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38 » Texas Equity Section 50(a)(6) mortgages » New York Consolidation, Extension, and Modification Agreement (NYCEMA) mortgages (Note: An eMortgage may be refinanced into NYCEMA using the NYCEMA process provided in Section 1402.17.) » Mortgages for which the borrower is a trust of any type. 5 ere are separate guidelines for to be approved as an eNote servicer. Being approved to originate and sell eNotes does not qualify the servicer to service an eNote. If the servicer wishes to be authorized to service eNotes, they should contact Fannie Mae and Freddie Mac for approval. e minimum requirements to service eNotes for FHLMC are as follows: » Be a member in good standing of MERSCORP Holdings, Inc. » Be an approved member and user of the MERS System, MERS Delivery, and MERS eRegistry » Have an approved eNote Vault System (Note: See Section 1402.5 for eNote Vault System requirements. If the eNote Vault System was not previously reviewed by Freddie Mac, the eNote Vault System must go through a review and approval process, similar to the process described in Section 1402.3, as applicable.) e eNote Vault System must have the ability to: » Maintain a copy of the Authoritative Copy of the eNote and its Tamper Evidence Seal for the life of the eMortgage plus seven years » Identify and track all eMortgages that the seller/servicer services for Freddie Mac » Record all status changes and required actions that occur during the life of the eMortgage in the MERS eRegistry » Accept an offer of change of control from Freddie Mac, in the event of a foreclosure or other Freddie Mac Default Legal Matters with respect to an eMortgage, as applicable » Create an offer of change of control to Freddie Mac, in the event of termination of a foreclosure or other Freddie Mac Default Legal Matters with respect to an eMortgage, as applicable » Confirm that the MERS eRegistry accurately always reflects the controller and location » Accept a transfer of the Authoritative Copy of the eNote from Freddie Mac's eNote Vault System using MERS e-Delivery, in the event of an eMortgage repurchase by the seller/servicer » Securely store electronic copies of Mortgage File Documents (Note: A seller/servicer can store all Electronic Mortgage File Documents in its eNote Vault System if the eNote Vault System allows such storage. If the eNote Vault System does not permit storage of Electronic Mortgage File Documents other than the eNote, the seller/servicer must have a secure e-Storage System for storing such documents. (See Section 1402.8(c)(iv) for e-Storage System requirements.) » Have written eMortgage Servicing policies and procedures in place » Meet any other eMortgage requirements imposed by Freddie Mac 6 In addition, if the loan is modified, the servicer should modify the loan in electronic format. Servicers should also be aware that while most state laws allow for the conversion of an eNote to a paper Note, this should not be done without the GSE's approval. 7 HUD & GINNIE MAE ENOTE GUIDELINES In 2018, as the impacts from the financial crisis began to subside and more servicers began to announce the creation of eNote origination platforms, Ginnie Mae announced it would create guidelines to begin accepting digital collateral beginning in 2020. In October of 2019, Ginnie Mae released its Digital Collateral Guide and requested input by December 2019. 8 e guide outlines a pilot program for servicers and originators to be approved to originate and service eNotes. In addition to similar technical and process requirements to that of the GSEs, the Ginnie Mae program requires that applicants have demonstrated experience in serving eNotes. While Ginnie Mae does not generally issue any specific forms or language for loan documents, it does list certain elements and sample language for eNotes. While the GSEs allow for loan modifications of eNotes to be completed in electronic format also, Ginnie Mae requires the modification to be completed in paper format with wet-ink signatures. HANDLING OF ENOTES AND EMORTGAGES IN DEFAULT While law firms rarely see eNotes and eMortgages, with their increasing popularity there are a few important items that need to be considered when foreclosing. Starting from the beginning as a threshold question, what are an eMortgage and eNote? "An eMortgage is a mortgage for which the promissory note and possibly other documents are created and stored electronically rather than by using traditional paper documentation that has a pen and ink signature." 9 e legal basis for proceeding under eMortgages stems from the Electronic Signatures in Global and National Commerce Act (ESIGN), and most states have adopted laws based on the Uniform Electronic Transactions Act (UETA). 10 While an eNote is defined as the electronic equivalent of a promissory note, it is a transferable record. 11 is leads to the next legal questions: » Are they legally enforceable? » From where is the authority derived? Legal Industry Update 5 Freddie Mac Single-Family Seller/Servicer Guide Sec. 1402.7 6 Id. at Sec. 1402.9 7 Id. at Sec. 1402.10 8 Id. at Sec. 1402.10 9 Enabled by Lenders, Embraced by Borrowers, Enforced by the Courts: What you Need to Know about Enotes, by Margo H.K. Tank and R. David Whitaker, May 1, 2018 0 FannieMae, eMortgage Delivery, Frequently Asked Questions, March 2007 11 FannieMae, eMortgage Delivery, Frequently Asked Questions, March 2007