The white paper entitled, Security Interests in Transferable Records Evidencing Residential Mortgage Lending Transactions and the Rights of Warehouse Lenders: An Analysis and Proposal, released today by the Mortgage Bankers Association (MBA), examines the legal underpinnings of eMortgages in the warehouse lending sector, under the Uniform Electronic Transaction Act (UETA) and the federal Electronic Signatures in Global and National Commerce Act (ESIGN), both of which lay the legal foundation for the industry's transition to electronic loan files. 

"This paper provides detailed and relevant legal information and a framework which addresses the key issue of eNote ownership rights in warehouse lending," said Harry Gardner, MBA's Senior Director of Industry Technology.  "This issue has been discussed by some of the most prominent legal minds in the residential industry, and we're grateful for their participation and efforts."

Because paper notes are usually negotiable instruments, warehouse lenders have protected themselves against unauthorized sales by taking possession of the original notes and delivering them to investors, pending payment, subject to special protections provided by existing secured transactions laws.  The white paper proposes a new strategy that takes advantage of the rights and protections that are built into UETA and ESIGN to ensure the same rights when funding and transferring electronic notes.

Along with a proposed solution, the paper analyzes the following key issues:
-          The special rules associated with negotiable promissory notes
-          The creation of "transferable records" as an electronic equivalent to negotiable promissory notes under UETA and ESIGN
-          The interplay between the UETA, ESIGN and Revised Article 9 of the Uniform Commercial Code (UCC) with respect to transferable records

To obtain a copy of the white paper, please visit MBA's eMortgage Resource page. 

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.