eNote Myth versus Fact

posted on Thursday, October 17, 2019 in Member Services

How familiar are you with eNotes? Each of the statements below is either an eNote MYTH or an eNote FACT. Test your knowledge and expand the section to see the results.

Test Your eNote Knowledge

• The use of electronic promissory notes (eNotes) is permissible only in jurisdictions which permit eRecording.

  MYTH

  In nearly all jurisdictions, the promissory note is not recorded and therefore can be signed electronically regardless of recording requirements.

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• An eNote can be converted to a paper promissory note.

  FACT

  • There is a clause written within the MISMO® SMART Doc® version 1.02 (Electronic Note) that outlines the steps to take when it is necessary to convert an Electronic Note to a Paper-Based Note.
  • Once an Electronic Note is converted to paper, it can NOT be transferred back to an electronic state.

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• A wet-ink signed, hard copy of an original promissory note can be converted to an eNote.

  MYTH

  • An eNote must be originated electronically, signed electronically, be stored in an eVault and have a tamper evident seal.
  • Defined in the MISMO® eMortgage Glossary as: An Electronic Record under ESIGN and UETA that (1) would be a Promissory 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. (Refer to Section 16 of UETA and in Title II, Section 201 of E-SIGN.)
  • An image of a wet signed note is NOT an eNote.

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• The borrower must consent to the use of electronic signatures.

  FACT

  As part of the closing process, borrower(s) must consent to signing electronically.

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• The MIN or Mortgage Identification Number used on an eNote matches the MIN used on the security instrument, if the loan is a MERS® Loan.

  FACT

  • The “MERS® eRegistry” is the “system of record” that identifies the current Controller and Location of the Authoritative Copy of an eNote.
  • The “MERS® system” tracks the servicing rights and ownership of mortgages.
  • Both MERS® databases utilize the same 18-digit MIN configuration. 

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• An eNote cannot be modified by a paper modification agreement.

  MYTH

  The terms of an eNote may be modified using a paper-based modification agreement.

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The 11 Federal Home Loan Banks (FHLBanks) are currently working together to develop a future solution for providing collateral value for eNotes. As member-owned cooperatives, we understand eNotes provide many benefits to both our nearly 6,900 member institutions and their borrowers. See our current progress towards accepting eNotes as eligible collateral.