The Electronic Signatures in Global and National Commerce Act is giving the mortgage industry legal and logistical fits.

A provision of the eight-month-old law that took effect March 1 stipulates that Fannie Mae, Freddie Mac, and other industry leaders set standards for electronic document storage in order to protect consumers. That means creating a legally binding online document format, and that is not easy, says Gabriel Minton, the Mortgage Bankers Association’s senior director of industry technology.

“There is a problem when you sign a mortgage on a screen,” he said. “How do you know where the original is? You have bits and bytes, but how do you know who has the original copy of the mortgage?”

Another dimension to this problem is that “there have been no cases in court,” Mr. Minton said. “There is a risk involved in pioneering in a new way of business.”

In publishing a draft of e-mortgage guidelines on March 5, Freddie Mac requested that lenders comment on the issue, and several sources say Fannie Mae has contributed to a group the MBA has established to work on this issue.

Doug W. Naidus, founder and chief executive of, an originator based in New York, said the law is also troublesome for the mortgage-backed security market.

“We don’t know what the industry will allow in the secondary market,” he said. “The fear is that while it may be lawful to accept the electronic signatures, that might not be enough for our conduits, our investors,” or the government-sponsored enterprises.

Electronic signatures that are not sufficiently authenticated could devalue securitizations, Mr. Naidus continued.

“The industry does not have a standard yet, and there are no rules,” he said.

Mr. Minton, chairman of the architecture workgroup within the MBA’s Mortgage Industry Standards Maintenance Organization, or MISMO, said one solution being explored is the creation of “smart” documents incorporating the HTML and XML software languages.

Mark Oliphant, Fannie Mae’s director of e-business solutions, said “smart” documents have the potential to “unlock savings” for the industry by reducing paperwork in tasks such as reconciliation.

“In the ‘smart’ world, you’re guaranteed that the data on the document is exactly as the parties entered it,” he said.

But right now, he said, “we’re really just at the early stages of getting the feedback and seeing where it goes.”

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