
The ePackage supports SMART Documents of any level as well as other electronic
documents and data files (for example, PDF, DTD, MS Word, TIFF). Thus, an ePackage
that is exchanged between business partners might contain a partial set of documents or a
completed file with signed loan documents.
Specific methods of encryption and compression have not been mandated; these
decisions are left up to the trading partners. However, the MISMO Information Security
Workgroup is developing recommendations for security-related technology
implementations. The choice of messaging technologies is left open; implementers may
choose to use the MISMO eMessaging Request/Response standard, or other technologies
like SOAP or an existing messaging backbone.
ePackages are recursive – they may be nested to form a “package of packages” when
needed.
The ePackage specification provides customizable metadata elements to allow business

partners to add as much custom descriptive data as desired.
After an ePackage has been filled with the desired files or eDocuments, it can be “signed
and sealed” using a tamper-evident signature, which allows a recipient of the ePackage to
verify its integrity upon receipt.
To learn more about the MISMO ePackage concept, you should obtain a copy of the
ePackaging Implementation Guide by visiting www.mismo.org and clicking on the
“eMortgage Guidelines and Recommendations” link.

MERS® eRegistry Concept
5.5 MERS® eRegistry Concept
Introduction
Mortgage Electronic Registration Systems, Inc. (MERS) is a mortgage industry utility

that eliminates the need to prepare and record assignments of mortgages when trading
mortgage loans. Borrowers name MERS as mortgagee and nominee for the lender on
deeds of trust and mortgages that are recorded in the public land records. Lenders then
register the loans on the MERS® System and electronically track changes in servicing and
investor ownership rights over the life of the loan.
MERS also operates the MERS® eRegistry, which is the system of record for the
mortgage industry to identify the current Controller (holder) and Location (custodian) of
the Authoritative Copy of eNotes.
Assumptions
The following discussion assumes that:

• Proprietary electronic custodial repositories (Electronic Vaults) will exist to store
eNotes.
• When an eNote is sold, the electronic file may be transferred from the seller’s
electronic vault to the buyer’s (or it may remain in place, if the buyer and seller
have a business relationship that allows for that).
• Any electronic copy of an eNote is identical to any other – since they are simply
bit-for-bit copies of computer files; no one copy of an eNote can contain data that
would identify it as the Authoritative Copy (the electronic equivalent of the paper
copy with the wet ink signatures).
Key Points
The concept of the MERS® eRegistry resulted from the need to centralize ownership
rights of eNotes in an evolving industry infrastructure for eMortgages. Other mature
industries have adopted registries to provide a system of record for ownership rights.
Perhaps the best known example is the Depository Trust and Clearing Corporation for the
securities industry.
Therefore, some external mechanism is required to resolve the question of which of the
(potentially many) copies of an eNote is the Authoritative Copy. The assurance of this
external mechanism will be required by secondary market investors for them to accept
delivery of eNotes.
Based on this need, the MERS® eRegistry allows eNotes to be registered and uniquely
identified for tracking and verification. It stores information on the Controller and

MERS® eRegistry Concept
Location of the Authoritative Copy of the eNote. The MERS® eRegistry does not store
the actual eNote but only identifying information about it.
Conclusion
To make use of the MERS® eRegistry, you must be a member of MERS and you must
integrate your business process and technology environments with the MERS® eRegistry.
For more information about MERS and the MERS® eRegistry, visit www.mersinc.org
and click on the MERS® eRegistry tab.

eDoc Delivery Concept
5.6 eDoc Delivery Concept
Introduction
Trading partners of eMortgages have expressed a need to have a consistent interface and
process for transporting eDocuments from one company to another. Since MISMO
standards have already been developed and approved for the Transfer Request and
Response messages and the Envelope & Packaging Specification, the mortgage industry
can cost effectively leverage these standards for transporting eDocuments from one
company to another.
A standard eDocument delivery process should greatly reduce the amount of time
required for aggregators to integrate eMortgage technology and business processes with
their brokers and correspondents since all parties can adopt the same standard services
rather than attempt to integrate with multiple proprietary services. Similarly, the time
and expense associated with integrating eMortgages between aggregators and secondary
market investors would also be streamlined.
Current Process
The following process flow diagram illustrates from a mortgage aggregator’s perspective
the complexities today associated with maintaining multiple proprietary interfaces for
acquiring eMortgages from brokers and correspondents, and delivering eMortgages into
the secondary market.

The following process flow diagram illustrates the reduced complexity from the
aggregator’s perspective assuming the integration of standard, nonproprietary interfaces
and the role of an industry utility (secure hub) to manage a common, secure and cost
effective set of communication protocols.

Conclusion
Trading partners of eMortgages can significantly enhance their adoption rate without the
cost and complexity of maintaining multiple proprietary interfaces by implementing the
MISMO Transfer Request and Response messages and the Envelope & Packaging
Specification, for delivering eDocuments. This solution is enhanced through the role of a
secure hub to manage a common set of communication protocols. In its role as the
industry’s solution for the national eNote registry, the MERS® eRegistry is providing the
role of a hub through its MERS® eDelivery service.
For more information, please see the MERS® eDelivery Business Design Specification
which can be found at www.mersinc.org under the “MERS® eRegistry” tab.

Electronic Vault Concept
5.7 Electronic Vault Concept
Introduction
The term “electronic vault” is typically used in the mortgage industry today to describe
where electronic documents are stored for safekeeping. However, to date, there is no
comprehensive and authoritative source that defines requirements and responsibilities for
implementing and operating an electronic vault on the behalf of lenders, warehouse
lenders, or investors.
To provide information and guidance for evaluating, implementing, and relying on

electronic vaults for storing electronic documents, MISMO has published the Electronic
Vault I-Guide.
Key Points
The transition from paper to a completely electronic mortgage process using electronic
security instruments and other closing documents will no doubt take some time. During
the transition period, custodians will be required to handle paper documents as well as
electronic ones.
After developing your requirements from a review of all available information sources,
you should review your requirements with your investors to confirm that they are
appropriate and comply with each investor’s requirements for delivering and storing
eNotes. Investor requirements will continue to evolve as the investors gain more
experience with purchasing eNotes.
If your investor has not yet integrated its eMortgage delivery systems with the MERS®
eRegistry, you should ask them if that is their intent and when you might expect them to
be ready. The business process and technical requirements for delivering eNotes to an
investor’s proprietary registry will change when that investor integrates with the MERS®
eRegistry.
Finally, in lieu of any instructions to the contrary, you should expect that the provider of
electronic vaulting services is subject to the same requirements that Ginnie Mae, Fannie
Mae, Freddie Mac and other investors have stipulated for the holding of paper notes.
However, as of the publication date of this document, the Document Custody Committee
of the MBA is working with Ginnie Mae, Fannie Mae, and Freddie Mac on
recommendations for eVerification requirements for eNotes, which will provide clearer
direction on the entities’ requirements for certifying eNotes.
To learn more about the electronic vault concept, you should obtain a copy of the
Electronic Vault I-Guide by visiting www.mismo.org and clicking on the “eMortgage
Guidelines and Recommendations” link.

Industry Processes
6 Industry Processes
The mortgage industry continues to evolve to an electronic mortgage environment
because of more efficient processes reducing time, cost, and risks. The eMortgage
processes involve the borrowers, lenders, title companies, county recorders, document
custodians, investors, and other key participants across origination, secondary marketing,
and servicing.
eDocs: MISMO electronic document Legal eDocs eRecording: The act of registering the
standards for the mortgage industry (Land records, security instrument electronically with the
(separating data and the view/image). tax liens, other county recorder or similar jurisdictional
docs/affidavits) authority.
eRecording Servicing
External
Docs
eOrigination & Doc Prep Secondary,

eClosing
Underwriting eDocs Investor
eDocuments
eSignatures
Service
Ordering: eNotarization Electronic Electronic
Credit Vault Vault
Flood Borrower(s)
Hazard & other
Title eNote Data, Messaging & Control
MI
MERS eRegistry
(National eNote Registry)
Electronic Vault: A secure, electronic repository

of eNotes and other documents. Similar to a paper eRegistry: A system of record that identifies
vault run by the document custodian industry today. the owner (controller) and custodian (location) for
registered eNotes.
The evolution to eMortgages can be approached in many different ways. The goal of this
chapter is to provide a high level overview of general industry processes based on the key
concepts and acceptable guidelines. The following is a list of the processes summarized
in this chapter:
• eDisclosure
• eCredit Report
• eAppraisal
• Electronic Flood Determination and Insurance
• eNote
• eSecurityInstrument
• eTitle Report and Insurance
• eClosing
• eNotary
• eRecording

Industry Processes
• eDoc Custody
• eLien Release
• Fraud Prevention
The open industry standards allow the participants to move forward with eMortgages,
take advantage of more efficient processes, and achieve the potential benefits. The
process summaries help to get started with eMortgages leveraging general industry
acceptable guidelines and recommendations without getting into internal processes,
business logic, algorithms, or other proprietary details.

eDisclosure Processes
6.1 eDisclosure Processes
Introduction
ESIGN, UETA, and other rules of law facilitate the use of electronic records and
signatures in many contexts where paper records and traditional signatures are otherwise
required.
This section illustrates a sample business process for the electronic delivery of legally-
required disclosures (eDisclosures) to consumer borrowers via a Web site and provides
references to applicable SPeRS standards for more particular guidance and additional
strategies for delivering eDisclosures in compliance with ESIGN and UETA. The
business process illustrated is not the only process that is suitable for providing
eDisclosures to borrowers.
The sample business process is independent of any particular document format, but
MISMO recommends the SMART™ Document format wherever applicable.
Sample eDisclosure Business Process Model
Recommendations
The titles of the following sections match the names of steps in the eDisclosure business
process model shown above; each section provides information related to one step in the
process.
Step: Invite Borrower to Receive Disclosures

Invitations to borrowers to receive eDisclosures can be provided through several
methods, including at the initial in-person interview, during a telephone discussion with

the borrower, or via e-mail. Lenders should carefully consider whether or not to send
confidential information via e-mail, and the utmost care should be taken to properly
authenticate the borrower before providing the borrower with a method of accessing the
eDisclosure delivery system.
Sample invitation sent by e-mail:
Welcome to Real Mortgage eDisclosure electronic delivery service. Your eDisclosure

package with important information about your mortgage loan application is available for
you to review.
Following the instructions below, please download and review your eDisclosure package.
The eDisclosure package is set to expire on: 2005-05-09 09:19 EST (3 business days
from the time it was sent to you). If the eDisclosure package expires before you have
accessed them, you will need to call your loan officer at (800) xxx-xxxx for a new
document package to be generated. If you download these documents within the time
allowed, they will remain accessible through the link for 90 days.
HOW TO PICK UP YOUR PACKAGE
Click on the following Web address:
https://real.mortgage.com/45340256
You will be taken to a secure web site.
Internet Explorer and Netscape Navigator provide a padlock icon (near the lower right
corner of the browser window) that can be used to verify the identity of a secure web site.
To confirm the authenticity of this message, double-click on the padlock and verify that
the site certificate was issued to real.mortgage.com.
After clicking the link, you will be asked to answer a question in order to authenticate
yourself. If you do not remember the answer to your question, please click on the
“Forgot Your Password?” link.
After you successfully answer the authentication question, you will be presented with
your eDisclosure package. You will need Adobe® Reader® to access your documents.
If you do not have Adobe Reader installed on your computer, please click on the Adobe
Reader link to install the software on your computer. Once opened, please follow the
instructions on the cover letter of the document package.
Thank you for using Real Mortgage eDisclosure Document Delivery System. For
technical support, please call (800) ###-####.
Adobe and Adobe Reader are trademarks or registered trademarks of Adobe Systems,
Inc.
Note:
• Lenders may wish to require answers to more than one question.
Step: Log in to Disclosure Delivery Site

Since disclosure documents may contain confidential information, eDisclosure systems

must ensure that eDisclosures are accessible only to authorized authenticated parties.
Lenders may wish to require that multiple authentication methods be used in combination
(“two-factor authentication”).
Sample authentication methods:
a. Challenge borrower to supply a predetermined password, blocking account access

after three consecutive failures to log in.
b. Challenge borrower to answer several questions based on information that only
the borrower would be expected to know—for example, the borrower’s pet’s
name, favorite color, and favorite sports team. (While someone other than the
intended recipient might know the answer to one of these questions, it is unlikely
that anyone else would know the answers to all of them.)
c. Challenge the borrower to provide information that can be verified against a third
party database, such as a portion—not all—of the borrower’s Social Security
number.
d. Require the borrower to use a hardware device, such as a USB token, to access
the eDisclosure system.
See SPeRS Standards 1-2, 1-3, and 1-4.
Step: ESIGN Consent

Consumers are not required to accept eDisclosures, although lenders may make
eDisclosures a requirement of doing business with them. However, before federally-
required written disclosures can be delivered electronically, lenders providing the
eDisclosures must provide the borrower with certain legal disclosures (see Legal Section)
describing their online practices, and must obtain the borrower’s consent to receive the
eDisclosures prior to sending such eDisclosures.

Sample consent process:
If you want Real Mortgage eDisclosure to send you your mortgage loan disclosure documents
electronically (eDisclosures) you must read and agree to the following:
You have the right to receive the eDisclosures listed below in writing on paper. If you wish to
receive them in writing on paper please call us at 513-999-8787, write us at Real Mortgage
eDisclosure c/o Loan Agent, 123 Main St., Cincinnati, OH, 55555 or e-mail us at
loanagent@realmortgagecorporation.com.
You have the right, without any cost, to withdraw your consent to receive the eDisclosures by
calling us at 513-999-8787, writing us at Real Mortgage eDisclosure c/o Loan Agent, 123 Main
St., Cincinnati, OH, 55555 or e-mailing us at loanagent@realmortgagecorporation.com. If you
withdraw your consent before we have provided you with the eDisclosures, the processing of your
loan request may take additional time as we transition to paper.
This consent applies to the following eDisclosures for this mortgage loan only:
SAMPLE
Uniform Residential Loan Application
Good Faith Estimate
Truth in Lending Disclosure
Borrowers Certification and Authorization
Gift Letter
Request for Copy of Tax Return
To access these eDisclosures, you must have a computer with an Internet connection, a Web
browser, and a functioning copy of Adobe® Reader® version 7.0 or above. If you do not have a
ONLY
copy of Adobe Reader, please click here to download a copy. Click here for Adobe Reader’s
hardware requirements. To save a copy of these disclosures, you must have an electronic storage
device such as a hard drive, floppy disk, or USB drive. To print a copy of these disclosures, you
must have a computer printer attached to your computer.
For any future mortgage loan with us we will have to obtain your consent again. If your e-mail
address (username@domain.com) changes, notify us by sending us an e-mail at
loanagent@realmortgagecorporation.com, calling us at 513-999-8787 or writing us at Real
Mortgage eDisclosure c/o Loan Agent, 123 Main St., Cincinnati, OH, 55555.
Clicking on the "I CONSENT" button below indicates your acknowledgement and agreement to
the following:
1. I consent to use of eDisclosures in place of written paper documents.

2. I am able to view this consent. I am also able to download and review files in Adobe Reader.
3. I have an account with an Internet service provider and I am able to send e-mail and receive e-
mail with hyperlinks to Web sites.
4. If applicable, I am consenting on behalf of all other co-borrowers. I am authorized to consent
on their behalf.
If you do not click the "I CONSENT" button then we cannot send you the mortgage loan
eDisclosures electronically; instead, we will have to deliver them to you on paper.
[I CONSENT] [CANCEL]
Adobe and Adobe Reader are trademarks or registered trademarks of Adobe Systems, Inc.

Note:
• The list of eDisclosures shown in this example is for illustration only; the
actual disclosures sent may vary.
The Loan Agent should be notified if the borrower does not consent to eDisclosures to
ensure that the borrower obtains paper copies of the disclosures within the time period
required by applicable legal requirements.
Sample notification email:
Regarding the following loan, the borrower has not consented to eDisclosures. Please print and
send a Customer Correspondence Package by FedEx today.
Loan Number: 12345

Property Address: 123 Main St. / Cincinnati, OH
See SPeRS Standards 2-1 through 2-3.
Step: Demonstration of Access

Under ESIGN and certain state enactments of the UETA, a borrower’s consent to receive
eDisclosures electronically is contingent on the borrower’s ability to reasonably
demonstrate the capacity to access the information (in this case the eDisclosures) in the
format to be used by the lender for delivery. The borrower should reasonably
demonstrate an ability to access the eDisclosure in both the method (e.g., e-mail, Web
page, etc.) and format (e.g., PDF, WORD, ASCII, HTML, etc.) used. (This is often
referred to as the “reasonable demonstration test.”) If the process does not in some way
reasonably demonstrate the borrower’s ability to access information sent electronically,
the consent may not be legally effective and the information sent (the eDisclosures) may
be deemed not to have been delivered.
One approach for reasonably demonstrating the ability to access information in a

particular electronic format is to deliver the consent to eDisclosures through the use of a
unique, unpublished URL (Web address) and asking the borrower to use the link to
review the content and acknowledge receipt. Accessing the URL and acknowledging
receipt of the content should reasonably demonstrate that the borrower is capable of
accessing the eDisclosures (so long as the eDisclosures are delivered through the same
process).
Another approach is to ask the borrower to acknowledge demonstration of access by

demonstrating an ability to use the formats provided. For example, if PDF format were
to be used, the lender could confirm that the borrower had software capable of displaying
PDF files by sending the borrower a link to a test PDF document (or by providing a test
PDF file on the Web site). The borrower would then click on the link to view the PDF
file in which a message would appear. The borrower would then enter the message on
the consent form. The communication of the message would demonstrate that the
borrower could access PDF documents.

See SPeRS Standards 2-6 and 3-5.
Step: Present Disclosures

Rules of law sometimes dictate that certain information must be displayed in a “clear and
conspicuous” manner, which has generally been defined as being: 1) reasonably
understandable; and 2) designed to call attention to the information that is being
disclosed. Other rules of law may require that disclosures be provided in a particular
format. For example, a rule of law might require that a lender present certain information
in 12-point bold type.
Lenders must consider these requirements when providing eDisclosures to borrowers.

Lenders can use a variety of tools to ensure that clear and conspicuous and formatting
requirements are satisfied, including using hyperlinks, dialog boxes and other tools and
visual cues to ensure that the information in the eDisclosures is being effectively
displayed.
See SPeRS Standards 3-1, 3-2, 3-6, and 5-5.
Step: Save or Print Disclosures

eDisclosures must be provided in a format that may be retained by the borrower for later
reference, and lenders must not do anything to prevent borrowers from saving or printing
eDisclosures.
The eDisclosure process should make clear to borrowers that they can retain or print
eDisclosures for later reference and should explain how to retain or to print disclosures.
eDisclosures should remain available to borrowers for at least 90 days.
See SPeRS Standards 3-1, 3-2, and 3-3.
Step: Notify Lender if Disclosures Not Accessed

A Web-based eDisclosure process should be able to notify the sending Loan Agent if
eDisclosures have not been accessed within a certain amount of time. If a borrower has
not consented to receive eDisclosures and demonstrated the ability to access information
in the format used for the eDisclosures, then the eDisclosures may be deemed not to have
been delivered, regardless of the time at which an invitation to receive the eDisclosures
was sent.
Sample notification e-mail:
Regarding the following loan, eDisclosure documents have not been accessed. Please
contact the borrower immediately and, if necessary, send a Customer Correspondence
Package by FedEx today.
Loan Number: 12345


Step: Withdraw Disclosures if Not Accessed

If eDisclosures have not been accessed within a reasonable amount of time (as defined by
the lender and applicable rules of law), the lender may want to withdraw the invitation
sent to the borrower. Accordingly, an eDisclosure system may provide some support for
withdrawing invitations.
Sample notification e-mail:
Regarding the following loan, eDisclosure documents have not been accessed, and the
borrower’s invitation to access disclosures electronically has been withdrawn. Please
contact the borrower and send a Customer Correspondence Package by FedEx today.
Loan Number: 12345

System-Level Requirements
Systems should meet a number of requirements that are not specifically related to a step
in the eDisclosure process. For example, appropriate physical, network, hardware, and
software controls must be used to protect confidential information. Companies also
should collect information necessary to demonstrate: 1) that a borrower consented to the
use of eDisclosures; and 2) when and how the borrower accessed eDisclosures.
Furthermore, in order to ensure that eDisclosures are legally effective, they need to meet
ESIGN record retention requirements, including that the eDisclosures be in a form that is
capable of being retained and accurately reproduced for later reference by all parties or
persons who are entitled to retain the eDisclosure. Finally, companies who use an
eDisclosure service provider should use due diligence in selecting a provider and in
continuing oversight of that provider’s activities.
See SPeRS Standards 5-1, 5-2, 5-5, and 5-6.
Conclusion
ESIGN, UETA, and other rules of law facilitate the use of electronic records and
signatures in many contexts where paper records and traditional signatures are otherwise
required, including the electronic delivery of legally required disclosures.
This section illustrates a sample business process for the electronic delivery of
disclosures (“eDisclosures”) to consumer borrowers and provides references to applicable
SPeRS standards for more particular guidance and additional strategies for delivering
eDisclosures in compliance with ESIGN and UETA. The sample business process shown
is not the only process that is suitable for providing eDisclosures to borrowers.
References:
• SPeRS: Standards and Procedures for Electronic Records and Signatures. v1. 2003
http://www.spers.org

eCredit Report Processes
6.2 eCredit Report Processes
The credit report is one of the tools used by brokers and lenders early in the mortgage
process, which helps to determine what loan programs that the borrower may qualify for.
The credit report lists the past payment history of the borrower and can be used to help
determine the borrower’s likelihood of making timely mortgage payments in the future.
Electronic versions of credit reports have become more commonly used in the mortgage
industry in the last ten years. Earlier, the credit reports were requested by fax or mail or
were submitted over the phone. Today, credit requests are generally sent as electronic
transactions that use either proprietary or public data formats. In the last couple of years
particularly, the MISMO XML format has become the accepted standard among lenders
and credit bureaus.
Having a common data format for the credit request and response has many benefits for
the lender. Their use has allowed mortgage lenders to more easily choose credit
reporting services based on the best price, service and quality. Having data in a standard
format allows the lender to use more automation in the qualifying process and in
determining the loan programs that the borrower may qualify for. This automation has
significantly reduced the time to qualify and approve a borrower for a loan.
Transaction Parties
To understand the eCredit Report Process, it is first necessary to define the parties
involved in the credit reporting transactions.
Borrower
• This is individual or group of individuals who are applying for the mortgage loan
and will be responsible for repayment of the mortgage loan.
Lender
• For our purpose here, this is the institution that is processing the loan application.
It could also be a representative of a lending institution, such as a mortgage
broker.
Credit Bureau
• The agency that creates the credit report for the lender. They are also sometimes
referred to as the “credit reporting agency” (CRA) or the “credit vendor.”
• Advantage Credit, CBC, Chase Credit Systems, Equifax Mortgage Services,
Factual Data, First American Credco, FNIS Credit Services, LandAmerica Credit
Services, LandSafe, and The Credit Network (TCN) are examples of credit
bureaus.
Credit Data Repository

• The credit data repositories are the companies that collect, store, and report
financial credit data on individuals in the United States.
• Equifax, Experian, and Trans Union are the three primary credit data repositories.
Transaction Document Types

There are several types of electronic documents that are used in the eCredit Report
Process. The documents are listed in the order that they generally occur in the process.
Loan Application
This is the paper or electronic form contains information about the borrower that will be
used initially in the qualifying process. It also contains basic borrower information that
will be needed to request a credit report. The MISMO XML Loan Application format is
an electronic version of the mortgage loan application.
Credit Request
When a lender needs a credit report, their software will generate and transmit one credit
request to a Credit Bureau. The MISMO XML Credit Request can be generated by most
Loan Origination Software (LOS) systems that are used by lenders. There are other
electronic formats that are still used for the Credit Request data, but the MISMO XML
format has become accepted as the de facto standard. There are several “actions” that can
be requested. Here are the most commonly used types.
• Submit Request – used to ask for a new report.
• Reissue Request – used to ask for an additional copy of an original report.
• Upgrade Request – used to ask for additional Repository Data, or a more
comprehensive report (see Report Types under Credit Report Response).
• Update Request – used to ask for a corrected or more current balance or status
information than was presented in the original report.
Repository Request
When a Credit Bureau receives a credit request, they transform that data into one of the
proprietary Repository Request data formats that is needed to request the raw credit data
from one or more of the three national Credit Data Repositories.
Repository Response
The Credit Data Repositories return credit data in their proprietary data format back to
the credit vendor for further processing.
Credit Response
The Credit Bureau processes the Repository Response data, identifies duplicate data and
prepares a Credit Report Response, which usually consists of a MISMO XML Credit
Response and sometimes a printable/viewable format will be embedded within the XML
file. The printable/viewable format could be a plain text format, HTML or a PDF format.
Because the PDF file contains binary (non-displayable) characters, it is stored in a
Base64-encoded format when it is embedded within the MISMO XML Credit Response
file. The file can easily be compressed and encrypted for archival purposes.

There are several types of credit reports that can be returned. Here are the most common
types.
• Merged Report – the electronic files from one or more of the Credit Repositories
are “merged” into a single credit report. For mortgage credit reports, normally
data is requested from all three Credit Repositories.
• RMCR (Residential Mortgage Credit Report) – this is an enhanced credit product
that contains verified information and/or additional investigation.
• Supplement – this provided additional information that had been requested by the
lender in an Update Request (See Credit Request – above).
Credit Decision
After the lender reviews the borrower’s loan application, credit report data, plus any other
information used by the lender, a Credit Decision is returned to the borrower. There is no
formal data format for reporting the credit decision, but somehow the lender indicates to
the borrower whether or not their loan application has been approved, and what type of
loan programs they are eligible for.
Credit Reporting Process

The following is a quick overview of the credit reporting process. Most of the processes
today are totally electronic, using a variety of data formats.
1. The process of producing a credit report begins with the collection and storage of
the credit data. Lenders and other entities report payment history on their
accounts on a monthly basis to the Credit Data Repositories, which store the
credit data and provide the data back to credit bureaus, lenders and other entities
that have a valid purpose for requesting the credit data.
2. The next step in the process is for the Lender to request the borrower’s credit
report from a Credit Bureau.
3. The Credit Bureau generates requests for credit data from one or more of the
Credit Data Repositories.
4. The Credit Data Repository locates the credit file data that matches the name,
address, SSN, and date of birth data that was submitted in the Credit Request, and
returns the data to the Credit Bureau
5. The Credit Bureau identifies the data that may be duplicated among the data
returned from the Credit Data Repositories and then prepares the report type
requested by the lender in the data format they have requested.
6. The resulting Credit Report data is returned to the Lender who made the original
request and the data is reviewed either electronically or manually and a credit
decision is prepared.
The following diagram provides an overview of the transaction parties, transaction

document types and the overall credit reporting process.

REQUEST TRANSACTIONS TRANSACTION PARTIES RESPONSE TRANSACTIONS
BORROWER
LOAN APPLICATION CREDIT DECISION
LENDER
CREDIT REQUEST CREDIT RESPONSE

(MERGED)
CREDIT BUREAU
REPOSITORY REPOSITORY
REQUEST(S) RESPONSE(S)
EQUIFAX
EXPERIAN
TRANS UNION
Conclusion
The MISMO Credit Request and Credit Response transactions were first approved in
2000. Since the release of Version 2.x of the transactions in 2002, the MISMO credit
transactions have been widely adopted by Credit Bureaus and Lenders. Most Loan
Origination System (LOS) software in use today supports the MISMO credit reporting
formats.

e-Appraisal Processes
6.3 e-Appraisal Processes
Overview of the residential valuation work flow process

AT
There are a wide range of residential valuation work flow processes in the industry. This
overview attempts to address some key basics and fundamentals.
The appraisal or property valuation report is subject to appraisal guidelines and specific
requirements of different customers. In addition, there are various appraisal related forms
and report types. The intended use and complexity of the appraisal assignment usually
dictate the scope of content and supporting report format.
A lender’s internal business logic will vary according to the scope of overall transaction
risk. The valuation process appraisers employ to prepare a report are similar, however
the degree of scope and sequence may vary. The sources of data are typically from local
and national stakeholders. More than one source for the same type of data may be used
for a single report, depending on the accuracy, completeness, and timeliness of
information. Sources are both public and private.
Consumer: Consumers seldom order appraisals directly, though it does happen

occasionally in residential refinance transactions where the lender or mortgage broker
does not have a presence in an area. The consumer does have contact with the appraiser
because arrangements for access to the property must be made where interior inspections
are required as part of the appraisal process.
Customer: Customers are typically lenders and increased growth by third party service
providers or Vendor Management Companies that take responsibility for coordinating a
number of services for the lender, including credit reports, title services, flood
certifications and other business needs. They may own or subscribe to portals for
ordering and tracking bundled services.
Automated Valuation Model (AVM): AVMs are statistical type tools that calculate
alternate valuation estimates typically based algorithms tied to large data bases of
properties of sales data and property features. These industry specific tools are being used
more often by lenders dealing with a range of transaction risk business models and others
ordering appraisals prior to ordering a full appraisal report. Based on the customer’s
business logic for the particular lender, borrower, property and loan type, the need for a
full appraisal may be skipped and replaced by an AVM with various degrees of
validation.
Receive Order: Orders are received by mail, fax, phone, in person or electronically.
Log Order: Orders are entered into the appraiser’s record system, whether computer or a
paper-based order book.

Set Up Status Tracking: The appraiser begins a process that enables the customer, and
possibly the consumer, to track the status of the appraisal. In addition to acknowledging
receipt of the order the appraiser will contact the property owner to set an appointment to
inspect the property if that is a requirement of the valuation to be performed. Subsequent
updates may be by phone, fax, online access by the customer to the appraiser’s system, an
online update by the appraiser to the lender’s system, or by online reporting to an
Appraisal Management Company (AMC).
Data Compiling: The appraiser collects data from a number of public and private
sources. Some are from online sources, such as MLS, public records, property appraiser
or census databases. Other data may be found in the appraiser’s own files, through field
work, e.g. site inspections, interviews, or through printed materials such as manuals on
construction costs. No set sequence is required for all the data gathering tasks. A number
of factors may determine the sequence used for an individual report. Many appraisers
have their own unique preferences. Data is compiled, pertinent information is selected,
and data elements are entered into the appraiser’s process filing system towards the
development of the respective report. The appraiser may use checklists to capture the
relevant data, as well as other tools such as cameras, sketch pads, search reports, notes,
and document copies. The tools may be either physical or electronic. The data may also
be paper or digital.
Select Comparables: Regardless of the sequence of the data compilation comparable

sales are usually selected before a site inspection. The initial search for comparable sales
covers a wide range to identify all relevant sales within an acceptable time frame,
preferably the most recent six months. Based on the number of prospective sales that
match the criteria for time, location (distance from the subject property and comparable
communities), styles, features, price differentials, etc., the appraiser will attempt select
the most representative for field inspection.
Field Inspection: The appraiser makes an on-site inspection of both the subject property
and the comparable sales properties. This may be bypassed based on the terms of the
order if the customer’s business logic does not need an on site inspection. It may require
only an on-site, but not an interior inspection, thus allowing for an appraisal performed
on a drive-by basis without full verification of interior condition. In that event the lender
assumes and accepts more risk.
The appraiser may interview real estate brokers who work in the neighborhood of the
subject property or other related parties when additional verification is deemed
appropriate. The MLS™ usually provides information on recent sales, contract offers or
cancelled contracts that usually provides pertinent information to the appraisal process.
Field work includes personal documentation by the appraiser. Various types of checklists
are used for interior and exterior inspections of the subject property, as each may be
required. Photos are taken of the subject property and comparable sales properties. If
required, interior and exterior measurements are taken and notes written.

Analysis and Reconciliation of Data: Once the data is compiled the appraiser reconciles
it for completeness, accuracy, and apparent validity. Calculations are made, adjustments
entered and the components organized to complete the final report.
Complete Forms: Once everything is ready, the appraiser completes the necessary forms
required for the particular report. Reports are generated from a series of sub-forms. The
reporting format for most residential valuation services are usually forms provided by
Fannie Mae/Freddie Mac such as the URAR 1004. In addition it should contain the
Statement of Limiting Conditions and the Appraiser’s Certification sub-forms and
supporting addenda. Depending on the appraiser’s report format and the particular
request this may also include a: cover sheet; table of contents; photos of the subject
property and of the comparables; addenda for various maps and sketches of the floor plan
and building on the subject property. In addition to the report itself the appraiser will
include an invoice for the valuation service.
Status Tracking: Status tracking can be done in a number of ways, including by: lender
telephone call directly to appraiser; lender fax to appraiser; lender’s online system
updating with appraiser access; appraiser’s online system update with lender access to
appraiser’s system; or, third party Vendor Management Company (VMC) or Appraisal
Management Company (AMC) online system set up for the lender customer and
subcontractor appraiser vendor. Lenders benefit by using an AMC with one stop
shopping but at times have difficulty without the benefit of talking directly with the
appraiser when there is a property value issue, complaint, value appeal, etc.
Sign and Submit: Once the forms are completed the appraiser signs it and submits the
completed appraisal to the lender. Most lenders request appraisals be submitted
electronically rather than paper reports. Electronic delivery is either direct to the lender or
back through a third party provider such as an AMC or VMC. Third party services are
usually based on web services. Other options, however, include email, FTP and
HTTP(S).
Billing and Customer Support: While the submission completes the process of
producing and delivering an appraisal, it does not conclude the order process. Information
from the invoice is entered into the appraiser’s accounting system and becomes a
receivable pending payment by the lender. The lender may also have questions regarding
the appraisal and need to contact the appraiser for clarification, follow up information or
for other reasons.
Industry Specific Issues
Several industry segments are beginning to move towards the use of an AVM by an
appraiser for property valuation needs. This raises several questions. The primary
question is the method and extent of the interaction between the AVM and the appraiser.
What standards are applicable and appropriate in this instance? Many lenders are
reluctant to fully embrace AVMs as more than a decision-based tool, or as an adjunct to a
more robust appraisal performed by an appraiser. Conversely, many lenders are seeking

options in which enhanced speed and lower cost are the driving forces. What appears
inevitable in this space is the combination of both the advanced toolset represented by the
AVM, while maintaining the “touch” of the appraiser. While this industry specific fusion
is still in its nascent stages, both appraisers and lenders are exploring business processes
in which appraisers are enabled by AVMs to provide more accurate, low cost, and timely
valuation product.
AVM Standards
AVM standards have been at the forefront of discussion to focus on Standards of Use,
Testing, Confidence Scoring and Terminology.
Interactive AVMs
There are a number of AVM vendors who are developing products with a greater
interactivity component than has previously been available to users. Intended both as an
alternative valuation tool, these products typically allow a user to interact in the decision
process based on local market knowledge and experience, the relevant factors of
importance, including qualitative measures that current AVMs do not achieve.
Education
New forms education and communication between lender and appraiser will likely help
grow acceptance in the industry. Coursework and training development will permit a
greater understanding of the methodologies and techniques underlying the valuation
toolset that an AVM represents.
Lender Perspective
• Eliminate the need to print appraisal reports to be imaged later for loan delivery
and servicing files.
• Current appraisal processes are fragmented, time consuming and costly.
• Inefficient time and distant cost factors to conduct business between disparate
entities scattered throughout the country.
• Dramatic benefits would be achieved by having electronic standards for common
ways to manage work flows between lender and appraiser with data fields,
communication and reporting methods.
• Need to automate outdated manual processes.
e-Appraisal Overview
An electronic appraisal (e-Appraisal) is intended to provide the equivalent of a paper
based appraisal with the additional benefits of being able to be processed in a more
automated fashion. Paper based appraisals are complex, consist of multiple forms and
contain non-uniform data types such as photos, text, drawings and maps within the report.
Key Points

Appraisal XML Data: There are over 500 industry form types that can be used in an
appraisal report with literally thousands of data points. Because of this complexity, only a
core subset of the data points is part of the process. The core subset consist of all the
points on the major appraisal forms plus any data points on secondary type or minor
forms necessary for compliance, review and automation of the appraisal process.
Property XML Data: Included in the Appraisal XML data is the core Property XML
data used by every area in the loan process. By segmenting property data from valuation
data, it allows for easier, more efficient automated processing of the property specific
information.
Data-Centric Approach: All the proprietary electronic appraisal systems in use today
apply a form centric approach to transmitting appraisals electronically. Form centric
means that the data transmitted is based on the form. This limits the system to only being
able to transmit appraisal reports composed of forms it can handle. Most systems in use
today, can handle less than 40 of the 500 appraisal forms in use today. So they are very
limited, difficult and costly to expand when new forms are added or required by the
lending community.
The approach implemented for the e-Appraisal process was data-centric instead of form-
centric allowing the e-Appraisal process to handle all types of appraisal reports consisting
of any combination of forms without modification.
PDF Representation of Report: Because of the complexity of each appraisal report, a

PDF representation is used to visually reproduce an exact replica of the appraisal report
as it was created by the appraiser.
Appraisal Order Communications: The process of ordering and fulfilling and appraisal
order is an asynchronous transaction with intra-party communications conducted over
days and sometimes weeks. Much of the communications consists of order status updates.
These order status states have been standardized so order updates can be handled
electronically and managed on an exception basis.
Appraisal Workflow Sample Overview




Conclusion

Today’s appraisal process is fragmented, time consuming and costly. This is mainly due
to the time and distance cost factors inherent in conducting business between disparate
entities scattered throughout the country. A standard format for Appraisal Request,
Response, Status structures and communication platforms between entities can be
automated removing much of the costs and inefficiencies.
Standardization of the compliance and review process can also leverage automation
techniques to enhance reporting quality, reduce processing costs and duration.
By utilizing the core property data points originating in the loan process, accurate
information about a property can be built-up from all the process areas, culminating in a
highly detailed record that can be used in future financial transactions. These core
property data points truly create a paperless transaction as they are entered once at
origination and live thought out loan process through recording of the title at the county
office.
In the context of vertical standards efforts, data standards at their core represent
agreement. The agreement is one between individual firms – often, competitors – to use
a common format for data interchange. This agreement does not threaten any
competitive advantage held by these firms. Rather, competitiveness is enhanced by
reducing unnecessary complexity in an area common to all firms, allowing innovators to
concentrate on their core competencies. Put another way, when is the last time anyone
saw an advertisement promoting a firm’s ability to re-key data faster than their
competitors?

Flood Determination Processes
6.4 Flood Zone Determination and Insurance Processes
Introduction
When a structure is being offered as collateral for a loan, federal law requires lenders to
determine whether the structure is, or will be, located in a Special Flood Hazard Area. If
so, then the purchase of flood insurance coverage is mandatory. If not, lenders may use
their discretion as to requiring flood insurance.
Today, the process of actually making a flood zone determination is highly automated,
thanks to Geographic Information Systems and other technologies. In contrast, the
process by which lenders, insurance companies and insurance agents obtain these
determinations from their flood data vendors is less universally evolved. Some order their
determinations by fax or phone, while a great many others submit and receive their orders
electronically. However, even using a primarily electronic process, the steps can be
cumbersome and may still involve printing, imaging, copying and filing paper flood zone
determinations at some point.
The MISMO Flood Work Group has developed data parameters designed to standardize
and streamline the ordering and delivery of flood zone determinations. While these
parameters are designed to promote industry-wide uniformity in data definitions, they are
also flexible enough to support the specific needs of individual lenders and insurance
agents. Users that adopt the MISMO standards will be able to complete the flood-related
aspects of loan closings and related transactions in a fully paperless environment. The
electronic flood documents with XML data can be retained and printed as needed,
eliminating the need for filing paper copies. The MISMO model even offers the option of
including electronic signatures for enhanced security and efficiency.
Advantages of Adopting the MISMO Standards
For lenders, the key advantage of adopting the MISMO standards, and requiring their
flood vendors to do so, is the reduction in data entry time as well as paper handling.
When a flood zone determination order is placed, the requested information is returned as
a set of data elements, with or without a completed copy of the FEMA Standard Flood
Hazard Determination Form in portable document file (PDF) format. The data can then
be used to populate the lender’s loan origination system (LOS).
The MISMO model not only supports delivery of the flood data but also manages
cancellations, edits, and disputes. Loan processors do not need to exit their loan
origination system and go to another Web site to check the status of a given order. The
LOS can submit a status query at any time to get the current status of a flood
determination. A status query can be automated within the LOS or manually executed by
a user.

The MISMO approach also makes it easier for lenders to do business with multiple flood
vendors. Since all parties are operating by the same set of standards and definitions,
communication becomes more efficient and less fraught with translation problems
between various companies systems. Each party is also freed from the task of developing
their own definitions and standards.
Adoption of consistent standards enhances the speed of the flood transaction by

delivering responses immediately via a real-time XML interface. The response will
include any messages or comments on the status of the order, such as an indication that
there was an error in the order or that additional research is required.
A sample electronic flood determination and insurance process – Very High Level and General
Origination Servicing
Borrower
Receive a copy
of eDocs
Receive flood
Is Provide a copy of
Request flood certification in
Start insurance eDocs to
determination eDoc format with
required? Borrower
XML data
Lender
Yes
Receive flood
XML XML Send Loan File
Order insurance in
Request Response eDocs and data
flood insurance eDoc format with
to Servicer
data
Return flood
certification Receive servicer Update flood
Receive order
Flood Vendor
eDoc with XML details status

data
Perform flood
determination
Servicer
Receive and Notify flood

Receive flood
retain Loan File vendor with
status
eDocs and data. servicer details
Insurance
Return flood
Agent
insurance
eDoc with data
Implementing the MISMO Standards
Once a lender makes the decision to adopt the MISMO standards, the implementation can
be completed in several simple steps. The first, and most important, is to notify the
appropriate LOS vendor and flood vendor(s), requesting that they support the MISMO
standard. Next, after downloading the MISMO documentation, the lender’s technology
team completes the necessary coding and programming of the XML interface, calling on
the LOS vendor for assistance if needed.
Conclusion

Creating a seamless, paperless environment for flood-related aspects of mortgage lending

can result in faster processing, savings in staff time, and reduction in errors resulting from
manual data entry. Lenders are in a position to spearhead the transition to this
environment. If lenders become advocates for adoption of universal standards and
definition, their industry partners will follow suit and ultimately benefit as well.

eNote Processes
6.5 eNote Processes
The MISMO eMortgage glossary defines eNote as, “…an electronic promissory note.”
The mortgage note is a promissory note that creates a legal obligation of the borrower to
repay the debt secured by the mortgage. The note is structured to be negotiable. This
allows the mortgage lender to assign the loan upon sale into the secondary mortgage
market. Once the debt is repaid in full, a notice of satisfaction is recorded. This clears
the lien from the property’s title.
The goal of this section is to connect the eNote across origination, closing, the MERS®
eRegistry, secondary market, document custody, servicing, and other key areas using
MISMO standards, at a high level, without getting into internal processes and systems.
For the purposes of the scenario, the lender is a retail lender that sells the loan to an
investor.
A sample eNote Process – Very High Level and General

Origination Servicing
Borrower
Authenticate,
Copy of Payoff or
eConsent,
eNote other
eSign eNote
Start
Originating
Get eNote from

Sell eNote loan Deliver eNote loan
Lender
Generate Closing, store in

to an investor to designated
eNote with Electronic Vault,
and retain servicer and doc
MERS MIN and review.
delegatee rights custodian.
AC
Tamper evident
eClosing
System
seal eNote and Register with

eClosing store it in MERS
Electronic Vault eRegistry
AC
Closing
Agent
Closing
Process
Record Record transfer Record

eRegistry
Record Record Record

change
MERS
Transfer of control to investor change Payoff or

New eNote Servicer as a
location to and retain location to other
Registration delegatee on
Lender delegatee rights Doc Custody
the eNote.
Investor
Purchase eNote Update

loan and accept pool
control details
Custody
Store eNote in
Doc
Electronic Vault, Release

certify collateral and collateral
pool. AC
Servicing
Service eNote Payoff or

loan other
Comments: Authoritative Copy (AC) relates to the eNote.
Origination
• Prior to Closing
o The lender generates the eNote electronic document with MERS MIN,
uniform eNote clause, and MERS as the operator of the eRegistry. The
MIN is the same as for the security instrument.

eNote Processes
o The lender delivers the eNote and other documents to the eClosing
platform.
• Closing
o The borrower’s identity is authenticated.
For example: The borrower is using User ID and a secret
password. In addition, the notary checks borrower’s credentials
with a valid form of identification.
o The borrower reviews required eSignature disclosures and provides an
affirmative consent for the eNote and other electronic documents. A
tamper evident seal is applied to the eConsent electronic document, and
the document is stored in the compliant electronic vault.
o The borrower agrees to the eNote using a standard eSignature method.
Please see eSignature section about standard eSignature methods.
o When all required signatures have been applied, a tamper-evident
signature is applied to the eNote, and the eNote is stored in an electronic
vault.
o Before a closing is completed, the closing agent requests eNote
registration with MERS® eRegistry.
o For more details, please see eClosing processes.
• After Closing
o The lender receives an authoritative copy (AC) of the eNote, eConsent,
and other documents from the closing agent. The lender stores eSigned
documents in the compliant electronic vault and requests appropriate
changes in MERS® eRegistry.
o The lender performs usual post closing processes using eNote instead of
the paper note.
o The lender sells the eNote loan to an investor, typically as part of a hybrid
(paper and electronic mortgage) pool.
o To complete the sale, the lender delivers a copy of the eNote to the
investor and requests MERS® eRegistry to transfer control from the lender
to the investor.
o Per investor instructions, the lender delivers a copy of the eNote to the
designated custodian and servicer as well as requests MERS® eRegistry to
transfer location to the custodian and delegatee to the servicer.
o The designated custodian receives a copy of the eNote and accepts
location request from MERS® eRegistry. At this point, the custodian has
the authoritative copy of the eNote for certification and safekeeping
functions.
Servicing
• The servicer performs usual functions using a copy of the eNote instead of a paper
or image copy.
• To complete a payoff request, the servicer requests the MERS® eRegistry to
record a payoff for the eNote record. Also, the servicer notifies the custodian and
the investor using the usual processes.

eNote Processes
Conclusion
The eNote processes are supported by the key industry standards and infrastructure such
as MISMO standards, MERS® eRegistry, electronic vault, and others. The data is a part
of the electronic document, eSigned, and tamper-evident sealed during eClosing. The
seal is also registered with MERS® eRegistry. The manual data re-entry and certification
can be automated because the data can be trusted. This is one of the key steps toward a
completely electronic mortgage environment.
Additional details:
• MERS® eRegistry Manuals (www.mersinc.org)

• Investor Guidelines or Manuals

eSecurityInstrument Processes
6.6 eSecurityInstrument Processes
The MISMO eMortgage glossary defines eSecurityInstrument as, “…an electronic

security instrument such as a mortgage or deed of trust evidencing the pledge of real
estate as collateral for the loan.”
The security instrument evidences the mortgage lender’s security interest in the real
property. In many states, this instrument is a “mortgage,” while in others it is a “deed of
trust” or “security trust deed.” The security instrument gives a legal description of the
property and provides for conveyance of the property from the borrower (mortgagor) to
the lender (mortgagee) in the case of default on the note. Once the debt is repaid in full,
the servicer of the mortgage records a satisfaction or lien release in the local public land
records. This removes the lien from the property.
After loan closing, the settlement agent ensures that the security instrument, signed by the
borrower and the notary, is recorded in the local public land records to make public
record of the security interest (in the form of a mortgage or deed of trust) and assignment
of the mortgage, if any. Recording protects the borrower and the mortgage banker from
competing claims against the property and creates a lien on the property.
The goal of this section is to connect the eSecurityInstrument across origination, closing,
notarization, MERS registration, title, recording, secondary market delivery, document
custody, servicing, and other key areas using MISMO standards at a high level, without
describing internal processes and system requirements. For the purposes of the scenario,
the lender is a retail lender and using an eNote together with the eSecurityInstrument.

Borrower
Originating
Lender
eClosing
System
Closing
Agent
System
MERS
Recorder
Office
Investor
Custody
Doc
Servicing
Origination
• Prior to Closing:
o The lender generates the eSecurityInstrument electronic document with
MERS MIN. The MIN is the same as for the eNote.
o The lender delivers the eSecurityInstrument, and other documents to the
eClosing platform.
• Closing:
o The borrower’s identity is authenticated.
For example: The borrower is using user ID and a secret
password. In addition, the closing agent checks borrower’s
credentials with a driver license.
o A notary is present to verify borrower’s identity, capacity and willingness
to sign.
o The borrower reviews required eSignature disclosures and provides an
affirmative consent for the eSecurityInstument, and other electronic
documents. A tamper-evident seal is applied to the eConsent electronic
document, and the document is stored in a compliant electronic vault.
o The borrower signs the eSecurityInstrument using a standard eSignature
method, the same for the eNote.
Please see eSignature section about standard eSignature methods.
o The eSecurityInstrument is notarized using an eNotarization method.

If the closing agent is not a notary (or if an attorney is required to

close the loan), then a notary signing agent or attorney must be
authenticated by the system (using a username/password
combination or some other acceptable authentication process).
If the closing agent is also a notary, then the notary/closing agent is
already authenticated by the eClosing system.
The notary adds any required electronic notary seal to the
electronic document and electronically signs the document (using
an acceptable eSignature technology such as a “click-button”
signature, signature pad, or even a digital signature).
In addition, the notarial act is recorded in an electronic notary
journal if required for compliance with appropriate state laws and
regulations.
• Please see eNotary Process section for more details.
o After the last required signature is obtained, a tamper-evident signature is
applied to the eSecurityInstrument, and the electronic document is stored
in an electronic vault along with the eNote.
o For more details, please see eClosing processes.
• After Closing:
o The closing agent reviews all documents and requests the eRecording
process.
For more details, please see eRecording processes or PRIA.
o The lender receives the authoritative copy of the eNote, unrecorded
eSecurityInstrument, eConsent for both documents, and other documents
from the closing agent. The lender stores eSigned documents in a
compliant electronic vault.
o The lender receives recorded eSecurityInstrument as a trailing document
post closing.
o The lender performs the post-closing processes using the
eSecurityInstrument instead of the paper note and paper security
instrument.
The lender registers loan with MERS System with recording data
from the recorded eSecurityInstrument.
• Sales and Delivery:
o The lender sells the eNote/eSecurityInstrument loan to an investor as part
of a typical hybrid loan delivery.
o To complete the sale, the lender delivers a copy of the eSecurityInstrument
to the investor and requests the MERS® System to transfer the beneficial
rights from the lender to the investor.
o Per investor instructions, the lender delivers a copy of the
eSecurityInstrument to the designated custodian and servicer as well as
requests the MERS® System to transfer servicing rights to the new
servicer.
o The designated custodian receives a copy of the eSecurityInstrument.
Servicing

• The servicer performs usual functions using a copy of the eSecurityInstrument

instead of a paper or image copy.
• To complete a payoff request, the servicer requests the MERS® System to record
a payoff for the loan. The servicer also sends an electronic and notarized request
for satisfaction to the County Recorder.
o For more details, please see eRecording processes or PRIA.
• The servicer notifies the custodian and investor using the usual processes.
Conclusion
The eSecurityInstrument processes are leveraging the eNote standards and processes.
The processes are also supported by the key industry standards such as MISMO
standards, MISMO eDocs, MERS® System, Electronic Vault, and others. The data is a
part of the electronic document, eSigned, eNotarized, tamper-evident sealed during
eClosing, and eRecorded after the closing as well as after the pay off. This is a major
step toward a completely electronic mortgage environment.
Additional details:
• MERS® System Manuals (www.mersinc.org)

• Investor Guidelines or Manuals

eTitle Report and Insurance Processes
6.7 eTitle Report and Insurance Processes
The MBA Mortgage Terms glossary defines Title Policy as, “An insurance which
protects the insured against any loss caused by defect of title to real estate, wherein the
insured has interest as purchaser, lender or otherwise.”
Today across the mortgage industry loan title policies and preliminary products are often
produced and delivered on paper in a long form or short form. The costs associated with
creating, shipping, handling, reviewing and storing paper title policies can be high for
both title companies and mortgage lenders.
There are also examples of electronic production and delivery that provide a good vehicle
to introduce a fully ‘data enabled’ version of a title product. There are national and state
regulations to consider when producing both paper and electronic versions of these
products. These will also need to be examined to provide the proper guidance as we
move to the data enabled eDoc title policy. The following process steps and proposed
standards are offered as an example of how eTitle processes can occur.
The MISMO organization, in cooperation with various title companies, mortgage lenders,
and the American Land Title Association have developed the XML data structure to
satisfy the title specific information required to produce and map a title policy to a
MISMO eDoc. The following forms have been considered:
- ALTA and TLTA Short Form Loan Policies.

- ALTA Long Form Loan Policy.
The Title Provider

• There are several large and many smaller providers of the title service.
• A lender usually has a master agreement with specific providers for
underwriting title. The master agreement usually includes the scope of
products to be produced and the liabilities insured between the parties.
• It is not uncommon for a provider to contract out portions of the title
production work depending on the location and automation of the title work.
They are still responsible for the final product as the underwriter of the policy.
• In certain parts of the country, title work is often requested in conjunction
with the closing service. When this occurs, there may be an explicit or
implicit request for the service that must be tracked in conjunction to closing
or settlement services.
The Title Order

• Lender places title order using Title Request. They have the ability to choose
the production office and specific product(s).

• Order confirmation is sent from the title company using Title Response. The
response supports acknowledgements of receipt of the order as well as
subsequent status reporting on the progress of the title order.
The Title Commitment

• The title company searches and examines the property title and prepares a title
commitment or other form of title evidence. The title commitment is prepared
in a paper form as well as electronic in many cases.
• A preliminary title commitment is then sent to the settlement agent and/or
lender.
• Any curative items or exceptions are noted and resolved.
• Multiple drafts of a commitment may be produced and exchanged.
Endorsements and supplements may also be included depending on the
product and policy type.
• The title underwriting party provides approval prior to a final commitment
being produced.
The Title Policy

• Several preliminary policies and supporting title documents may be sent to the
lender and closing parties.
• The electronic version of title policy is sent to the lender and document
retention party (if 3rd party).
• Language that is specific to eDocs may be required to be compliant with
UETA and should be agreed upon by the industry participants and
associations.
• Any policies around transfers or endorsements may also need to be considered
relative to eDocs.
A sample electronic title report and insurance process – Very High Level and General
Origination
Receive title
Review title and Receive title
Lender
commitment in
Start Place title order clear open policy in eDoc
eDoc format with
issues format with data
XML data
Return title
Title Service Provider
Receive title
Receive title Return title policy
commitment underwriting
report order eDoc with data
eDoc with data approval
Search and
examine the Issue title policy
property title

Conclusion
The title operations and business have made good progress in automating and producing
electronic versions of their products. There are also standards from ALTA around the
forms used to present interim and final products.
The MISMO organization has added key data points to the existing Title Request and
Response DTDs to enable electronic title transactions including the delivery of the eTitle
Policy document.

eClosing Processes
6.8 eClosing Processes
Introduction
The MISMO eMortgage glossary defines eClosing as, “The act of closing a mortgage
loan electronically. This occurs through a secure electronic environment where all closing
docs are accessed and executed via the Web. This is also known as the ‘execution’ phase
of creating an electronic mortgage loan.”
Assumptions
For the purposes of this chapter we assume that the closing results minimally with an
eNote and/or eSecurity Instrument signed by the borrower. Other closing documents
may or may not be eSigned.
The eClosing process illustration below also assumes that the eClosing occurs at the
offices of an independent settlement agent with a notary present to confirm the identity of
the borrower. We recognize that on a refinance the process could occur in the borrower’s
home in the presence of a signing agent.
One more point that requires emphasis is that a successful eClosing implies that the
resulting eNote’s enforceability is insured by the title policy, just as it is implied with the
closing of a paper note. Some lenders make that implication explicit in the “Closing
Protection Letter” that they have signed when doing business with a new settlement
agent. In transactions where the lender does not require title insurance (e.g. refinances,
HELOCs, etc.) the lender may assume full liability for the enforceability of the eNote.
Key Points
The following process steps and proposed standards are offered as an example of how an
eClosing can occur. They are designed to close the gap in time between creating the
eNote and registering the eNote on the MERS® eRegistry so that salability of the eNote
can be ensured immediately.

eClosing Processes
Pre Closing:
• Lender sends required eSigning disclosures, conventional disclosures and closing

documents to the borrower.
• The lender and settlement agent have agreed on the use of a specific eClosing
platform.
• The lender has created the closing documents and uploaded them to the eClosing
platform.
• The settlement agent has reviewed the documents, added title-related
documentation (may include new HUD1) and confirmed the content and accuracy
of the closing package with the lender.
• For convenience, the lender may have provided the borrower with a user ID and
password to make the closing package available via the Internet or the lender may
e-mail the documents to the borrower for review.
Closing:
• Settlement agent or signing agent prints documents that will not be signed
electronically.
• Notary confirms identity of borrower.
• Participants access the eClosing platform.
• Settlement agent explains disclosures and confirms borrower’s consent (consent
can be obtained electronically or manually.)

eClosing Processes
• Settlement agent guides borrower through documents, enters data where

appropriate, and shows borrower where to initial and sign each document that is
signed electronically.
• After final signature is obtained on the eNote (assuming that the Note is signed
electronically), the eClosing platform accesses the digital certificate and signs the
eNote with a tamper-evident seal.
• The eClosing platform deposits the Authoritative Copy of the eNote into an
electronic records repository. The Location on the MERS® eRegistry can identify
the Authoritative Copy of the eNote as residing in the electronic vault of the
original Controller, or in a third party electronic vault designated by the original
Controller.
• Settlement agent ensures that the Controller and Location of Authoritative Copy
of the eNote on the MERS® eRegistry agree with the closing instructions.
• Prior to logging off the eClosing platform and ending that specific eClosing
session, the eClosing platform launches the registration transaction with the
MERS® eRegistry and confirms successful registration.
• The eClosing platform records all transactions in a permanent audit trail.
• Settlement agent provides borrower with copy of closing package either
electronically or on paper.
Conclusion
The specific process used for any given eClosing will vary according to the lender, the
product and the eClosing platform on which the eClosing is conducted. However, the
following key principles apply to all eClosings:
• A notary is present to verify the borrower’s identity, capacity and willingness to

sign.
• The process obtains the borrower’s consent to sign electronically.
• The eNote and/or eSecurity Instrument is legally signed electronically by the
borrower.
• The process properly applies the tamper-evident signature to the eNote and/or
eSecurity Instrument.
• The eNote is registered with the MERS® eRegistry immediately after closing.
• The eClosing platform maintains a permanent audit trail of all transactions.
• The eClosing process results in an enforceable eNote insured by the title policy,
or in transactions where the lender does not require a title policy, the lender may
assume full liability for the enforceability of the eNote.

eNotary Processes
6.9 eNotary Processes
Disclaimer
Each state has laws governing the commissioning, duties, and conduct of notaries. Many aspects of state notarial law are beyond the
scope of this guide. This guide concerns itself only with certain aspects of the notary’s acknowledgment in the electronic closing
documents: the aspects of the acknowledgment that are uniquely electronic or that vary significantly from those in the paper world.
No attempt has been made to exhaustively examine state notarial law. State notarial law and regulations must be consulted before
implementing an eNotary process.
Introduction
In every state, the transfer of real property or an interest in real property typically requires
one or more notarized documents. Some of these notarized documents are recorded in the
public land records by county clerks or recorders. Some are simply retained by a
receiving party for any number of years to satisfy certain legal requirements.
For a more extensive treatment of the laws affecting electronic notarization, including the
Uniform Electronic Transactions Act (UETA), the Electronic Signatures in Global and
National Commerce Act (ESIGN), and the Uniform Real Property Electronic Recording
Act (URPERA), please refer to the Legal chapter of this eMortgage Guide.
UETA, ESIGN, and URPERA address the legal sufficiency of the notary’s electronic
signature. However, it is important to remember that even in an electronic world, any
existing legislation (except for the physical or visual seal requirement discussed in the
Legal chapter) governing the notary’s conduct still applies.
Developing or Evaluating Electronic Notarization Technologies
Those responsible for building or evaluating electronic notarization technologies should

keep the following criteria in mind:
1. Notarization, whether electronic or not, requires the physical appearance of the
document signer(s) before a notary.
2. Electronic notarizations (and electronic notarization technology) must satisfy any
existing state statutes or regulations governing the conduct or practice of a notary
public.
3. States may require notaries to register or hold a separate commission to perform
notarial acts electronically.
4. States may require a notary to use an electronic signature technology that is
approved by or registered with the state.
Performing Notarial Acts Electronically
Generally speaking, electronic notarization will involve the same steps of a paper
notarization.

eNotary Processes
• The document signer appears personally before a notary – the physical

appearance requirement may deter fraud and protect consumers by compelling the
document signer to appear and request an act.
• A notary verifies the document signer’s identity credentials – a notary performs
an independent authentication process governed by state law and/or regulation.
• A notary screens the document signer for willingness and awareness – a notary
verifies the document signer’s intent to adopt the contents of the document as his
or her act.
• A notarial act (swearing of document signer, administering of oath or affirmation,
witnessing document signer’s signature, or taking acknowledgment) is performed.
• A notary completes a certificate – a notary’s certificate is an indication to
receiving agencies of the notarial act performed and is evidence of the fact of the
notarization.
• All other state laws and regulations apply - a notary must comply with all
applicable state laws and/or regulations, including when required making the
appropriate journal entry, to complete the transaction.
Conclusion
When performed in compliance with applicable state law, an electronic notarization

performs the same function and carries the same legal validity as a wet-ink notarial act
performed on paper documents. A notarized document provides a presumption that the
document was, in fact, signed by the signer and the document signer intended to be
bound by it. The act of notarization is also helpful in deterring fraud. The notary’s act of
verifying the document signer’s credentials provides a level of identity proof.
Other laws affecting electronic notarization include UETA, ESIGN, and URPERA. More
information on these laws may be found in the Legal chapter of this eMortgage Guide.
Additionally, implementers should take care to ensure that systems developed comply
with all applicable notarial laws and regulations in the jurisdictions where they will be
utilized.

eRecording Processes
6.10 eRecording Processes
eRecording is the act of recording the security instrument and other recordable
documents electronically with the county recorder or similar local public authority for the
purposes of making real estate documents public and providing constructive notice.
Recording a real estate document represents the process that places a copy of the original
document - deed, mortgage, lien release, etc. - in the public record at the local county
recorder's office, town clerk, or other local public agency. This process puts third parties
on notice with respect to real estate ownership, interest in real estate, and provides critical
information to prospective subsequent purchasers of real estate. Real estate recordings are
transactions entered and indexed into the public land records and are maintained in the
recorder's system.
Electronic recording redesigns the real estate recording process. eRecording initially
redesigned the method of delivering real estate documents to the county recorder and
returning the documents to the closing agent, lender or mortgage servicer. The goal of
electronic recording is to create efficiencies whereby costs are reduced for both the
county recorder and the customer (e.g., closing agent, mortgage servicer, or real estate
owners).
Later, because federal ESIGN and UETA allow for the replacement of paper and ink
signatures with electronic records and signatures, other technologies are introduced to the
recording process to represent the real estate information to be recorded, e.g., scanned
images, electronic documents, or electronic data (e.g., XML), which allows for the
redesign of other processes within the recorder's office, such as document examination,
indexing, and recording fees collection. The electronic recording process reduces or, in
some cases, eliminates steps that reduce time and costs, and provides quicker turnaround
time for closing agents and mortgage servicers.
Recorders' offices around the country are increasingly adopting electronic recording
because it saves time and money. There are three models, or types, of eRecording:
Model 1: Scanned paper, or images, of the original transaction are transmitted

over secure networks, such as virtual private networks (VPNs), to the
recorder’s office;
Model 2: Images and data, usually XML, are transmitted securely to the
recorder’s office for processing; and
Model 3: One electronic file representing both the electronic document and the
XML data, such as a Category 1 SMART Doc™ form or intelligent
PDF, is transmitted securely to the recorder’s office for processing.
MISMO and the Property Records Industry Association (PRIA) are alliance partners
working to ensure the creation and maintenance of interoperable technological standards
for eMortgages and eRecording across origination and servicing processes.

When utilized with SMART™ documents or intelligent PDF, eRecording provides

trading partners with a reduction in recording time in the public land records and
turnaround time for their trading partners; reduction and possible elimination of errors
and rejections because re-keying of data is not needed; reduction of costs and time for all
trading partners; improvement in productivity; reduction of certain document fraud
because electronic documents are encrypted; automated document data extraction and
system data population; and improvement of overall customer service and satisfaction.
Examples of eRecording Processes:

B. Example of eRecording Process - eLienRelease

After the loan is paid off
Initiates preparation of lien Accesses e-signing

Views recording
release document in an platform by corporate
information and/or
Start automated manner; interfaces signatory; reviews and
recorded copy of eLien
with servicing / payoff system e-signs lien release in
Release
and e-signing platform. front of the Notary.
E-Signs Notary's
acknowledgement on
elien release document
Receives confirmation of
Prepares electronic lien Receives e-signed eLien recorded eLien Release from
release; waits for e- Release; transmits eDoc County with recording
signing by corporate to County Recorder information; may receive copy of
signatory and notary. recorded eLien Release
Recieves eLien Date and Time stamps eLien Release; Sends copy of recorded eLien
Release; authenticates cashiers recording fee; recording system Release to Borrower OR
Submitter; validates extracts data and indexes document; transmits recorded eLien
eLien Release has not creates retrieval / archival copy; transmits Release to Servicer (depending
been tampered confirmation to Servicer. on prior instructions).
Receives copy of
recorded lien release End
from County.
References:
• http://www.pria.us

eDoc Custody Processes
6.11 eDoc Custody Processes
The MISMO eMortgage glossary defines eDoc Custodian as, “…a financial institution
that contracts with a lender to maintain custody of certain electronic and paper mortgage
documents on the lender’s or investor’s behalf.”
During the evolution of the secondary mortgage market, most investors transitioned from
requiring physical delivery of the promissory note for loans they purchased or securitized
to allowing mortgage lenders (seller/servicers and issuers) to maintain the promissory
notes in approved custodial facilities. These facilities could exist internal to the
operations of the mortgage lender (e.g. a trust department), or the lender could contract
with a third party facility to hold the notes in custody for the investor.
The current role of the Document Custodian emerged from this evolution, and Fannie
Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Banks have all published
their respective requirements for how approved Document Custodians must operate.
Consistent with all these investor requirements, the Document Custodian is contractually
an agent of the mortgage lender, not the investor. Therefore, the onus is on the mortgage
lender, not the investor, to ensure that their custodial solutions meet investor’s
requirements.
Although there are differences in secondary market investor requirements for document
custodians, they all describe the following basic responsibilities:
• Physical safekeeping – Storage of documents in a secure and fire-resistant facility.

This includes policies and procedures to prevent unauthorized access to
documents and to maintain control over all documents received.
• Custodial control over the documents – A document tracking system to maintain
ownership records and to maintain the status of all notes in a specific pool.
• Certification of information on documents and data submitted to provide
assurance for the investor that the custodian possesses the authoritative copy of
the eNote and all other documents as required by that investor.
In addition to these responsibilities, investors typically require that the Document

Custodian meet the following eligibility requirements:
• Be a financial institution subject to supervision of the appropriate regulator

(FDIC, OCC, OTS, NCUA, etc.)
• Be in good standing with its regulator
• Maintain an acceptable rating with the Rating Agencies (Fitch, Moody’s, S&P,
etc.)
• Comply with the investors published requirements for document custodians
• Maintain adequate insurance
• Disaster recovery plan and procedures in place and tested

eDoc Custody Processes
• Quality assurance procedures in place

• Employ knowledgeable personnel
Note: For more information on the role of the Document Custodian, please see the
MBA’s Document Custody Conference Beginner’s Workshop Manual from which this
summary is quoted.
Borrower
Originating
Lender
eRegistry
MERS
Investor
Doc Custody
Servicing
Lender

eLien Release Processes
6.12 eLien Release Processes
Introduction
The MISMO eMortgage glossary defines eLien Release as, “A process through which a
lender provides notice that they relinquish their mortgagee’s interest in a specific parcel
of real property.”
Key Points
When a mortgage is paid off, the mortgagee (secured creditor) is obligated to record a
statement (lien release) in the public land records that establishes the mortgage is
satisfied. The statement makes it clear to subsequent purchasers and their secured
creditors that the title is clear of the mortgage obligation.
The goal of this section is to connect the eLien Release across loan servicing, MERS and
recording without describing internal processes and system requirements.
Servicing
Loan
MERS
Lien Release
Operations
Lien Release
System
eDelivery
Recorder
County
As is the case with a paper-based mortgage, a lien release needs to be recorded in the
public land records when an eMortgage is paid in full. The MERS eNote Registry and/or
MERS will also need to be updated.
Upon receipt of full payment of the obligation, the Servicing Department requests the
generation of an electronic lien release document. The payoff/lien release system

generates a lien release document in a format that is recordable by the appropriate local
public agency (herein referred to as the “county recorder”). See Section 6.10 for details
regarding the three models of electronic recording. (NOTE: The generation of an
electronic lien release by the mortgage servicer is incumbent on whether the county
recorder’s office where the property is located and the original mortgage has been
recorded accepts electronic recording of lien releases, and not whether the mortgage
being paid off is an electronic or paper-based mortgage.)
The eLien Release is then reviewed to insure that the correct lien is being released and
that recordability standards are met. This review may be either manual or automated
depending on the servicer’s payoff/lien release system.
The document is then electronically signed by an authorized agent of the secured creditor.
Since every recording jurisdiction currently requires this type of document to be
notarized, a notary must be present at the time of signing, regardless of the signature
technology employed. Upon witnessing the signature of the authorized agent, the notary
would acknowledge the signing by completing the notarial act in electronic format with
the notary’s electronic signature. See section 6.9 for details on eNotarization.
A tamper-evident seal should be affixed to the eLien Release as soon as possible after the
notary completes their work. This tamper-evident seal will allow the eRecording system
to determine if the document was received without alteration and authenticate the
submitter.
Two concurrent transactions would now be initiated. A request is sent to the MERS
Registry to update the Registry to indicate that the lien has been satisfied. At the same
time, the eLien Release document is transmitted to the county recorder for recordation in
the public land records.
Ideally servicing systems would automate the transaction to the MERS® eRegistry
indicating that the loan has been paid-off or foreclosed (charged-off) similar to how
servicing systems have automated those transactions to the MERS® System for members
of the MERS lien registration service.
When the eLien Release arrives at the county recorder’s system, the system should
validate the tamper-evident seal. If the seal fails validation, a notice to this effect should
be sent to the submitter and the eLien Release is usually rejected.
If the tamper-evident seal is intact, the release will be examined by the county recorder
for recordability. This examination may be manual or automated depending on the
system utilized in the county. Any recordability deficiency in the document should
generate a notice of the deficiency that will be returned with the electronic unrecorded
document to the submitter.
If all recordability requirements are met, the county recorder system calculates the
recording fee for the lien release. The recording fee may be transmitted with an

electronically signed document that evidences (1) the amount of the recording fee; (2) the
payment will be made via the Automated Clearing House (ACH) network; and (3) other
payment information about the payee and payor. This electronic ACH payment
document is included in the electronic package submitted to the county. Another option
is for the submitter to include a similar electronic payment document with the eLien
Release recording package where the recording fee is paid from a “draw-down” account
maintained off-line depending on the county’s business processes.
Upon processing payment for the eRecording of the eLien Release document, the county
recorder’s system will then electronically endorse the document with a time/date stamp, a
unique instrument number and in some cases, a book and page number. This
endorsement is appended to the eLien Release.
The lien release is then entered into the county recorder’s land records database.
Depending on the system used and the county’s business rules this entry may be either
manual or automated. An official copy of the recorded lien release is stored in the county
recorder’s imaging system. This is accomplished by converting the eLien Release to a
viewable format, usually TIFF or PDF.
Once these processes are completed, the county recorder’s system returns the endorsed,
recorded eLien Release to the submitter.
Conclusion
eLien Releases are an intregal part of the eMortgage process. When a mortgage is paid in
full, they clear title with respect to a specific mortgagee’s interest as indexed in the public
land records and also with the MERS eRegistry. In the near-term, lenders will need to
verify the type and availability of recording an electronic lien release in individual
counties.

Fraud Detection Processes
6.13 Fraud Detection Processes
Introduction
Fraud in the mortgage industry includes misrepresentation and falsified documentation by

borrowers and industry participants. Misrepresentation is most common in the following
areas:
• Identity
• Occupancy
• Employment/Income
• Asset/ Liabilities
• Down Payment
• Property Valuation
Fraud also includes double selling.1
Electronic mortgage documents cannot inherently control misrepresentation of original

data any better than paper mortgage documents. However, eMortgages can improve
upon fraud detection in terms of changes to documents, identity of industry participants
who are involved in selling eMortgages and double selling.
Assumptions
This chapter is limited to specific anti-fraud technologies and procedures that relate to the
creation and selling of eMortgages.
Key Points
Changes to Documents are mitigated by the MISMO eMortgage standards
• The tamper-evident seal that is applied to the signed eNote immediately after the
document has been signed by the borrower(s) ensures that any changes made to
the document post closing can be detected by the hash validation.
• Tamper-evident seals can, in fact, be used to lock down documents all through the
pre-closing process, ensuring document integrity for documents in transit
• Once the eNote has been “sealed,” the mapping of the data to the view provides
the ability to validate that the data section used in downstream processes is
identical to the data that the borrower signed in the view.
• The MERS® eRegistry becomes the single definitive source of ownership
information for registered loans, tracking the controller of the eNote at any one
moment in time. The eNote record is also the single definitive source of the
1 Business Requirement – Working Draft – MISMO’s Fraud Detection Workgroup (5/19/05)

Fraud Detection Processes
digital hash information – essentially capturing a fingerprint of the loan

immediately when it is created and storing that hash value for validation at any
point in the life of the loan, and providing a central service for ensuring that the
eNote is never changed in any way.
• SMART™ documents can also be used to compare the data that goes to the
closing table with other data, from the loan origination system (LOS), etc. There
could be an opportunity there to detect fraud.
Authentication of MERS users is validated through the use of SISAC digital certificates
Packages submitted to MERS must be signed using a digital certificate, which is

authenticated by MERS, ensuring that the party who submits the package can be
authenticated. All MERS users must abide by the legal agreements that authorize their
use of the registry.
We recommend that great care be taken to protect the private key used to sign the
package/message transmitted to MERS. A hardware storage module, used to store the
private key on the server transmitting to MERS, provides an appropriate level of security
to protect the key.
Double selling is mitigated by the MERS® eRegistry
Each eNote includes a unique MIN and hash value. The MERS® eRegistry validates that
each eNote registered is unique and the corresponding eNote record ensures that there
can only be a single controller of any individual eNote at any one point in time. Any
entity seeking to know the controller of an eNote can query the eRegistry, named in the
eNote, to determine controller information.
Audit trails mitigate against fraud during the pre-closing, closing and post-closing
processes
Because all events are or should be logged by Closing Systems, the audit trail gives
added protection documenting each event in the pre-closing and closing process. This
event log can evolve as we move forward to create an auditable play-by-play of each
action in the life of the loan.
Conclusion
The potential for fraud cannot be eliminated; however, as the industry evolves from paper
to the electronic mortgages, the fraud detection processes will be significantly improved
because of underlying standards and technologies such as tamper-evident seal of an
electronic document, MERS® Registry, and other.

Appendix – FAQ
7 Appendix
7.1 FAQ
How do ESIGN and UETA differ?

ESIGN was enacted in 2000 to facilitate the use of electronic records and signatures in
interstate commerce. ESIGN adopts many of the most significant provisions of UETA,
provides consumer consent standards through electronic disclosures for purposes of
federal disclosure requirements, legitimizing electronic consents, and sets boundaries for
regulatory authority. UETA is currently enacted in 47 states and was initially approved
by the National Conference of Commissioners on Uniform State Laws in 1999. UETA is
adopted at a state level and authorizes electronic signatures and the replacement of
tangible writings with electronic records. ESIGN allows the state to modify, limit, or
supersede ESIGN, or adopt a state alternative that is consistent with ESIGN.
Can the MERS® eRegistry be used to hold eNotes?

No, the MERS® eRegistry is the system of record to identify the Controller and Location
of an eNote. An eNote is stored in an electronic vault owned by the Controller of the
asset or the managed through a third-party relationship such as document custodian.
What is “Location” on the MERS® eRegistry?

“Location” identifies the organization that stores the Authoritative Copy of the eNote.
That organization is identified by the 7-digit MERS-assigned Org ID. The Controller of
the Authoritative Copy may choose to specify its own Org ID as the Location, or a
designated Custodian.
Since the MERS® eRegistry is the “system of record” of ownership for eNotes, does
MERS control the disbursement of closing funds?
No. Closing funds are disbursed as they would be with the closing of a paper note.
Who asked MERS to build the MERS® eRegistry?

The Mortgage Bankers Association and the American Land Title Association sanctioned
the creation of a single, national electronic note (eNote) registry system and both
organizations have endorsed MERS as the provider of the system.
What legal guidelines have been provided for electronic record keeping?
Aside from the provisions of ESIGN and UETA, the Office of the Comptroller of the
Currency (www.occ.gov) has developed an advisory letter on electronic record keeping.
The advisory provides a basic overview of considerations a company should make when
retaining electronic documents.

Appendix – FAQ
SPeRS (Standards and Procedures for Electronic Records and Signatures) has developed
guidelines for implementing electronic signatures, consumer disclosure and consent,
records retention, printing, delivery, and presentation of information. The SPeRS manual
can be ordered at www.spers.org.
In 2001, the Federal Reserve Board (www.federalreserve.gov) issued an interim rule to

establish standards for electronic disclosures to consumers for lenders to comply with
ESIGN. These interim rules have never been finalized but remain a good source for
compliance advice.

Appendix – Reference Links
7.2 Reference Links
MBA Mortgage Bankers Association

www.mortgagebankers.org
MISMO Mortgage Industry Standards Maintenance Organization

www.mismo.org
MERS Mortgage Electronic Registration System Inc.

www.mersinc.org
PRIA Property Records Industry Association.

www.pria.us
SISAC Secure Identity Services Accreditation Corporation.

www.sisac.org
SPERS Standards and Procedures for Electronic Records and Signatures.

www.spers.org
NNA National Notary Association

www.nationalnotary.org
USNA United States Notary Association

www.enotary.org

Appendix - Glossary
7.3 Glossary
Authentication A process of identifying an individual, either in connection with the creation of a

relationship or in connection with the individual’s participation in a transaction.
Authoritative Copy The unique controlling reference copy of the Transferable Record (eNote), which is
(AC) registered on the MERS eRegistry.
Certificate A computer-based record or electronic file that, at least, states name or identifies
the issuing Certificate, identifies the Subscriber, contains the Subscriber’s public
key, identifies the Certificate’s Operational Period, contains a Certificate serial
number, and is digitally signed by the Issuing Authority.
Control 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 pursuant
to Section 16 of UETA and Section 201 of ESIGN. For example, Control can be
thought of as having possession of an original paper note.
Controller The Person named on the MERS eRegistry that has Control of the eNote and its
Authoritative Copy. For example, the Controller can be thought of as the “holder,”
“holder in due course,” and/or “purchaser” of an original paper note as defined
under the Uniform Commercial Code.
Delegatee A member of the MERS eRegistry that is authorized by the Controller to perform
certain MERS eRegistry transactions on the Controller’s behalf.
Digital Certificate A public key (or digital) certificate is a certificate that uses a digital signature to
bind together a public key with an identity - information such as the name of a
person or an organization, their address, and so forth. The certificate can be used to
verify that a public key belongs to an individual or an organization.
Digital Signature A cryptographic method of authenticating the identity of the sender of a message or
the signer of a document that can also be used to ensure that the original content of
the message or document has not been changed. Digital signatures are easily
transportable, cannot be imitated by someone else, and can be automatically time-
stamped. The ability to ensure that the original signed message was received means
that the sender cannot easily repudiate it later.
DTD Document Type Definition. A file that defines the “markup language” that will be
used to describe the data. It defines and names the elements that can be used in the
document, the order in which the elements can appear, the element attributes that
can be used, and other document features.
Electronic Record A record created, generated, sent, communicated, received, or stored by electronic
means.
Electronic Signature An electronic sound, symbol, or process attached to or logically associated with a
record and executed or adopted by a person with the intent to sign the record.

Appendix - Glossary
Electronic Vault Electronic vault is a transferable records management solution that meets ESIGN,
UETA, and other compliance requirements. The concept is similar to a paper vault
run by the document custodian industry today. Because there will be multiple
electronic vaults, there is a need for national registry service (MERS® eRegistry) to
manage the authoritativeness of records. In addition to the transferable records, the
solution may support other types of eDocuments.
eDoc An electronic document (eDoc) is intended to provide an equivalent to a paper

document without a need for printing. The desire for a paperless environment has
been a key driver in the evolution of the eDoc formats from imaging to electronic
records. Legislatively, ESIGN and UETA similarly define an electronic record as a
record "created, generated, sent, communicated, received, or stored by electronic
means."
eDoc Custodian A financial institution that contracts with a lender to maintain custody of certain
electronic and paper mortgage documents on the lender’s or investor’s behalf.
eClosing The act of closing a mortgage loan electronically. This occurs through a secure
electronic environment where all closing docs are accessed and executed via the
web. This is also known as the “execution” phase of creating an electronic
mortgage loan.
eMortgage A mortgage where the critical loan documentation – specifically the promissory
note, assignments and security instrument, are created electronically, executed
electronically, transferred electronically and ultimately stored electronically. AKA
– the paperless mortgage.
eNote A Transferable Record as defined by ESIGN or UETA, whichever is applicable.
eRecording An act of recording the security instrument and other recordable documents
electronically with the county recorder or similar local public authority for the
purposes of making real estate documents public and providing constructive notice.
eSecurityInstrument An electronic security instrument such as a mortgage or deed of trust evidencing

the pledge of real estate as collateral for the loan
GSE Government Sponsored Enterprise: A private organization with government

charter and backing. Examples are Freddie Mac and Fannie Mae.
Handwritten A handwritten signature that is converted upon execution into an electronic form.
electronic signature This is usually performed with a pen and a graphics drawing tablet used for
sketching new images or tracing old ones. The user makes contact with the tablet
with a pen or puck (mistakenly called a mouse) that is either wireless or connected
to the tablet by a wire. For sketching, the user draws with the pen or puck and the
screen cursor "draws" a corresponding image. This technology alone will not
encrypt a document once signed.
HUD-1 Uniform settlement statement. Same as a closing statement.
Hybrid Transaction A transaction in which the associated documents are a combination of electronic
records and paper documents.

Appendix - Glossary
Lien Release A process through which a lender provides notice that they relinquish their
mortgagee’s interest in a specific parcel of real property.
Location The Person named on the MERS eRegistry that maintains the Authoritative Copy
(as it pertains to of the eNote either as Controller or as a custodian on behalf of the Controller.
Transfer of Location)
LOS Loan Origination System.
MERS Mortgage Electronic Registration Systems, Inc.
MERS® eRegistry The MERS® eRegistry serves as the System of Record to identify the current
Controller and Location of the Authoritative Copy of an eNote.
MIN MERS Mortgage Identification Number. The MIN is an 18-digit number composed
of a seven-digit Organization ID, 10-digit sequence number, and check digit.
MISMO Mortgage Industry Standards Maintenance Organization. The Mortgage Bankers

Association (MBA) created MISMO in October 1999. The Mortgage Industry
Standards Maintenance Organization's mission is to develop, promote, and
maintain voluntary electronic commerce standards for the mortgage industry.
MOM MERS as the Original Mortgagee. Language written into security instruments that
establishes MERS as the Original Mortgagee and nominee for the Lender, its
successors and assigns.
Person An individual, corporation, business trust, estate, trust, partnership, limited liability
company, association, joint venture, governmental agency, public corporation, or
any other legal or commercial entity.
PKI Public Key Infrastructure. A system that provides the basis for establishing and
maintaining a trustworthy networking environment through the generation and
distribution of keys and certificates. This is also the foundation technology for
providing enhanced Internet security.
Secure Sockets Layer The industry-standard method for protecting Web communications developed by
(SSL) Netscape Communications Corporation. The SSL security protocol provides data
encryption, server authentication, message integrity, and optional client
authentication for a Transmission Control Protocol/Internet Protocol connection
SISAC Secure Identity Services Accreditation Corporation. SISAC is responsible for

accrediting digital identity credential issuers for the mortgage industry. SISAC is
owned by the MBA.
SMART Document An electronic document created to conform to a specification standardized by

MISMO. A SMART Document locks together data and presentation in such a way
that it can be system-validated to guarantee the integrity of the document.
System of Record Authoritative System recognized to establish ownership and location of the
Authoritative Copy of the eNote.

Appendix - Glossary
Tamper-evident seal A "seal" wrapping an electronic document that is created by a digital signature. The
seal can be verified to ensure that no changes have been made to the document
since the seal was put in place.
Title Insurance An insurance which protects the insured against any loss caused by defect of title to
real estate, wherein the insured has interest as purchaser, lender or otherwise.
Transferable Record An Electronic Record under ESIGN and UETA that (1) would be a note under the
Uniform Commercial Code if the Electronic Record were in writing; (2) the issuer
of the Electronic Record expressly has agreed is a Transferable Record; and (3) for
purposes of ESIGN, relates to a loan secured by real property. A Transferable
Record is also referred to as an eNote.
UCC Uniform Commercial Code.
UTC Universal Time Coordinated. UTC is also referred to as GMT (Greenwich Mean
Time) and is the global standard for time. All dates used by the MERS eRegistry
will use UTC format.
W3C World Wide Web Consortium. The World Wide Web Consortium was created to
lead the World Wide Web to its full potential by developing common protocols that
promote its evolution and ensure its interoperability.
X509 A standard for defining a Digital Certificate. It is the signing system used for SSL.
XHTML Extensible Hypertext Markup Language. A family of current and future document
types and modules that reproduce, subset, and extend HTML 4. XHTML family
document types are XML based, and ultimately are designed to work in
conjunction with XML-based user agents.
XML Extensible Markup Language. XML is a markup language designed specifically for
delivering information over the World Wide Web. In creating an XML document,
the user creates and assigns the element names.

Index
7.4 Index
eNotarization, 14
eNotary, 78
A eNote, 65
P
Appraisal, 53 ePackage, 31 PDF, 26
Authentication, 93 eRecording, 15, 80 Person, 95
authoritative copy, 12 eRegistry, 32 PKI, 95
Authoritative Copy, 93 eSecurityInstrument, 68
ESIGN, 10
ESIGN Consent, 43 R
B eSignature, 28 Regulation B, 18
Benefits, 6 eTitle, 72 Regulation Z, 18
C F S
Click-through signature, 28 Flood, 62 Sample consent, 44
Consent, 11 Fraud Detection, 88 SISAC, 95
Control, 12, 93 SMART™ Document, 26
Controller, 93 G System of Record, 95
Credit Report, 49
custodian, 13 GSE, 94
T
D H Tamper-evident seal, 95
Title Insurance, 17
deed of trust, 68 Handwritten electronic Title Policy, 72
Delegatee, 93 signature, 94 transferable record, 12
Digital Certificate, 93 Handwritten electronic Transferable Record, 96
Digital signature, 28 signature, 28
Digital Signature, 93
DTD, 93
U
L
UCC, 96
Logical Data Dictionary (LDD), UETA, 9
E 22 URPERA, 14
eClosing, 75
eDisclosure, 41 M
eDoc, 25, 94
X
eDoc Custody, 83 MERS, 32 XHTML, 96
Electronic Vault, 37, 94 MERS® eRegistry, 32, 95 XML, 96
eLien Release, 85 MIN, 95
eMortgage, 94 MISMO, 22, 95
eMortgage processes, 39 mortgage, 68

MISMO eMortgage Guide
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MISMO® Guide

This MISMO® eMortgage Guide, published by MISMO®, Inc., a wholly owned

* * * The information provided is educational in nature, providing general information

© 2006 MISMO®. All rights reserved.

MISMO® is a registered service mark of the Mortgage Bankers Association.

1 About This Guide...................................................................................................... 4

1 About This Guide

The MISMO eMortgage Guide, published by the Mortgage Industry Standards

The MISMO eMortgage Guide describes and explains industry-standard concepts,

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partners as companies begin to leverage the MISMO standards to

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TILA Advance HUD-1

Uniform Electronic Transactions Act Summary

The National Conference of Commissioners on Uniform Laws (NCCUSL) promulgated

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Consent Requirements under ESIGN and UETA

Before a party can electronically provide information required to be “in writing” to a

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An electronic form of promissory note cannot qualify as a “transferable record” under

Establishing Control of a Transferable Record

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The authoritative copy is communicated to and maintained by the person asserting

Any revision of the authoritative copy is readily identifiable as an authorized or

Section 11. Notarization and Acknowledgment. If a law requires a

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authorized to perform those acts, together with all other information

Subsection 101(g). Notarization and Acknowledgment. If a statute,

State Laws and Regulations Enabling eNotarization

Implementation of electronic recording (eRecording) necessarily implies that the real

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Title Insurance Coverage for eMortgages

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Electronic Delivery of Consumer Disclosures

The delivery of required consumer disclosures in an electronic mortgage lending

ESIGN contains additional conditions on providing disclosures electronically, such

For compliance guidance on the electronic delivery and retention of consumer

Electronic Delivery Provisions within Regulation Z and Regulation B

Requirements for Electronic Communication

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Regulation Z and Regulation B define “Electronic Communication” as a message

For purposes of either Regulation Z or Regulation B, a consumer’s electronic address is

If an electronic disclosure is returned to creditor undelivered, the creditor is required to

For disclosures provided on a creditor’s equipment (i.e., a computer terminal in creditor’s

Applicability to Delivery of Regulation Z Disclosures

ESIGN Consent Required for Transaction-Specific Regulation Z Disclosures

Early Home Equity and Early ARM Disclosures

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Notice of Right to Rescind

Applicability to Delivery of Regulation B Disclosures

Regulation B Disclosures Given At Time of Application

Appraisals and Adverse Action

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• MISMO XML Standards

For more details, please visit the MISMO website at www.mismo.org.

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5.1 MISMO XML Data Standards