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?

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.

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.

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

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

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?

That's pull, because the applicant pulls it down from the server.

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.

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?

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.

Yes, and I would like to know where that came from also???

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

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.

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?

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.

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?

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.

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.

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?

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.

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?

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 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,

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.

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!