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40 e legality of eNotes and eMortgages was established in 2000 with the enactment of the federal Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act aka eCommerce laws. 12 ese eCommerce laws provide that a transferable record created in conformity with their requirements is the functional equivalent of a paper negotiable promissory note/mortgage and is just enforceable against the borrower as its written counterpart. 13 So, what makes them "just as enforceable?" For an eNote to qualify as a transferable record at the time of issuance, an eNote must be electronically created, presented to the borrower, and executed entirely on information processing systems. 14 Further, it must otherwise qualify as a negotiable promissory note under Article 3, if it were in writing; the borrower must expressly agree that the instrument is a Transferable Record; and must be signed and must reliably establish the identity of the person entitled to "control" the eNote (Controller). 15 To ensure the authenticity, the tamper-evident seal is a kind of "digital thumbprint" of the eNote, which is stored on the MERS eRegistry and can be verified at any point in the loan's life by the various business partners who may hold the eNote at different times. 16 Additionally, the eCommerce laws provide a safe harbor for satisfying the rules establishing Control (safe harbor), which lay out the following conditions to ensure same. ey are: » A single authoritative copy of the record exists that is unique identifiable, unalterable; » e 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; » e authoritative copy is communicated to and maintained by the person asserting control or his designated custodian; » 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; » Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and » Any revision of the authoritative copy is readily identifiable as an authorized or unauthorized revision. Leading to the discussion of MersCorp Holdings, Inc (MERSCORP) services, MERSCORP developed the MERS eRegistry in cooperation with several mortgage industry stakeholders. e MERS eRegistry does not store the actual eNote, but instead only stores and tracks identifying information about it, including the eNote's digital footprint, the name of the Controller, and the location of the note. e authoritative copies of the eNotes themselves are stored in an eVault. It records all transactions on the MERS eRegistry record. 17 COMMON ISSUES IN HANDLING ENOTES AND EMORTGAGES Now that we have addressed a brief of overview of what they are, the legality of same, and where to find to find them, let us get into the common issues that we see in the default industry. To start with, we understand the benefits to utilizing eNotes and eMortgages, as it eliminates the need for paper, increases capital efficiencies (achieving quicker warehouse turn times, increasing liquidity for investors), eliminates lost notes, improves audit trials, increases process efficiencies and automation, reduces security needs. 18 Now come the possible issues with proceeding on them as it relates to foreclosure: » Different terminology: Key terms when dealing with eMortgage and eNotes include: » Transferable Record: "An electronic record that would be a Note under Article 3 of the Uniform Commercial Code (UCC) if it were in writing. To be a transferable record, the issuer (borrower) must have agreed the document is transferable record and the document must relate to a loan secured by real property." 19 » Control, aka as the Controller: is means that a "person has a control of a transferable record if the 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." (ESIGN 15 U.S.C. 7021(b); UETA 16b). » Authoritative Copy: "a system satisfies the conditions of ESIGN and UETA if it maintains records in a manner such than an "authoritative copy" of the transferable record exists." It must be a single, unique, identifiable, and generally unalterable copy. 20 » Location: e MERS eRegistry tracks the location of every eNote. » Proving standing: » is includes getting the MERS transaction history into record and guiding the court through the chain of transfers. Also, important to note here: pursuant to MERS Rule Number 8, any member as of September 1, 2011, that initiates a foreclosure or files a legal proceeding in MERS' name could be sanctioned by MERSCORP Holdings pursuant to Rule 7. » Additionally, when reviewing Assignment of Mortgages from MERS, one will notice that the "language Legal Industry Update 12 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 13 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 14 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 15 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 16 eMortgage Frequently Asked Questions, MBA Technology: Where are you the Road to E-Mortgages, MBA Residential Technology Committee, eMortgage Adoption Task Force, March 9, 2007 17 MERS, Mortgage Innovation: eNotes and the MERs eRegistry, www.mersinc.org/mers-eregistry 18 Mortgage Innovation: eNotes and the MERS eRegistry, www.mersinc.org/mers-eregistry 19 Uniform Mortgage Data Program, eMortgage Foreclosure Education Aid, Document Version, 1.0, 3/30/17 20 Uniform Mortgage Data Program, eMortgage Foreclosure Education Aid, Document Version, 1.0, 3/30/17