FHA and IRS finally to allow Electronic Signatures

Amen…  FHA and the IRS decide to finally move into the 1980’s… in 2012

The Mortgage Bankers Association said one of its recent priorities has been to get FHA and the IRS to finally accept electronic signatures, which both currently do not for mortgage related activities. Loan application documents, per FHA, must currently have wet signatures, which seriously slows down the loan process in the digital age.

The IRS refuses to accept digital signatures on a mortgage loan application document called a 4506-T (also known as the Request for Transcript of Tax Return), which all lenders must get signed and send in to the IRS to verify a home loan applicants W2, or tax return income, for fraud. Because of this, many mortgage lenders have not moved to more efficient e-signature technology.

It has been reported that  the Federal Housing Administration and Internal Revenue Service will begin allowing electronic signatures on FHA loan documents and the 4506-T form in 2012, according to the Mortgage Bankers Association.

An electronic signature, or e-signature, is any electronic means that indicates either that a person adopts the contents of an electronic message, or more broadly that the person who claims to have written a message is the one who wrote it (and that the message received is the one that was sent). By comparison, a signature is a stylized script associated with a person. In commerce and the law, a signature on a document is an indication that the person adopts the intentions recorded in the document. Both are comparable to a seal.

Increasingly, encrypted digital signatures are used in e-commerce and in regulatory filings as digital signatures are more secure than a simple generic electronic signature. The concept itself is not new, with common law jurisdictions having recognized telegraph signatures as far back as the mid-19th century and faxed signatures since the 1980s. In the United States, electronic signatures have the same legal consequences as the more traditional forms of executing of documents.

Currently we use e-signature technology for our MN mortgage loan application documents on conventional loans, which people can just sign on their computers. Then we must send them the 4506-T separately to get a real signatures, seriously slowing down the application process, and increasing consumer costs. On an FHA loan, we must send everything out to the client for real signatures.

Moving into the 1980’s, streamlining the application and processing of mortgage loans is long overdue, will reduce client costs, improve processing times, reduce lost paperwork, reduce signature fraud, and generally make the process more satisfying for everyone.

UPDATE

January 2014.  FHA finally has officially announce and OK’d electronic signatures on FHA Mortgage loan Applications effective immediately


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