Delivering Appraisals & ESign Act

Posted By: SouthernBanker

Delivering Appraisals & ESign Act - 11/12/13 06:55 PM

We're planning to deliver the majority of our appraisals electronically to borrowers. Does the electronic delivery of the appraisal copy have to comply with the ESign Act?

Based on my reading of reg B, yes, it does. However, our vendor's compliance representative has questioned if this is necessary, given that the borrower does not sign the appraisal nor is it a disclosure.

Thoughts?
Posted By: John Burnett

Re: Delivering Appraisals & ESign Act - 11/12/13 07:09 PM

Please check out section 1002.14(a)(5). You need to comply with the demonstrable consent provisions of the E-SIGN act.

"(5) Copies in electronic form. The copies required by § 1002.14(a)(1) may be provided to the applicant in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.)."

Ask your vendor's compliance rep if the vendor will finance your legal fees for violations. It's a disclosure and whether it needs a signature from the borrower is irrelevant.
Posted By: SouthernBanker

Re: Delivering Appraisals & ESign Act - 11/12/13 07:15 PM

Thanks for the response John. Another debate we're having, is in regards to tracking the borrower's receipt of electronic documents. We can track the date of delivery within our system.

However, based on the Reg B commentary (below), I think we need to also ensure that the borrower has received their electronic appraisal.

Are other lenders tracking the receipt of electronic documents or just the delivery?

4. Timing. Section 1002.14(a)(1)
i. For purposes of this timing requirement, "provide" means "deliver." Delivery occurs three business days after mailing or delivering the copies to the last-known address of the applicant, or when evidence indicates actual receipt by the applicant, whichever is earlier. Delivery to or actual receipt by the applicant by electronic means must comply with the E-Sign Act, as provided for in § 1002.14(a)(5).


Having a hard time convicing our vendor the business need to track the receipt as well.
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 11/12/13 07:19 PM

If you have a compliant E-Sign system, delivery happens when you push the button regardless of whether the recipient ever looks at it.
Posted By: John Burnett

Re: Delivering Appraisals & ESign Act - 11/12/13 07:22 PM

Similar language appears in 1026.35(c)(6)(iii), the provision requiring delivery of copies for non-QM HPMLs.
Posted By: SouthernBanker

Re: Delivering Appraisals & ESign Act - 11/12/13 08:25 PM

rlcarey, can you define push and pull method a bit more? I noticed it on this thread also:

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1857695#Post1857695

Here's our process: Email is sent to the borrower containing a hyperlink. Borrrower clicks on hyperlink and is directed to a portal where they can then viewe and download the appraisal.

Is that a push or a pull method?
Posted By: John Burnett

Re: Delivering Appraisals & ESign Act - 11/12/13 08:37 PM

That's pull, because the applicant pulls it down from the server.
Posted By: SouthernBanker

Re: Delivering Appraisals & ESign Act - 11/12/13 09:25 PM

Thanks John...to beat a horse, if not dead, then surely mortally wounded...

Based on the thread referenced above, because our method is a pull method, I need to have something demonstrating the borrower's receipt of the document.

Can you point me to the regulation or guidance that supports this? Building out system tracking of the borrower's receipt of documents is presenting a challenge and I want to have firm support if this is needed.
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 11/12/13 09:34 PM

I guess I am lost. Where does it say in the E-Sign Act that if it is a pull system, there has to be an acknowledgement of receipt?
Posted By: SouthernBanker

Re: Delivering Appraisals & ESign Act - 11/12/13 09:42 PM

That's what I'm looking for. In the other thread Carolina Blue wrote:

Without demonstrating receipt, the delivered date will depend on the regulation for the disclosure. e.g. statements are considered devliered upon sending and TIL forms are considered delivered 3 days after mailing.

As for demonstrating receipt after meeting E-SIGN requirements:
If you're using a push method of delivery, i.e. encrypted file in an email, then you'll need some type of documentation to show the customer received the email; could be read receipt or reply email stating they received it.

If you're using a pull method, e.g. secure website customer logs into to download document, then there will be a record of the customer's download showing they recieved it.

Am I misinterpreting? What is this based on? Also, I'm assuming they meant the appraisal copy - not the ESign disclosure.
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 11/12/13 10:07 PM

Yes, and I would like to know where that came from also???
Posted By: MarieF

Re: Delivering Appraisals & ESign Act - 11/14/13 10:37 PM

If sending appraisals electronically (e-sign compliant), wouldn't you have to track the applicants electronic consent before deeming it delivered?
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 11/15/13 01:57 PM

Well, the first step in setting up any E-Sign compliant delivery system is obtaining demonstrable consent from the consumer for the delivery of electronic documents, if that is what you are asking.

Once that happens and the customer agrees to the delivery method and proves that they can access the documents, once the bank makes those documents available to the consumer, they are considered delivered whether the consumer ever looks at them or not.
Posted By: BCK

Re: Delivering Appraisals & ESign Act - 11/18/13 09:59 PM

I'm wondering what others are doing to demonstrate consent from the consumer for the delivery of electronic documents and how they prove they can access the documents. We do very little with electronic delivery, but also wanted to look into sending appraisals via email. We are thinking of simply emailing the pdf to the consumer; is this acceptable as long as they demonstrate they can access a pdf document and consent to receive it in this manner?
Posted By: Dan Persfull

Re: Delivering Appraisals & ESign Act - 11/20/13 05:32 PM

We are thinking of simply emailing the pdf to the consumer; is this acceptable as long as they demonstrate they can access a pdf document and consent to receive it in this manner?

No. You have to give them a disclosure that among other things explains how they can opt out if they wish to, the notification responsibilities if their delivery address changes, hardware and software requirements, etc. You have to provide them a test document either in an eamil or embedded on your Web site with a link to a document in the data format the form will be provided that they can open and demonstrate their ability to receive and access the document.

The process is not a simple can we question and yes you can answer.
Posted By: Jade'sFire

Re: Delivering Appraisals & ESign Act - 11/22/13 09:01 PM

I realize you must comply with e-sign for delivery to consumers, but since e-sign is a "consumer" rule can we still just email valuations to our business customers without going through the e-sign hoops?
Posted By: ComplianceRegs

Re: Delivering Appraisals & ESign Act - 11/22/13 09:28 PM

I would like clarification on the same point as well. § 1002.14(a)(5) indicates that all copies required by § 1002.14(a)(1) provided in electronic form must be in compliance with the consumer consent and other applicable provisions of E-Sign.
Posted By: John Burnett

Re: Delivering Appraisals & ESign Act - 11/22/13 09:39 PM

The Bureau failed to split hairs as finely as you would like, but, if your applicant is not a consumer, I believe you can comply with E-SIGN merely by obtaining the applicant's consent (would not have to demonstrable consent) for electronic delivery of the appraisal.
Posted By: ComplianceRegs

Re: Delivering Appraisals & ESign Act - 11/22/13 09:44 PM

John, I appreciate the response. Could you indicate how you came to the determination that only applicant consent for electronic delivery is required? Would an email by the applicant consenting to receipt suffice in this particular scenario?
Posted By: John Burnett

Re: Delivering Appraisals & ESign Act - 11/25/13 12:25 AM

Take a look at the E-SIGN Act. We have a copy of it in our Read A Reg (Alphabet Soup) section, at http://www.bankersonline.com/regs/esign/esign.html. Start by reading section 7001(a), which is the general rule that electronic documents are legally binding. Then review section 7001(c), which states that in order to electronically deliver a record (document) that is required by law or regulation to be given to a consumer in writing, certain steps have to be taken. Those steps only apply to dealings with a consumer.
Posted By: ComplianceRegs

Re: Delivering Appraisals & ESign Act - 11/25/13 02:09 PM

I had read both § 7001(a) and § 7001(c), but I was trying to find information on having the applicant (commercial applicant only) consent to electronic delivery (not demonstrable consent). I couldn't tell if this was just something you were recommending or if I was missing the requirement? Were you just indicating it would be a good idea/best practice to get the commercial customers consent prior to providing by email?
Posted By: John Burnett

Re: Delivering Appraisals & ESign Act - 11/26/13 01:21 PM

My point is that the law (ESIGN) does not have a demonstrable consent requirement for businesses. So all you need from an entity is consent. From my perspective that consent ought to be documented in case you have to back it up in court.
Posted By: banker-12

Re: Delivering Appraisals & ESign Act - 12/20/13 12:40 AM

If we have a business purpose loan to an individual, do we have to demonstrate and consent or is obtaiing only consent allowed like for an entity?

thanks,
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 12/22/13 01:40 PM

SEC. 106. DEFINITIONS.
For purposes of this title:
(1) CONSUMER.—The term ‘‘consumer’’ means an individual
who obtains, through a transaction, products or services which
are used primarily for personal, family, or household purposes,
and also means the legal representative of such an individual.
Posted By: Red Raiders

Re: Delivering Appraisals & ESign Act - 01/14/14 04:08 PM

We are wanting to be able to email appraisals to our commercial loan customers to comply with the new requirements of Reg B for dwelling secured loans. Is there a short paragraph we can incorporate into our loan application to gain consent for this or does it need to be a stand-alone disclosure?

If anyone has any insight or samples of what I can use it would be greatly appreciated!
Posted By: bisco

Re: Delivering Appraisals & ESign Act - 01/14/14 04:22 PM

Originally Posted By: John Burnett
My point is that the law (ESIGN) does not have a demonstrable consent requirement for businesses. So all you need from an entity is consent. From my perspective that consent ought to be documented in case you have to back it up in court.


If you have a commercial client and obtain consent, are there any other requirements beyond that point such as verifying/documenting delivery? For example if you obtain the client's consent via email (which you retain for documentation) and then you email the PDF to the client - would you need to document delivery or that you sent the email with the PDF to the client?
Posted By: John Burnett

Re: Delivering Appraisals & ESign Act - 01/14/14 05:05 PM

There are no documentation of receipt requirements.
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 01/14/14 05:41 PM

OK thinking about this a little and playing devil's advocate. Reg B states:

(5) Copies in electronic form. The copies required by § 1002.14(a)(1) may be provided to the applicant in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).

The question is: "Can you provide electronic copies outside of E-Sign (business customer or not)?

There is no provision for the delivery of disclosures that are required to be in writing outside of E-sign in either 1002.4 or 1002.14.
Posted By: Dolly Nugent

Re: Delivering Appraisals & ESign Act - 01/14/14 10:37 PM

Interesting point rlcarey. So, who is going to be the one to ask their regulator this question? smile Or do we really want to know the answer?
Posted By: Red Raiders

Re: Delivering Appraisals & ESign Act - 01/15/14 02:49 PM

I think my post got skipped over so I'm going to throw it out there again! smile

We are wanting to be able to email appraisals to our commercial loan customers to comply with the new requirements of Reg B for dwelling secured loans. Is there a short paragraph we can incorporate into our loan application to gain consent for this or does it need to be a stand-alone disclosure?

If anyone has any insight or samples of what I can use it would be greatly appreciated!
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 01/15/14 03:07 PM

I did not skip over your question. I presented an argument that any electronic delivery of an appraisal outside of the E-Sign provisions is not support by the regulation whether it involves a commercial customer or not.
Posted By: ComplianceRegs

Re: Delivering Appraisals & ESign Act - 01/15/14 03:35 PM

I had the very same thought, but when you look at § 7001(c) it clearly states that it would only apply to a consumer (personal, family, or household purposes). If the consumer consent provision under E-SIGN does not apply, all you would need is an agreement from the commercial customer (verbal or written) to receive that information electronically.

I was specifically focused on the following language:
(5) Copies in electronic form. The copies required by § 1002.14(a)(1) may be provided to the applicant in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act

The consumer consent provision would not apply in the case of a commercial customer. It is a little difficult to analyze how the other applicable provisions would impact this scenario, but the general consensus seems to be that you need to obtain some type of consent through a basic agreement with the commercial customer prior to providing documents they have agreed to accept in electronic form.

I would love to hear any other thoughts. I know Richard Insley is usually involved in a number of discussions involving E-SIGN.
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 01/15/14 04:44 PM

I guess the interpretation of the meaning of the comma in that sentence makes a big difference.
Posted By: Red Raiders

Re: Delivering Appraisals & ESign Act - 01/15/14 04:49 PM

I had in my head that I wanted to comply with E-Sign for our commercial loan customers and just wanted to know if this is something that could easily be agreed to on the commercial loan application. I know the demonstrable consent portion doesn't apply to commercial loans but my initial thought was they had to agree to receive the appraisal electronically before we could send it.
Posted By: bisco

Re: Delivering Appraisals & ESign Act - 01/15/14 10:09 PM

Originally Posted By: John Burnett
There are no documentation of receipt requirements.


Good to know. From the perspective of documenting delivery for the new ECOA/Reg. B Appraisal requirements, wouldn't you want some type of documentation to prove delivery? For example, a copy of the sent email. I'm just thinking about when the CFPB comes in and says, "prove to me that you provided the applicant with a copy of their appraisal". If we are emailing the client a copy via email in a decentralized environment then what's the best way to prove delivery or at least "attempted delivery"?
Posted By: complofcr

Re: Delivering Appraisals & ESign Act - 01/15/14 10:14 PM

We are about to begin delivering our appraisals through e-mail. Do I understand the Reg correctly that as long as we get an E-Sign Disclosure signed by the applicant at application, we can do this? The disclosure came from Laser Pro and has normal disclosure wording at the top and does list the Hardware and Software Requirements along with a consent statement and another section for them to withdraw their electronic communications and resume paper communications. Is there anything else that we need to do?
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 01/15/14 11:07 PM

Where is the electronic demonstrable consent in signing a document? If all they are doing is signing a document, then LaserPro has no concept of the E-Sign demonstrable consent requirements.
Posted By: complofcr

Re: Delivering Appraisals & ESign Act - 01/16/14 02:13 PM

I guess that's where I'm lost. What do we have to do to comply with the E-Sign Act? I see the consumer disclosure we have to provide and that's about it. I'm reading from the FDIC Compliance Manual dated August 2012, is that the most recent?
Posted By: complofcr

Re: Delivering Appraisals & ESign Act - 01/16/14 02:20 PM

Okay, please disregard that last question. I've found additional information relating to the demonstrable consent. Thank you rlcarey!
Posted By: TEL

Re: Delivering Appraisals & ESign Act - 01/17/14 07:00 PM

I am interested also in the E-SIGN applicability. We have non-consumer purpose loans and in many cases the "dwelling" is owned by a non-natural person. Based on the E-SIGN definition of consumer (Sec 106 as referenced above by rlcarey), if the loan is not made both to an individual and for a consumer purpose (i.e.primarily for personal, family, or household purposes, it does not seem that compliance with E-SIGN, whether the loan is made to and individual or not, would apply (of course IMO). What am I missing?
Posted By: Iszy_theBug

Re: Delivering Appraisals & ESign Act - 01/17/14 07:58 PM

If we have a customer who has already given us E-sign consent for another type of document (electronic statements), can we email the customer appraisal without additional steps as long as we send it to the same email in which they gave us consent to use (for the statements)?
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 01/17/14 08:00 PM

You can only send them documents and disclosures on which you have previously agreed upon.

(ii) informing the consumer of whether the consent
applies (I) only to the particular transaction which
gave rise to the obligation to provide the record, or
(II) to identified categories of records that may be
provided or made available during the course of the
parties’ relationship;
Posted By: OceanView

Re: Delivering Appraisals & ESign Act - 01/17/14 10:17 PM

Holy smoke. Who knew getting a signature could be this involved.

Does this approach passs the disclosure/access proof test:

1. Disclosure sent to borrower explaining rights and options;

and

2. Email sent to borrower with pdf attachment that says "I can open this document" on the pdf that they must open. Borrower opens attachment and emails us back with the super secret code "I can open this document." this provides the "proof of access"
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 01/19/14 01:46 PM

The E-Sign delivery process being discussed has nothing to do with signatures, it has to do with delivery. There are no signatures required on the appraisal disclosure or when you deliver an appraisal to the applicant.
Posted By: OceanView

Re: Delivering Appraisals & ESign Act - 01/20/14 11:02 PM

That's correct, rl. Should say e-sign.

Does the 2-step process above pass the test for approval/proof of access?
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 01/21/14 12:48 PM

Yes. Having to enter a code embedded into the type of document that you will be sending would be a form of demonstrable consent.
Posted By: Dolly Nugent

Re: Delivering Appraisals & ESign Act - 01/31/14 10:37 PM

From the FRB's Consumer Compliance Outlook issued today on page 12.

The Dodd-Frank Act amended the ECOA’s notice requirements
for appraisals effective January 18, 2014.
Under the amendment, a creditor must notify an applicant
for a first-lien mortgage loan that the creditor
may order an appraisal or other written valuation to
determine the value of the property securing the loan
and will promptly provide the applicant with a copy,
even if the loan is not consummated.13 The appraisal
or valuation may be provided electronically subject to
compliance with the E-Sign Act’s consent provisions,
while the notice may be provided without regard to the consent requirements.
Posted By: Indy Banker

Re: Delivering Appraisals & ESign Act - 02/03/14 07:27 PM

Originally Posted By: Dolly Nugent
From the FRB's Consumer Compliance Outlook issued today on page 12.

The Dodd-Frank Act amended the ECOA’s notice requirements
for appraisals effective January 18, 2014.
Under the amendment, a creditor must notify an applicant
for a first-lien mortgage loan that the creditor
may order an appraisal or other written valuation to
determine the value of the property securing the loan
and will promptly provide the applicant with a copy,
even if the loan is not consummated.13 The appraisal
or valuation may be provided electronically subject to
compliance with the E-Sign Act’s consent provisions,
while the notice may be provided without regard to the consent requirements.


Careful with the context of this quotation - I believe this refers to situations in which the application is accessed electronically by the applicant, and required disclosures are provided electronically at the time the application is accessed:

"For applications submitted online,...The Dodd-Frank Act amended the ECOA’s notice requirements
for appraisals effective January 18, 2014.
Under the amendment, a creditor must notify an applicant
for a first-lien mortgage loan that the creditor
may order an appraisal or other written valuation to
determine the value of the property securing the loan
and will promptly provide the applicant with a copy,
even if the loan is not consummated.13 The appraisal
or valuation may be provided electronically subject to
compliance with the E-Sign Act’s consent provisions,14
while the notice may be provided without regard to
the consent requirements.15"

Where the disclosures under §§1002.5(b)(1), 1002.5(b)(2), 1002.5(d)(1), 1002.5(d)(2), 1002.13, and 1002.14(a)(2) accompany an application accessed by the applicant in electronic form, these disclosures may be provided to the applicant in electronic form on or with the application form, without regard to the consumer consent or other provisions of the E-Sign Act.

Posted By: Dolly Nugent

Re: Delivering Appraisals & ESign Act - 02/03/14 08:04 PM

I was just pointing out what the FRB's publication stated. If read in that context it certainly is misleading.
Posted By: Sean W

Re: Delivering Appraisals & ESign Act - 03/04/14 06:25 PM

If we are sending appraisals in paper form (US postal) 100% of the time, are we allowed to send the appraisal electronically if it's not e-sign compliant?

Our compliance area is saying that we would be in violation of the reg - even though sending the appraisal electronically is a secondary means of delivering the evaluation report.

Again, we always send them in paper form as part of our policy.

Similar to early disclosures, we send them in paper form 100% of the time but for some borrowers we also send them electronically.
Posted By: RR Joker

Re: Delivering Appraisals & ESign Act - 03/04/14 06:44 PM

Why would you send them both ways? If you don't comply with esign, I believe you would have to use the mail delivery required count of 3 days to receipt.
]

ETA: Having said that, there's nothing against sending them electronically, just don't consider that method to be 'delivered' on consumer loans in particular.
Posted By: John Burnett

Re: Delivering Appraisals & ESign Act - 03/04/14 07:26 PM

The compliance concern is that you make timely delivery of the appraisal copy in written form. If you conform to the regulation's requirements with the written copy, an e-copy is extra, and there's absolutely no need to address E-SIGN requirements.

However, your e-copy should be delivered in a way that protects your applicant's privacy. A simple unencrypted attachment over unprotected e-mail would not, in my opinion, meet that standard.
Posted By: fmissle

Re: Delivering Appraisals & ESign Act - 03/05/14 04:54 PM

Originally Posted By: RR Joker
Why would you send them both ways? If you don't comply with esign, I believe you would have to use the mail delivery required count of 3 days to receipt.
]

ETA: Having said that, there's nothing against sending them electronically, just don't consider that method to be 'delivered' on consumer loans in particular.


Just providing a reason here, without addressing the compliance concerns.

We provide electronic copies to all of our customers because most of them want it. It’s much easier for them to retain and store electronically than physically.

This is in addition to written copies, which we provide via mail. We don’t have an e-sign process in place.
Posted By: RR Joker

Re: Delivering Appraisals & ESign Act - 03/05/14 08:20 PM

I wondered about that after I asked...I can see it being a good 'filing' cabinet!
Posted By: Sean W

Re: Delivering Appraisals & ESign Act - 03/10/14 08:39 PM

Thanks to all that replied.

We tend to be a little slow to adopt new technology and have been providing hard copies up to this point. We also send electronic copies to those who request it on a case-by-case basis.

When we do send them electronically it is securely, just not e-Sign compliant.

We are working on the s-Sign part but in the meantime I'm trying to let our compliance dept. know that we are not in violation the way we currently are sending them. They are telling us that we are not compliant, even though sending them via email is secondary.
Posted By: MyBrainHurts

Re: Delivering Appraisals & ESign Act - 04/15/14 04:28 PM

We struggled with finding an E-SIGN compliant solution to delivering appraisals. I think our MLOs think I just made up E-SIGN to torment them. I rejected three vendors who swore they were E-SIGN compliant, because none understood demonstrable consent.

I believe I've found a solution right under my nose. In my BankersOnline Daily Compliance Briefing was an ad for http://www.mercuryvmp.com/ I believe they have a compliant and cost effective solution. Those of you struggling with this issue may want to take a look.

I have no affliation; I'm just a banker.
Posted By: Chris22

Re: Delivering Appraisals & ESign Act - 05/16/14 03:51 PM

If you may not provide electronically any required disclosures without jumping through the e-sign hoops, then what is the legal effect of inadvertently sending a required disclosure via e-mail? Does it render it a nullity as though it never happened?
Posted By: rlcarey

Re: Delivering Appraisals & ESign Act - 05/16/14 03:58 PM

Disclosure - what disclosure?????

Yes, you are correct, it as if it never happened.
Posted By: Chris22

Re: ESign Act - 05/16/14 04:59 PM

John:
I get that the sending of disclosures electronically to borrowers without going through the e-sign process cannot occur even where the borrower may be telling you over the phone its OK.

But assume an electronic disclosure is inadvertently sent electronically, and without the bank going through the E-Sign consent process. Is that act of sending the disclosures to the borrower electronically without proper consent now a nullity as though the disclosure were never made at all?
Posted By: rlcarey

Re: ESign Act - 05/16/14 05:33 PM

Didn't I just answer that question?
Posted By: John Burnett

Re: ESign Act - 05/16/14 06:00 PM

Yes, it never happened. The best you can do is, if you haven't already passed the deadline for delivery, hand deliver it in written form.