If a Bank Denies an Electronic Signature, are They Breaking the Law?

Just wondering – If a Bank Denies an Electronic Signature, Is it Illegal?

Banks/lenders and misunderstanding underwriters and the accompanying systems are the single greatest holdup in the evolution of the real estate from always requiring “wet” signatures” to understanding the electronic signatures are efficient and legal and, as opposed to sixth-generation contracts, legible. Electronic signatures are finally here; and I’m going to use them.

From the Code of Virginia:

(bolding mine)

§ 59.1-485. Legal recognition of electronic records, electronic signatures, and electronic contracts.

(a) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.

(b) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.

(c) If a law requires a record to be in writing, an electronic record satisfies the law.

(d) If a law requires a signature, or provides for certain consequences in the absence of a signature, an electronic signature satisfies the law.

I am now at the point where I will not be recommending lending who inconsistently do not understand and implement the *law*. I tell my clients why I recommend some and don’t recommend others; they are free to disregard my advice; it’s their decision.

Thanks to Richmond and Fishburne for pointing this out again.

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  1. Dean Ouellette March 2, 2011 at 16:35

    Jim I am with you in spirit. I wont personally recommend a lender who does not accept them. From what I understand the national law which, which trumpets state law, says that electronic signatures are legal and authorized if both parties agree to accept them.

    I may be wrong… but that is how I understood it.

    1. Jim Duncan March 3, 2011 at 03:12

      Yeah, it’s a damn shame that institutions can’t seem to figure out that an electronic signature is a heck of a lot more secure than a faxed signature.

  2. Wehaveyourback March 2, 2011 at 19:58

    I find that multiple lenders frequently disregard Virginia statute (think automatic subordination on second liens for refinance purposes) citing its the “end investors” guidelines/rules. What makes it worse is when you request clarification early on in the process only to get no response whatsoever…sad.

  3. John Jacobs March 5, 2011 at 23:35

    Jim, you have raised a good question. First, I would always recomend that agents, underwriters and lenders make sure that all parties involved are comfortable/accepting of any change in business process prior to additions, changes or modifications.

    That said, there are laws in place (as you have mentioned) that ensure the legal validity and admissibility of e-signed documents, just as long as the electronic signing process was executed in compliance with the UETA (Uniform Electronic Transaction Act) and ESIGN (Electronic Signatures in Global and National Commerce Act) regulations.

    When is comes down to it, just as a Consumer is not required to sign documents electronically; Banks, Lenders and other businesses also have the ability to chose whether or not they will accept or use electronic signatures, especially if it may impact the value of their investments or negotiable instruments.

    I work for an electronic signature provider- eOriginal. A leader in the industry with more than 15 years experience, eOriginal is one of the most widely used e-signature tools in the financial space. We have patented processes in place that allow for electronically signed documents to be converted to paper originals in the event that financial institutions are not yet ready to accept the electronic versions. This process is currently used by many financial institutions, large and small.

    I certainly am a proponent of businesses and banks moving to a fully electronic process, but some times it just cant be forced. Please don’t hesitate to contact us with any questions, we are always happy to discuss.

    Best Regards,

    John Jacobs
    eOriginal, Inc

  4. Pingback: Is An Autopen Kinda Like Docusign? | RealCentralVA.com

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