Freddie Mac

Conversation with Freddie Mac

November 16, 2000

Featuring Jerry Buckley And David Whitaker


John: Today’s Freddie Mac program welcomes two excellent speakers today, David Whitaker and Jerry Buckley. David Whitaker is an assistant general counsel at Freddie Mac in McLean, Virginia. Mr. Whitaker is a member of the American Bar Association’s Business Section and the Business Section’s Committee on the Uniform Commercial Code, Committee on the Law of Commerce in Cyberspace, and the UCC subcommittee on Letters Of Credit. He has appeared as a speaker on banking law and e-commerce at more than 40 conferences and seminars across the country. Jerry Buckley is from the Electronic Financial Services Council. The EFSC is an association of companies involved in providing electronically based financial services. The EFSC played a key role in enactment of the federal ESIGN legislation that makes it possible to provide fully electronic financial services. Mr. Buckley is executive director of the EFSC and a partner in the Goodwin, Proctor, and Hoar Law Firm in Washington, DC. An expert on legal, consumer, and technology issues in financial services, Mr. Buckley served as chairman of the American Bar Association’s Committee on RESPA. He speaks and writes frequently on financial service issues. Jerry, welcome to the program today. Mr. Buckley: Thank you. Well, and I’d like to welcome our guests on the teleconference as well on behalf of both the Electronic Financial Services Council and Freddie Mac. For those of you who are not familiar with the Electronic Financial Services Council, it’s an organization that’s been in existence for about two years now. It’s founding members were Microsoft and Intuit, General Electric and Countrywide. And its mission is to update those laws and regulations, which need to be changed to facilitate electronic delivery of financial services. Securing enactment of ESIGN legislation was a major focus of the group over the last year. However, issues such as privacy, state barriers to entry, clarification of RESPA’s impact on electronic transactions and a number of other issues are on the Council’s agenda as well. Like other trade associations, which...Unlike other trade associations which tend to focus on a particular industry or whose members have a common charter or license, the common bond among the members of the Electronic Financial Services Council is their interest in using electronic medium to deliver financial services. And as such, its members include both traditional financial services firms and technology companies. We hope to continue to expand our membership and keep the issues on which we focus at the forefront of public policy debate. Now I’ve been asked to pause and have John ask polling questions as we go through here because it takes some time, a little bit of time for tabulation. So I’m going to pause and allow John to ask the first polling question. John: Thanks, Jerry. And our first question today is, we’re curious about how many people are listening in at your site today. And using your touch-tone keypad this is how polling works. If you are the only one listening in your room today just simply press one on your touch-tone keypad. If there happens to be two of


you in the room, press two. If there happens to be three, press three. And so on up the line. If by chance there are nine or more listening in at your site, simply press nine. And go ahead and press the corresponding number at this time. And we will have several other polling questions throughout today’s program. Jerry, I’ll turn it back over to you for a little bit. Mr. Buckley: Thank you John. Well having succeeded in securing the enactment of legislation authorizing electronic signatures and records at the federal level, our group has begun to focus on the ways in which these new powers can be implemented. Both the federal ESIGN legislation and UETA, the Uniform Electronic Transactions Act, are overlay statutes. That is they overlay the laws and regulations which require signatures of records. Simply stated, these statutes make electronic signatures the equivalent of ink signatures and electronic records the equivalent of paper records. But these simple changes in law bring significant operational questions. Neither the Federal ESIGN Act nor UETA rely on regulations to be implemented. Rather they leave it to the participants in consumer and commercial transactions to establish the ways in which they will do business. A major focus of the Electronic Financial Services Council over the last few months has been a discussion about what guidelines and business conventions need to be developed to facilitate e-commerce in financial services. And we have been pursuing these issues through our regular working group meetings and now through this teleconference session. John, how about your next question? John: Alright, Jerry. Our second question, polling question is, how would you rate your knowledge of this topic today? Press one if high. Press two if some. Press three if low. Again the question, how would you rate your knowledge of this topic? Press one if high. Press two if some. Press three if low. And Jerry, I’ll now turn it back over to you. Mr. Buckley: Thank you. Freddie Mac is a valued, active member of the Electronic Financial Services Council. It has taken a leading role in our discussions regarding guidelines for electronic financial transactions. Freddie Mac’s Preliminary Specifications For Electronic Loan Documentation, which were issued in a discussion draft on November 1st of this year, address some of the most important issues that will be faced. Not only in the mortgage industry, but in other financial services industries, as we seek to establish guidelines to effectuate transactions electronically. The Council is pleased to have the opportunity to join with Freddie Mac in sponsoring this teleconference and explore these issues, to explore these issues and to secure the views of industry participants. This is an educational process for us all. And no one purports to have all the right answers. Provisions have been made for receiving your questions as has been mentioned earlier and in sending in your comments by facsimile. And we have reserved time to respond to them at the end of the latter part of the session.

I’d like to welcome all of you to the conference. We already have. we’ll begin. and it’s possible that we won’t. John. For roughly the balance of the next hour. regulations. But in all those cases. His experience with an understanding of these issues is both broad and deep. and agreements laid out for future reference And for checking against our memory in a paper form. And we began to see rules. They are essentially rules that are either imposed on us or that we agree to. Thank you. In civil contracts and agreements they tend to run more along the lines of damages or other types of remedies. Now with that background in mind. And they provide. In about 1750 BC. to be one of the first fairly extensive codifications of law and regulations in a written form. Just to manage to give you some idea of how we plan to proceed so that you know what to expect. Jerry. And Jerry will be going over the questions that have been faxed in to us. In the event that we don’t get to all of them.000 years ago some folks in a place called Sumeria got the bright idea that they would take some of those rules and set them down in a tangible form on stone tablets. through roughly 3:30 eastern time I will be taking you through both the underlying thought process that produced the preliminary Freddie Mac specifications and highlighting for you certain things within the specifications themselves. the code of Hammurabi was set down on stone tablets and became what we know today . papyrus began to come into use for recording rules. in some cases civil rules. regulations and contracts are all about controlling future behavior.4 We will begin with David Whitaker walking us through the principle revisions of the draft specifications explaining issues which the draft seeks to address. take it from here. Now about 4. And we are fortunate to have him as our guide as we walk through the many issues raised by the process of electronically originating and servicing home mortgages. in fact. So that they could go back and check later to make sure that they all remembered what they had agreed to. In about 500 BC. Jerry and I. As kind of a general proposition. Whitaker: Thank you. And we’ll be trying between us. In the case of statutes and regulations. we will be trying over the next few days to respond to the additional questions directly back to those who have asked them. And in about 150 AD the Chinese invented what we call today vellum paper. David. . that provide for the way we are to comport ourselves in the future. for penalties if we fail to do so. largely religious rules. the penalties may run from incarceration to fines. At the end of that time we will shift to the question and answer format. statutory law. to do our best to answer those questions. We are all fortunate to have David involved in this process because of his long time involvement both with UETA Drafting Process and with the enactment of ESIGN Legislation.at least we believe today. a couple that have arrived. the idea is you agree to abide by a set of rules and when you fail to abide by that set of rules there are consequences. Mr. one way or another.

our world has accepted for 4. and managing electronic loans. We simply assume the existence of procedures for establishing the authority to sign a document or the purpose for which a signature is used in a particular case or how the documents will be stored or retrieved or how we will maintain document integrity. which really preceded ESIGN and was enacted by 19 states largely in a uniform manner and by three more states in a partial enactment with some significant variations. and what will be required in order to establish the integrity of these documents at the courthouse and what internally will our auditors and technologists require of us in order to establish these systems in an effective and a reliable manner? The preliminary specifications are a first stab at gathering all of these kinds of rules in one place. selling. servicing.000 years the concept of placing things down in tangible form for future reference. But in at least 19 states we had a comprehensive enactment prior to ESIGN. in favor of using electronics. to gather together sellers. Now over the last several months Freddie Mac has encountered over and over again expressions from industry participants of a desire for guidance on the appropriate processes for originating. There’s really nothing global about it. ESIGN draws most of its principle provisions from the UETA. TheUnited States made the conscious decision to abandon that process. of our functional process to address these issues. These are all things that we have come to take for granted. A chance to gather the industry together.5 The bottom line is that our culture. On October 1st. This requires an amalgamation of legal requirements under ESIGN and UETA in addition to compliance with rules of evidence in place within US courts and also with best practices for audit purposes and for purposes of implementing technology. It applies in the United States but they needed the ‘g’ for ESIGN. These two statutes attempt to lay down a set of rules for how we will make this conversion from a paper to an electronic environment. And how the electronic environment is supposed to behave from a legal perspective. Incidentally the ‘g’ is in there so that they can make the acronym. that in many cases we don’t even realize we are addressing them. 2000. So there you have it. To gather Freddie Mac. it isn’t enough simply to ask what does ESIGN or the UETA say? One has to in addition ask. It is as natural to all of us as breathing. at least in commercial transactions and to a certain extent in other kinds of transactions via the Electronic Signatures In Global And National Commerce Act. It is a federal law. title . In other words. There are an awful lot of parts of the paper infrastructure that we use today that we simply take for granted. And in fact. In addition to ESIGN we have Uniform Electronic Transactions Act. They are so much part of our business process. storing. otherwise known as ESIGN. closing. And in particular for placing down in tangible form those rules that guide our behavior and a description of the penalties that result for failing to meet our agreement. It is part of our world and we take it for granted. servicers. Our challenge now as an industry as we attempt to move into an electronic loan documentation environment is to try to consciously build an infrastructure and convention for transposing these concepts into an electronic environment.

that the use of electronic records reflects an improvement in the process. So some of the specifications are implementations of law and some reflect our first cut at what we think constitutes good public policy. and enforceable is part of our obligation to control and mitigate risk. We need to understand what’s expected of our business partners. And making sure that everyone understands what their role is and that the documents are in fact effective. what do we expect from our vendors? What do we expect from each other? And what do we expect of the borrowers in this process? And perhaps most importantly. We want to . technology vendors. And we’re convinced that we need the entire industry to work together to make sure that we’ve got this process right. First of all ultimately. we’re sure we don’t have it right. Number two. we think it is awfully important as we move into this new environment if we have to go down to a court house to be able to demonstrate to a judge not only that the documents are technically and legally enforceable. We are absolutely dead serious when we say. Number three. In fact. we feel that everyone in the process from Freddie Mac to the lenders and the vendors and the settlement service providers and the title insurers and the hazard insurers all need to understand what is expected. not supporting the new environment constitutes a public policy error. as we have said on our website. But also that the documents are in fact a good public policy choice. And we’re hoping that the specifications. as we have said when we have contacted industry members to discuss this issue. the settlement service providers. why is Freddie Mac doing this? Basically there are four reasons. And we’re sure that we haven’t thought of everything. And to ask the question. to establish better efficiencies in the marketplace. And that means that it’s our asset and we securitize it to investors and we’re responsible for those investors and to the public at large to make sure that we understand what we own and that what we own is enforceable. the loan documentation evidence is a debt obligation that we own if we’ve bought it. Now I want to pause here to emphasize for you we don’t think we’ve got it right. to lower the cost of doing business in such a way that not enforcing these new kinds of documents and this new environment. hazard insurers. An opportunity to better deliver information to our customer. We’ve been asked over the last few weeks. that we are very interested in getting back any kind of comments anyone on this call or anyone else who has taken a look at these preliminary specifications cares to send to us. valid. We have the obligation and the right to be fully satisfied with the documentation that we are obtaining as part of that process. Because the bottom line is that we are looking to establish a set of specifications that the industry is comfortable with. as we are saying now.6 insurers. will constitute a consensus on the kind of checklist that the industry needs to use in order to establish that these documents are being effectively prepared and effectively utilized. when they are fleshed out by the industry. what are the borrowers entitled to expect from us? And what are they entitled to experience as part of a process in which they interact with their loan documentation electronically instead of on paper. And we need to understand what’s expected of each other. not just a set of specifications that we’re comfortable with.

7 know what you think we’ve got right. the Preliminary Specifications compliment that guidance essentially by promoting an industry dialogue concerning what the significance of the rules in UETA and ESIGN. If you actually have a copy in front of you and you care to follow along the page I’m actually going to start on is page 12. And we think that for purposes of understanding what is required particularly with respect to an electronic equivalent of a negotiable promissory note. We want to know what you think we’ve got wrong. either through technology or through agreement as the primary reference copy of a document. We do not have a firm notion at this point of exactly what it should mean. And we want to know what you think we have not made clear. We have had some inquiries from people who have asked. They do not make any judgments concerning technology and therefore are in no way contradictory to anything we have seen from Fannie Mae at this point. we are very interested in learning what might be wrong or right about those definitions. There simply are copies of an electronic record -- . I am very interested. either out of the statute or out of practice. In a lot of other ways when you look at the other parts of the Fannie Mae guidance. The first one is in Section 1. A couple of these definitions I want to draw to your attention. And underlying and surrounding rules are in connection with the kind of processes we need to have in place in order to make this effective. This is an undefined term in ESIGN and in the UETA. And an important thing to note here is that you will spot.2 where I want to draw to your attention the definition of ‘authoritative copy’. what we haven’t defined that we probably need to. We’re going to jump over the introductory materials and talk directly about the specifications themselves. They will work with XHTML. There is an extensive recap of the basic rules of law under the ESIGN and the UETA. You will note that in this first section we have a number of definitions. how do these two things fit together? If you look at the Fannie Mae letter it’s basically in two parts. What the industry thinks needs definition. They’ll probably work with a lot of other things. including a reliance on XHTML. almost immediately the absence of the word “original” from just about any of the provisions in the specifications. And then there’s an indication of some initial technical specifications and preferences that Fannie Mae believes are appropriate. But I can tell you under the statute generally what it is understood to mean is a copy that has been identified. And in particular. it’s important for the industry to have a common understanding of what is meant by ‘authoritative copy’. Now with that kind of background in place. that we have not yet effectively identified. You’ve probably noticed that the preliminary specifications we have issued are technology neutral. This is because in an electronic environment the concept of original really has no application. let me start to take you through the Preliminary Specifications themselves. We want to know what you think we’ve missed. I think. Now I also want to say just a quick word about the Fannie Mae guidance letter that was issued a couple of weeks ago.

Another one of these definitions that I want to particularly bring to your attention is ‘procedure or process’. such as checking a driver’s license for identity. the participants in that system will need to enter into a common understanding on a large number of issues including access rights. And if they do not consent then the document may not be taken electronic. Finally I want to point out to you among the definitions. In Section 2. That means that you don’t gotta play unless you wanna. There are a lot of questions that ESIGN and the UETA do not answer. or something that happens in the physical world.13 on page 13 of the specifications. Both the UETA and ESIGN are opt in statutes. distribution of system risk. There are a number of references to procedures or processes in the specifications themselves.8 there can be a first copy or a second copy or fifty copies but there is not in any real sense an original of the electronic record. and dispute resolution. or who are entitled by law to rely on that document. the people who are directly involved. Particularly with respect to the relationship among the parties who execute or may own an electronic equivalent to a promissory note or an electronic mortgage. most of which are self explanatory. And there is nothing in the standards themselves that makes a judgment at this point concerning whether the procedure is technological or nontechnological. what constitutes sending and receipt. before it can be taken electronic. Now having talked a little bit about some of the more mystifying definitions on page 14. What that means in turn is that if there is now a requirement that something be in writing. . I’d like you to note that when we say ‘procedure or process’ we are not talking about particularly or necessarily an entirely technological procedure or a technological process. But we are open to the concept that there may be other ways to respond to this set of issues and we’re certainly interested in your comments on what should be included or excluded or how system rules might be effectively implemented. And our reference here to System Rules is to the concept that as the systems of document control and document management develop. the people who are either giving or receiving that document.21 on System Rules. A ‘procedur or process’ may be as we understand it in the specifications something that is technological. This is a phrase that is used a number of times inside the specifications. And incidentally that’s at Section 1.1 we talk a little bit about some of the folks who might be expected to have to consent as part of a real estate transaction. we begin really the meat of the specifications by talking about what is one of probably the most important issues that we have to address in an electronic environment. And that is consent to move from a paper environment to an electronic environment where there is an existing legal requirement that something be provided or delivered or maintained in writing. Those issues have been left to a large extent for agreement by the parties. the concept on page 14. And so the UETA and ESIGN avoid that concept and so do the specifications. are entitled to consent. It’s Section 1. We think that probably those things are effectively handled through the use of system rules with respect to these kinds of loan document management products. or it may be a combination of the two.

And we expect them to be given the opportunity to decide whether to consent in a clearer. And that brings us of course to the most important party from whom we must obtain consent. Thank you David. if you jump in the pool we expect that you wanted to swim. Our view at this point. where both the borrower and the hazard insurer would need to be consenting to the concept of having the hazard insurance policy delivered electronically. That is to say if you are a particular lender or seller/servicer who is maintaining an electronic loan document management system and you have a certain number of title insurers who are participating in that system and they have all given you their electronic consent to deliver documents into that system that otherwise would be required to be in writing and to receive those kinds of documents. And he proposed an amendment. based on a reading of UETA and ESIGN.9 Now one of the things that has already been pointed out to me is that at this point the consent procedures and the consent provisions are a little too 2-dimensional. that consent may be construed from the circumstances. He’s a new democrat and a member of the house banking committee. We expect the consent to be informed. after it has been made effective by the consent of the borrower and the consent of the hazard insurer. then once you’ve obtained that consent on a blanket basis you can go forward. In other words. Buckley: Yes. except with respect to certain kinds of consumer transactions. which was called the Insley . if I can use that phrase. But the consent there is different because it’s not a consent that effects the document or the effectiveness of the policy itself but rather effects its introduction into the lending transaction. And then. could you give us a hand? Mr. straightforward and effective manner. And at this juncture what I’d like to do is to ask Jerry to rejoin us here for a few moments and talk briefly about the federal ESIGN’s expectations and rules with respect to consumer consent in a transaction where a writing would otherwise be required. or the borrower if you like. UETA and ESIGN both provide that if you start flashing electronic documents all over the country that probably you meant to engage in electronic commerce and you meant to consent to the electronic delivery of the documents. since the lender is relying on the delivery of the hazard insurance policy to establish one of its requirements for the loan it would also have to consent as well. The consumer advocacy community raised questions about the understanding of consumers and what types of transactions they were getting into and their ability to get out of such transactions if they find they couldn’t effectively operate in that medium. Congressman Jay Insley of Washington State took the lead in this area. They need to be more 3dimensional in the sense that in some cases these are documents in which more than two parties are at one time or another involved. We expect folks who are consenting to be told they are consenting. An example would be hazard insurance. and that is the consumer. Jerry. in addition. As part of the process of enacting ESIGN there was a need to respond to consumer concerns. is that consent for commercial parties may be obtained on a blanket basis. We are also aided here by the fact that again. And that was a barrier to passage of legislation in the House of Representatives unless consumer rights were more clearly defined.

David? Mr. The consumer consent may be given electronically by reasonably demonstrating that the consumer can access the information in electronic form in the form that is going to be used to communicate with the consumer. Moreover the provider of the electronic records must again comply with the axis verification provisions which I discussed earlier. There might be the consumer’s e-mail confirming that the consumer can access the electronic records or there may be another form of acknowledgement. which may include termination of the party’s relationship.1 of the Specifications. And it spelled out the rights that the consumers have in connection with electronic transactions. And so that’s the. Prior to obtaining consent an electronic record provider must deliver a clear and conspicuous statement informing the consumer of any right or option of the consumer to have the record provided or made available in paper form. the consumer must be provided with a statement of revised hardware and software requirements. And they have to let the consumer know what the hardware and software requirements will be to access or to retain records. between those items . Jerry. which once again are open to discussion. They also have to let the consumer know whether the consent applies only the particular transactions that give rise to the record or to all identified categories of records provided during the course of the parties relationship. you’ll find our first stab at trying to implement these requirements under ESIGN. And whether any fee will be charged for such a copy. 18 and 19 in Section 2. The consumer may by some affirmative response indicate that they are able to obtain the disclosures or other documents or agreements in the form that the financial services provider or other commercial entity is providing them. obtain a paper copy of electronic record. if the consumer withdraws. We have made a couple of policy choices at this point. if there is a change in heart or a software requirements needed to access or retain electronic records that creates material risks that the consumer will not be able to access or retain subsequent records. And really the requirements are fairly understandable although they will be something that has to be done on each transaction. which would be a fine distinction. presumably all home mortgage transactions.3. after consenting and upon request.10 Amendment. that’s the boiler plate that’s in the statute and will be required in connection with any consumer transaction. They also have to provide disclosure that tells the consumer about their right to withdraw consent and any conditions or consequences. After the consumer has consented. The first is that we don’t intend in our view to make a distinction between. be they financial services transactions or others. Whitaker: Thank you. They also have to let them know the procedures the consumer must use to withdraw consent or to update information needed to contact the consumer. They have to let the consumer know how the consumer may. If you look on pages 17.

We can see no objection to that legally. For other participants of course we have set some standards but they’re fairly abbreviated. Things that in any event it seems to us the consumer would need to know anyway. However there are a few policy choices made as you work your way through the Specifications in addition to strict compliance with the law and the question of exactly how consent should be approached with the consumer. So that if you are an individual and you wish to consent to act electronically you would be in a position to execute a power of attorney granting that right to consent to another person. There have been some questions about this. Finally you’ll note that we have observed that it seems that it should be perfectly appropriate to be able to give someone a power of attorney to consent. what kind of circumstances? And what does that variance mean as a practical matter for us in terms of how we evaluate the transaction? On page 20 we move onto another topic that is of course near and dear to everyone’s heart in this process. If any of you happen to think of one please let us know. As we’ve begun to have conversations with vendors and lenders and other parties to the transaction. what is the right moment for the consumer to consent in this process? And if it’s going to vary depending on circumstances. It is a highly technical analysis to determine when exactly an ESIGN consent. we have noticed here as much as anywhere a tendency to take for granted certain processes that happen almost unconsciously in the physical paper world that we think we need to be careful to pour over into the electronic environment. I encourage all of you to take a close look at what we envision as the potential consent process and to provide us with your insights on how we might improve what we have written here. One of the core concepts in ESIGN and UETA is the notion that we can do away with the pen and the ink. given the fact that we must have consent before delivery of most documents to consumers. is applicable in the appropriate state. or a non-ESIGN consent under perhaps the UETA. That is to say the signing of documents. the timing of consent issue. All of which would be signatures under existing law and instead we can go to a signature in an electronic environment.11 for which a consent involving the Consumer Consent Provisions under ESIGN would be required and those parts of the process where the consumer's consent would not necessarily require compliance with ESIGN. what we’ve missed and what we might want to add or subtract. it is an area in which once again we are quite sure we don’t have all the answers. First of all we need to be paying careful attention to the question of authority to sign. and with the X or even if you like. The notion is of course that commercial parties are largely able to take care of themselves so long as they know that they’re consenting to something. and that’s execution. having capacity to . And our view is that for the most part as you work through the ESIGN Consent Provisions For Consumers most of them are simply common sense provisions. When should the various parties consent? And in particular. Moving on then. with the spitting on the page. Of course in the case of an individual we’re largely thinking in terms of being of an age of majority. I encourage your thought on this subject and your responses. Well. I want to hit just briefly on page 20.

trusts.4 that are technological in their nature. And it’s simply one example among many of the questions that need to be asked. we’re looking at the question of from where do they derive their authority to act on behalf of their principal. gotten it right or wrong. think about those questions and ask yourself how we might flesh out these rules in order to make it clearer to the parties what they are engaging to do when they sign. partnerships. I ask you the question. Where if you think about it today if the hazard insurance policy arrives on a preprinted form. or otherwise incapable of making decisions for yourself. what kind of check on authority are you accustomed to now and would you expect or want to have happen in an electronic environment? Today we also expect to see evidence of intent to sign.1. And for those of you who would be settlement service providers. looking at Sections 3. We think we need to be conscious in electronic environment of reproducing that experience and making sure that everyone who is signing a document understands what they’re signing and understands what their signature signified with respect to that document. are we then entitled to inquire no further concerning the authorization of the signature? That’s an area in which we would be very interested in the thoughts of the parties in interest concerning what should or shouldn’t be required. Let us know. Is it an agreement to the terms of the document? Is it an agreement that they’ve received the document? Is it an agreement that the document has been sent? Or an indication that you are the sender? These are all things one might use a signature for and usually the context currently supplies us with an understanding of what that purpose is. 3. They are essentially inquiries to our friends on the vending side of the fence concerning whether or not their systems have been devised in order to accomplish certain things that appear to be required by ESIGN and the UETA.3 and 3. usually in facsimile. And I think that one of the questions that is important to ask here is for which parts of the mortgage lending transactions do we simply take authority for granted currently? In which case we may be justified in taking it for granted in an electronic environment? And where do we actually check currently? A good example might be with hazard insurance.1.1. corporations. . ostensibly signed by an authorized representative of the insurance company. If you look on page 23 and 24 you will see essentially two items. So as you look on pages 21 and 22. not being mentally ill. On that theory is it appropriate for us to take the same basic position in an electronic environment? That if the policy is in fact delivered and we know it has been delivered by the insurance company that signed up to engage in the process or participate in the loan origination system.12 contract. We would welcome comments from vendors as to whether or not we have expressed that correctly. For representatives of legal entities. This is usually expressed either through a statement in a document itself concerning what the signature accomplishes or through surrounding circumstances.2 and the subsections underneath that section on pages 22 and 23. we usually simply take that for granted as an effective signature and do not further inquire.

public infrastructure or dual-key encryption as an alternative for the notary process. which is not something that we address in detail in the standards. But beyond that UETA and ESIGN do not change any other state law requirements with respect to notarization. And so at this point we. at Freddie Mac. And ask yourself what kind of additional guidance as either seller servicers. On the other hand there is the chance for overkill. You might look through that section with an eye towards the balance it tries to strike and ask yourself whether or not you think that balance is correct.13 Attribution of course is the concept of attaching a signature to an individual. That brings us to Section 3. There does not have to be a stamp and a seal although the information that was on an embossed seal or on the stamp has to be included in the notarization. are feeling very cautious about the concept of changing the requirement for personal appearance before a notary for the notary to either witness each document as it’s being signed or to witness the acknowledgement personally of those signatures by the signer. the opportunity that we may actually require too much in the way of attribution compared to what we are requiring today. The UETA and ESIGN provide that a notary can sign a document electronically. to still be looking even when we’re having an electronic closing in the sense of electronic loan documentation prepared to expect that there will be a physical appearance with a notary for the purposes of executing documents. It provides that the stamp and seal goes away. Are we going to produce an authentic analog for that by going to any type of remote public key infrastructure based equivalent for notarization? Our approach at this point is to address this with caution and to at least the beginning of this process. for example. we have had questions raised shortly after the ESIGN legislation passed. Mr. Jerry. To begin with. notarization. We are a little reticent at this point concerning proposals to use. at this point I’d like to pause for a moment and ask you to talk in connection with the notary issue about the question of filing down at the county clerk’s office. Both the American Bar Association and some of the elements of the academic community and at the county recorders association as to whether the ESIGN act would require a county recorder to accept an electronic filing. If in fact as the National Notaries Association maintains and the American Society of Notaries maintains the notary actually serves both a ceremonial function and a protective function by establishing an absence of duress and the existence of self awareness and awareness of the document. or other participants you might care to have concerning the level of attribution or the level of security one would need to have associated with a signature attached to a particular type of document. or vendors. And it’s . Buckley: Well. You might talk for just a few moments about what we currently see the situation to be and how we expect things to develop. And this is a subject where of course technology provides us with an opportunity to potentially improve the process of establishing our confidence with respect to the identity of the individual who affixes the electronic signature.2. in most states we don’t think it meets current legal requirements and we also have a serious policy issue.

side A).. We are also of course trying to set some standards for delivery methods. and the Electronic Financial Services Council to render an opinion on this.own equipment. It would not necessarily be true that you would have to preserve that formatting if you were to print out a copy of that document for reference. Our law firm. And there are fines or other penalties for failure to accept a document that is presented for recordation. In fact the UETA and ESIGN both make reference to the fact that the copy you are able to access needs to preserve the information but not necessarily all the formatting. which is on page 27 if you happen to have the printed copy. And a number have been done. We’ll move on to Section 4. And if you don’t. in particularly the technology vendors concerning the appropriate standards that should be set and the way in which these standards should be expressed. And that means for all intents and purposes that particular documents are going to have to stay on paper for the time being. 2000. if you look for Section 4 and Sections 4. At this point we have simply addressed a legal question.. Now an interesting thing to note is that if you’ve agreed to move into an electronic environment the document that has to meet those requirements is the one that’s displayed electronically. With those things then behind us. and the good news is we’re about to pick up the pace a little because the concepts of consent and signature are perhaps the most important core concepts that we wanted to lay out in detail for you during the first part of this presentation. And what is and is not technologically possible. This is particularly of interest because the UETA and ESIGN do not change the existing formatting requirements. raise some interesting technological questions because of differences with respect to how consumers have their equipment formatted (end of tape 1.14 understandable that. will be more rapid than one might have thought a few years ago. I am told. And we think that progress in this area. Whitaker: Alright. we are anxious to work with recorders toward achieving electronic filing.1 and 4. there was some consternation in that community that if that were the case they wouldn’t be ready. And what we will have to tell consumers about the configuration of their equipment in order to effectively deliver these documents in conformity with law. David? Mr.2 we are trying to figure out the knotty question of document format and delivery. given the disposition of many of the recorders to move in this direction. the Consumer Mortgage Coalition. given the large number of recorders who would not be ready to do that with the effective date being October 1st. except under the federal ESIGN . And while the statute is subject to various interpretations we think that the clear intent of Congress and the intent of the statute is that the recorders are not compelled to accept an electronic filing. was called upon by the American Land Title Association. But that does. If there is in fact a requirement that says that you have to deliver this by hand or you have to deliver it by first class mail postage prepaid that is not changed. If there’s a requirement right now that a document be in bold face or that it be in a particular size font those requirements do not change. Both the UETA and ESIGN leave in place existing rules that may require a document to be delivered by mail. Goodwin & Proctor. That having been said. And we are very interested in input from all parties. which is the issue of using electronic delivery where the law currently requires postal delivery or hand delivery of documents.

In Section 5. Are these subjects on which we need to address the issues more deeply or in more detail than we have at this point. And from the technology point of view whether or not what we described is achievable. And remember I talked earlier about the definition of authoritative copies. And whether or not what we have described is clear. we are extremely interested in your feedback so that we can start to develop a good solid industry . and either an initialing of a change or perhaps an amendment to the document itself. sending an e-mail to which there is or in which there is included a hot link to a website at which the document itself is located. In a paper world. document integrity. One of the most significant issues we think is tracking alterations and versions. In order to provide confidence at the end of the day to a court that the document has not been tampered with once it has been executed. We are particularly concerned of course with preventing the later alteration of signed documents. we think it’s important for the systems that are put in place to keep track of the versions and the changes as one comes up to closing. We are extremely interested in the industry’s take on whether or not we have the concept right. when you sign a piece of paper the concept is that after that date it’s not supposed to be messed with.2 and 5. The question then is. as much as any other. And in fact having the signature on the document is supposed to essentially be a signifier that changes to the document that happen afterwards would require a revisiting to the document by the signer. Now in Section 5.15 act under some circumstances it may qualify for delivery electronically even if there’s an existing state or federal law mandating postal requirement. In the same vein we think it would be very important to be able to demonstrate to a court that once these documents have been executed the loan management system is designed such that it will not be possible to change those documents without those changes being detected. Now the question for all of you is what else do we need to say about delivery issues? Do we need for example to talk about the concept of delivering documents by say. On page 29 if you happen to have the printed book in front of you. On this subject. We start to talk about the question of trying to maintain the documents over time so that we have confidence that if the documents must at some point be taken down to a courthouse they will be enforceable. what kinds of standards should be set in this kind of document? How should the specifications address that issue? What kinds of sub-issues do we need to address which are not yet addressed in Sections 5. for example.3? Finally in Section 5. So it’s possible to demonstrate how the document was modified as negotiations and plans continued and changed and so that at the end of the day the court can have confidence that they have seen the process by which the final document package was created and put together.5 we talk about identifying the authoritative copies.5 we attempt to carve out or we like kind of flesh out the concept of what constitutes an authoritative copy. We all know that in the course of preparing a loan package for closing that there are any number of variations and any number of changes that get made to documents that the documents themselves go through a number of iterations.

So for heaven’s sakes whatever else we might do let’s not start talking about shredding paper promissory notes. two-volume examination set on data management and information systems that the FFIEC uses when examining financial institutions. how we think it should manage the relationship between the electronic documents and the written documents. And by that I mean the kind of transactions I expect to happen a lot. written documents and electronic documents should be related to each other and how we should describe the process by which they are related in the specifications. This is a central concept under transferable record and therefore one we have to pay a great deal of attention to.16 consensus on what constitutes an authoritative copy. concerning physical environment or 6. There is also the question of overkill. And if you were to digitize it and then shred it there’s a very good chance you’ve forgiven the debt. . Section 6. which begins on page 31 if you’ve got the book in front of you.2 concerning processing or 6. or how a loan management system should interact with a hybrid transaction. We are very interested in insight concerning what we may have right and wrong here. And in particular we are interested in trying to get a better feeling for how these two different sets of documents.4 that we have attempted briefly to address the question of hybrid transactions. These are issues that almost all of you are probably familiar with at some level through your IT departments or through your third party providers of electronic data services. If there is anything in the world clear under the UETA and ESIGN is that once a promissory note is executed on paper it stays on paper.1. which are the ones we are most familiar with? And what would be the appropriate level of application of those standards to this process? We are looking for your input with respect to those standards and with respect to the kinds of rigor that should be applied to the management of electronic loan documentation. That is to say a transaction where some of the documentation occurs electronically but there may very well also be documentation which occurs in a paper form. The real question is at what level should specifications address this issue? What level of guidance is necessary and to what extent should this be left to other sets of standards? What other standards are there out there besides the FFIEC standards. One thing that’s very important I want to point out to you is at the end of Section 6. We have provided here some brief guidelines concerning how we think those kinds of systems.4 you will notice that despite the fact that we contemplate that most documents that begin on paper might eventually end up being electronic. are the kinds of issues that are raised for example in Section 6. To what extent are those overkill given current circumstances and unnecessary in the view of industry participants as part of a mandatory specification? I also want to point out to you in Section 6. talks at a very high level concerning records management issues. The FFIEC as is mentioned here actually has a huge. that we don’t mean it with respect to the written promissory note. given the way in which those documents are managed today. To what extent.3 the technical environment.

titled Systems Administrators and Document Custodians. This once again is a question largely to the technology vendors and the IT people. the relationship should look like among the vendors.3. Obviously this is a … we refer to this as a 30+7 transaction. This is another area I think I mentioned this briefly earlier where we’re quite sure we don’t have it right yet. What relationships should these parties have to each other and what warranties should they be providing to each other? And what warranties should they be providing into the secondary market? Once again we stress nothing in here is written in stone. after all Freddie Mac will not be involved until the transaction’s ready to be smoothed into the secondary market. from my point of view. This is our very first cut at what it looks like to us. And Contract Terms which is in Section 8. And we are open to discussions concerning who should be accepting responsibility for what parts of the specifications and compliance with which portions of these specifications? I want to particularly draw to your attention Section 8. Section 7. what kind of specificity. producing the potential for a need to be able to reproduce these documents for 37 years. Warranties. One thing that almost anyone knows who has worked with legacy systems is that at the point at which you have a large amount of data and a large amount of value stored on that system you can find yourself in a difficult . It’s a 30-year mortgage in most cases and then there’s 7 additional years for the IRS. what is not reasonable to expect. we are very interested in input from the industry concerning what we may have right here. What in this particular set of standards is not yet clear as you read through these? Are there portions of this that are confusing? Are there portions of this where you don’t think we’ve got it right concerning who should have access and how? And from the technology vendors in describing the changes in status of access. Section 8.3. the sellers. when do those new parties first obtain their access to the documents? And perhaps most importantly since there is a clear legal requirement in UETA and ESIGN that a consumer who has elected to accepted and use electronic documents have the opportunity to have continued access throughout the life of the transaction to those documents. document custodians if that is yet a different person. what is reasonable to expect. What do we do. when and how? And when their need for access ends how do we terminate that access? And when a new participant comes into the transaction.17 On page 35. which is on page 39 and 40 if you have the printed book in front of you. what we have wrong here. one of the most important issues that has to be addressed in this space. what kind of clarity do you need concerning our expectations that is not yet provided concerning when and how and who has access to the transaction? We are also very concerned about data survivability. if they are different. persons who are administering these loan management systems. The question is who needs to have access to documents in electronic loan package. talks about what is. or what do we have to say in order to establish or in order to set standards for the future survivability and access to these records as part of this process? If you’ll move to page 38 to Reps. document access. how do we provide access for consumers? We are very interested in the insight you can provide to us concerning the proper way to describe and to establish access rights.

At this point the guidance concerning transferable record is largely limited to a repeat or recitation of the requirements in the law. if the owner of that note needs access to those records they get access to those records. . But what we will emphasize is we expect the approach. If in fact this concept is not palatable to some of the players then we are certainly open to the notion of an alternative approach. what kind of additional guidance or what kind of additional industry consensus is necessary for the industry to be comfortable that these six requirements have been addressed? Now. that there will never under any circumstances be steps taken to prevent the owner of the debt obligation from having access to the electronic records. It is our belief that this will need to be fleshed out. And one of the things that I am suggesting as part of this process is the concept of the bifurcated license. beginning on page 40 in Sections 9 of the document you have some guidance concerning transferable record. And at this point. that no matter what kind of arguments or negotiations may be in process. And they are in a position to hold that information hostage.2. access to the data underlying the electronic records. which you will find as bullet points under Section 9. We are quite clear on one point. the notion with respect to software providers that with their licensing of software to the participants in the system that there’s a difference between the license for a loan that has closed and a license for a loan yet to be entered into. This is of deep concern to us because in the case of loan documentation we are talking about the asset itself. whatever it may be. of what we own. Once again we invite comment on this subject. that brings us to the end of an overview of the consent of provisions and the other preliminary specifications in the preliminary document. to learn what additional guidance they need concerning compliance with what I refer to as the six control provisions in the UETA and ESIGN. once again from the perspective of the technology providers. With respect to a closed loan. vis-a-vis a provider of that system who is looking at a license renewal or who has control of your data and you are attempting to maintain control or you are attempting to negotiate a renewal of that license. our expectation is that the right to access the software and utilize the software in order to manage that document becomes perpetual. Although it’s certainly possible that with respect to new transactions as it comes time for license renewal the parties would negotiate with respect to the continuing use of the system for the generation of new loans. We are particularly interested in the suggestion of alternatives. Do the technology providers think at this point that they have those issues knocked? And if they do not. just about exactly on time I’m pleased to note. and that is that these systems must be constructed so that it is clear to all parties that no matter what else may happen.18 position. the physical manifestation if you will. that no matter what other disputes may be ongoing. And we are particularly interested. This is probably the only thing in this set of our initial specifications that is close to non-negotiable. Finally. to secure the right to the data and to secure the right to the documents until such time as the loan is paid in full. The loan documentation is the evidence. The notion is that no matter what else may happen.

. I think what we’d like to do. press 4. Another multiple choice question. Buckley: Thank you. is to have you start to take us through some of the questions and perhaps also through some of John’s additional polling questions. Our hope is that when these specifications are completed that they will be in such a form that it will be possible for a technology vendor to sit down or an internal IT department. Whitaker: OK.com or through the www. There was a question that we received that says. press 1.org. Jerry. for those of you who may be trying to develop this capacity or this capability internally. Buckley: Maybe it would be a good idea to pause now and let John. and press 4 if undetermined. “How does the. And the thinking that went into them. if undetermined. press 2. in the next year. participation is confidential. As are the askers of these questions confidential. And our next polling question is this. John. And the answer is. press 3. Again our polling question is. Whitaker: You’re gonna let me field that one. huh? Mr. Let me go to the first question which I can answer myself. Jerry. Mr. There was also a question about can we obtain a recording of the session? That had not been anticipated and we will have to look into that. six months. Mr. And in fact I think that. Finally someone wanted to know if they could have a list of the participants. press 2. having reviewed the people participating here. what the heck. And I’ll turn it back over to you now. press 1. site of the Electronic Financial Services Council where there’ll be a link as well. It will be online next week and will be available through either emortgage@freddiemac. will your company offer electronic mortgages in the next. It was a question about which is administrative in nature. John would you like to ask another polling question at this point? John: Yes.. certainly.By the way. Mr. So we will not be disclosing a list of participants to the public. Now to a more substantive question. And the answer is yes. Mr. press 3.effcouncil. Can we obtain a transcript of the question and answer session? In fact of the entire program I think is what the questioner had in mind. how can a lending institution verify that technology applications they choose for supporting electronic mortgage transactions are compliant with ultimate specifications? Is it enough for the technology vendor simply to certify their compliance to the lending industry?” And David I’m gonna let you. Here’s what I think the way I think this plays out in the real world. if two years. Will your company offer electronic mortgages in the next. in the next two years. that you will be in a position to sit down with the specifications and . 6 months. Buckley: Yeah. in the next year. probably that question would apply to anyone who is providing a settlement service. Will you provide electronic settlement services in those time frames? Not only mortgages because you may be in other businesses related to the origination of home loan.19 Jerry. thank you David that was a good tour of the specifications. I know we’ve gotten a number of questions in.

of course to a certain extent. to provide you with documents that are appropriate to that state. will look to the seller and servicer. as in-house council. be it an internal system or an externally provided system? If I were still inhouse at a bank. As I have had it explained to me. either in-house or out of house. on LINUX. that you see the concern on that issue reflected in the Fannie Mae guidance letter in which they indicate that their first preference at the moment for a technology solution is the use of XHTML. in the different states in which you operate. And you ask certain questions and you check certain things but you also. my answer to that question would be that I would expect to sit down with those who are providing the technology. which I once was. And once again what will play into this is the industry’s general reaction and approach to the issues raised by Section 8 of the preliminary specifications. Now at that point the question becomes. Do you think we need to address that further or can we move on? Mr. Jerry. I’m told.” And that what will happen probably from a flow point of view with respect to warranties is that Freddie Mac. “We are looking to you just as we ask you today to warrant to us that the documentation is prepared. Those of you who rely on outside document providers today are relying on them of course. Where we get hopefully a better view for what the different parties in the transaction view their appropriate role as. And that. rely on them to provide you with comfort on this subject. I expect the same kind of dynamic to work in this environment. That is to say it is based on an extremely old and venerated system of character-based information. To go through and say.” We will be looking to the seller to warrant that with respect to the electronic documentation. and particularly to the seller. on an old MS- . that makes it extraordinarily portable across platforms. one that you did touch on briefly but this questioner wants to know. Obviously just as with a paper system there is no absolute certainty. I hope that’s pertinent to the question. Another question. “OK we’ve got X covered and Y covered and Z covered.20 essentially use them as a type of extended checklist. I think that the short answer is that. particularly with respect to certifying to those of the chain as to what has and has not happened. as a secondary market participant. from a best practices and a due diligence point of view. on Windows. XHTML is essentially a hybrid of extensible markup language and hypertext markup language and is ASCII-based. we still need to work on M. and will say. Whitaker: If I had a complete answer to that one I would be vying with Bill Gates for ownership of his home in Washington. Buckley: I think you’ve covered it. “How will documents with a potential life of 37 years remain accessible as technology changes in the future?” Mr. and to go through the final specifications with some rigor. We don’t have M covered yet. has been prepared and executed appropriately. Oops. in order to make sure that I was at some level satisfied that in fact all these issues had been addressed in a way that I viewed as appropriate. what will the seller/servicer then require of the vendor and of its internal auditors and its internal process owners as they vet the technology system. work for example today on UNIX. It will.

And Jerry. not because I don’t know the answer. So that it appears that the initial thoughts from the technical folks at Fannie are that this kind of format presents a more reliable and robust method for maintaining the documents over time. I do and if I ask it wrong. Do you perceive electronic mortgages as a benefit or a negative to: press 1. But I can tell those of you who are on the purchasing end that you will undoubtedly have contact with some vendors who have had their eye on this ball and who believe they can convince you that they have got an appropriate solution. Here’s one that. David. Buckley: I think so. It does not at any given moment have to be the same copy it was five years ago. press 2. It is my view. and on a Macintosh system as well from Apple. to the complexity of doing business. if your cost of doing business. for example. The UETA and the ESIGN both provide that the holder of a . And I’m having to pause for a second not because I don’t. “Do you perceive electronic mortgages as a benefit or a negative to. I think you’re asking really is it gonna be a plus or a minus to your. I’ll turn it back over to you. Of course we make no endorsements at this point concerning that subject. all UETA and ESIGN require is that at any given moment there be an authoritative copy that the management system is able to identify. but because I do. Buckley: Thank you. Whitaker: That is an interesting question on a couple levels. Great. Jerry? Mr. so I’ll ask it again. “What happens if you lose authoritative copy of a note? How does a lost note. The question is. in either of those categories. Mr. I also know that there are a couple of technology vendors that have specifically addressed this question of survivability in their systems development. Do you have another question here that’s one of your polling questions you’d like to insert at this point? John: Yeah. And go ahead and vote now. And that they at least at the moment are holding themselves out as having accomplished that. Mr. let me ask John. But let’s suppose that that were not possible or that backups were not maintained or that something disastrous happened to the backups as well. Jerry. if one were to have a server failure that resulted in say the elimination of the authoritative copy of the note. or complexity of doing business? Is that how that should be asked. So that. your cost of doing business. believe it or not. press 1. it’s my view that it would be completely within the construct of the UETA and ESIGN to do a restoration from a backed up copy of that note and to establish a new authoritative copy. Whitaker: John. John.21 DOS system. correct me. and I am of course very interested in alternative or opposing views at this point. First of all one of the things one has to understand is the concept of authoritative copy as it is contained in UETA and ESIGN does not necessarily mean that the same copy is the authoritative copy from one point in the transaction to the next. Because I’m trying to decide how to approach it. In other words. John: OK. how would a lost note affidavit be done in an electronic mortgage context?” Mr. press 2.

Whitaker: My interpretation of the UETA and ESIGN is that the use of a mirrored copy would be acceptable.22 transferable record has all of the rights of a holder of a promissory note under Article 3 of the Uniform Commercial Code. Does the authoritative copy have to be available to be displayed to the owner or can it be securely stored in a designated location? Identifiable unique identifier with only mirrored copies available to the authorized party? Mr. Simply because a lot of our problems today with loss of notes has to do with physical mishandling. They are entitled to access to the authoritative copy for two purposes. in the final specifications. And if there are folks out there listening who think that I’ve got that wrong and think they know why I think it would be a very good idea for you to let me know. address the question of whether or not they have to have access to the authoritative copy itself or whether a mirrored copy outside a firewall would be acceptable. here’s another one. Jerry? Mr. That happens as part of the process surrounding the actual act of signing. to your lost note affidavit today. One is to reestablish its terms and number two is to check the ownership registry so they know who the note holder is. The registry does not have to be part of the debt obligation itself. Essentially your lost note affidavit would be almost identical. The rights would exist just as they exist today to enforce that obligation. It has to be logically associated with the debt obligation. Mr. perhaps in some except in some small details. Buckley: OK. It’s part of the process surrounding the signature. It’s not a matter on which I think there is complete consensus in the marketplace at the moment or among legal scholars. now. in an electronic environment. Because I believe we will. Really all you lose is the same thing you lose today and that is the right to further negotiate that note. Whitaker: The answer would be the same as it is today. Now again. what they’re entitled to is to view the authoritative copy. One of the rights of the holder of a promissory note under Article 3 of the Uniform Commercial Code is the right to enforce a lost promissory note. And in fact in some ways therefore it is possible that this could be an improvement in that respect. except for things like physical crashes the chances are that the rate of note loss would be far less than it is today. Buckley: OK. You don’t establish mental capacity or majority when the person puts a pen on a piece of paper and signs it. And that ties directly back . And with respect to the authoritative copy itself. The good news is also that. So I’m definitely open to being corrected on that subject. But I see no reason from a technological point of view why that could not be accomplished through a mirroring process. Just as today you could not negotiate the note to a new holder in due course after you had lost the written original. If you were to lose the authoritative copy and be unable to restore it you would not be able to negotiate the note further to a new holder in due course. And without that as a problem as part of this process we would actually anticipate a significant reduction in the need to ever pull out the old lost note affidavit. Does the age check or legally incompetent requirement need to be fulfilled by the signing act itself or simply the process around accepting a signature? Mr. that is another issue on which that’s a matter of opinion.

What we ran into. “Look we’ve got the graphic of your signature. which may be burned into the electronic documents as my signature. I’m real skeptical. And that’s a personal opinion. And the documents are signed electronically after the customary display of a driver’s license and a major credit card. Signing of a document is intended to perform one of about four functions. Here’s the next document here’s what it is.” Not that they slavishly reproduce whatever you’re using as an electronic signature 40 times. Whitaker: I want to get that out then. I could actually sign my name on that scribble pad 45 times.2. But they are also perfectly capable of being accomplished just as they are today and they would not have to be part of the signature process. Mr. What I think though is important is that the party actually have a chance consciously to say. I’ve had a chance to look at it. in which case we’re very interested in knowing about them. Mr. And in demonstrating the document execution system they showed me how neat it was that you could sign your name. is to slavishly reproduce that scribbled . That’s a good question. Here’s what it does. They may already be out there. Buckley: Now here’s an illustration related to Section 3.3. And they said to me. either using a scribble pad or typing the name out once.1.. “Yes I want my signature on this document. And if you apply a signature to 40 documents at once or 25 documents at once I think you’ve got a real problem with your process when you go down to the courthouse. So for example. “Could you please clarify this example?”. Here’s your intent in signing it. let’s say I was using a process where I was actually signing my name on a scribble pad and then I have a graphic. I’m sending it. “Yes. It may not turn out to be true. Here’s the concept. I actually ran into someone who was demonstrating a document execution system. Or I could sign my name once and then as each document is presented I believe it would be perfectly effective to say.. “No. I don’t want my signature attached to this document. These are processes that we may find electronic analogs for over time. I think. I could conceive for example of a process for signing where in fact you still have everyone gather together in a closing room as they do today.” Or you can click. Are you ready to go? Yes or no?” And you can either click. which is what I got asked for the last time I bought a house in Maryland. This constitutes an electronic signature. says the questioner. I’ve got it. Mr. The idea is that the signature process will probably include both electronic and non-electronic elements. “Isn’t that wonderful?” And of course as a banking lawyer I clasped my hands over my chest and had to reach for the nitroglycerine pills. I want my signature attached to this document. Whitaker: OK. I agree to it.23 into the definition that appears for process or procedure in Section 1 of the specifications. And then they pressed the button and that signature was attached to fifty documents all at once.” But what you don’t have. I’m not ready yet. Mr. This is worth a couple of minute explanation. Buckley: The electronic signature is created once but then associated with each electronic record independently by affirmative act of a signer confirming the intention to sign electronic record. Somebody got specific on me.

at least beyond pilot stage by the middle of 2001. it is our expectation that given what we know today concerning the status of the technological solutions that are out there. I thought that’s what we were doing. “Are we planning to certify vendors?”. In other words it’s not going to be one of those things I think where one flips a switch and suddenly there are a gazillion loans coming. Let’s try to clarify a little bit. “Let a thousand flowers bloom. And that means that we potentially might be certifying one person ahead of another person when both have perfectly competent systems. However if the industry thinks it would be valuable and if the technology vendors think it would be valuable. I think at this point I would say it would be our hope to see loans coming in electronically on a production basis at some level of volume that is at least. Here’s one. But certainly in the middle 2001 time frame we would hope to see these in on a production basis.. It can move real fast or real slow.. You know our perspective on this is. How quickly this moves is to a large extent gonna be up to the folks on the other end of this telephone call.. Mr. Because in case you haven’t all noticed. that we expect this to happen gradually. We are hoping that when we get finished with these specifications that they will provide guidance. both because of consumer concerns and because of the question of bringing the appropriate industry players online. So we are very reluctant at this point to get into the certification business because we’re not sure that it is a fair approach. At this moment we have no specific plans to do such a thing. getting them comfortable with their role in the process.24 signature or that typed signature 45 times but you do have to consciously attach it to every document in the package. Buckley: Alright. But we are certainly open to the thoughts of the industry concerning whether or not we have the right take on that. Buckley: Here’s one regarding timing. “Is Freddie Mac going to address authorization certification requirements stating what requirements Freddie Mac would be comfortable with?” Mr. Why? We’re concerned about the fact that we do not want to create an anti-competitive environment of any kind. They’re interested in. I will say this. to say this vendor is a Freddie Mac certified loan technology vendor. we’re out there in front . we do not have such plans. But I would say at this point. It would be sequential. I think the answer. If the question is at this point is. Possibly a little earlier depending on developments. Possibly a little later depending on developments. Jerry? Mr. it’s certainly something we could take under consideration. Whitaker: I gotta admit that’s a stumper. Whitaker: That’s another one that if I knew the answer to I’d be preparing to retire. “When will Freddie Mac purchase electronic mortgages in significant volume?” Mr.” And if there are three or four or five or ten providers out there that can meet these specifications it would take us an awfully long time to plow through those ten and with the resources we’ve got available we could probably not do it on a parallel basis. flowing into Freddie Mac electronically. given what we know today about the infrastructure status of the industry and of the settlement service providers. I believe that what will happen is that production will start slowly.

Whitaker: Jerry.. Whitaker: A lot of mixed metaphors. Seriously. Mr. Well. There hasn’t been as we mentioned at the beginning.” And so my view is that no. Whitaker: Number one. And certainly the questions gonna arise over time that we don’t have the answer to. to be answered is the perspective of the bond rating agencies and the various and sundry regulatory authorities toward these loans vis-a-vis paper loans. That is “Are regulators going to feel the need to supplement ESIGN with additional guidance? And will such guidance be sought by the industry?” To this point we are unaware of any regulatory guidance that’s being. Mr. Buckley: Regarding specifications. Mr. it’s actually better. Clearly I think one of the questions that has to be. Jerry? Mr. they’re wondering how far you’re gonna march. as an industry resolve to approach this effectively and in a sober manner. Mr. But there are certain hurdles that’ll have to be met by a regulator if they’re gonna do anything that is in anyway contradictory to what is permitted under the ESIGN legislation. Will Freddie Mac be converting electronic mortgages into mortgage backed securities and is there any greater risk with this type of investment? Mr. kidding aside. really not at all so far. I cannot imagine taking these in on any kind of production basis and then not converting them into mortgage backed securities cause that’s what we do. Mr. Buckley: Here’s one. So there isn’t a requirement for regulations. So when y’all are ready and we’ve got all the pieces put together and we’ve got the clear consensus in the industry concerning who’s supposed to do what. I believe there is every intention to turn these into mortgage backed securities. in fact. It does not require regulations to become effective. Buckley: Well. So long as the industry takes a resolution now to do it right. So we’ll see how the industry approaches this and how quickly we can as a group gather ourselves together and head out onto the playing field. It relies on the agreements and modes of doing business that are developed among the parties. I’m sorry about that. But there is the possibility that they would come out .25 cracking the whip and leading the charge. Freddie is ready to get marching.. when and how. yes. Now regulations under the ESIGN Act are permitted from either the state or federal level. Whitaker: The answer . Strike up the band. Buckley: OK. I think we can both answer that. now here is the question about. why don’t you take a crack at that? You know as much about that as I do. “To what degree have regulatory authorities rated into electronic mortgage fray?” Mr. going to be put out there by the federal regulators and/or state regulators. My personal view of this is that if we get the specifications right and if we. Mr. “This isn’t just as good as getting this stuff on paper. I do not think that this will constitute a larger risk to the investing public as they look at mortgage backed securities. now that you’re marching. this act is a self-effectuating act. that we will be able with an absolute straight face to look at the regulatory authorities and at the rating authorities and say. Buckley: Well.

if industry supplied chain adoption of e-commerce. you know we’ve been trying to answer questions.. John. I think that that’s certainly in keeping with my understanding. Thank you. You know. press 1. How about. that in some respect there are areas in which the industry might very well feel that some additional regulatory guidance might be valuable. Jerry. But we could use some regulatory help. are very rigid. I’m not too sure they’re well understood by me.at your total finance charge. a video streaming presentation. if other incentives. Jerry at this point do we still have John hanging on with some more questions? Mr. taking incoming fire here. One of my examples of the kind of thing I’m talking about. available to you a hot link with the disclosure that takes you to a voice. if price break. Let me suggest to those of you who are out there listening as industry participants. boxes. the total finance charge. where one sees for example. those particular disclosures are not well understood by the public. side b). while they are capable of compliance in an electronic world. Mr. Or press four. have a friendly little person appear in a box and explain over the computer to the consumer exactly what the total finance charge is all about. Press two. etc. If . We aren’t looking for it in the near future though. if education. give-aways. And particularly what I have in mind is the question of the presentation of required disclosures and formatting requirements. I’ll ask that question again. is the notion of the tax expert who appears in a little window on your screen to explain to you your home office deduction. In your opinion how would we best influence consumer receptivity or adoption of electronic closings? If education. and particularly to those of you on the sellers/servicers side. The truth is that some of the current requirements in the paper world. Whitaker: Let me add just a though to that. And our next question again is a multiple-choice question. Press three. which helps to explain how to do business in this area. do you have anything else to lob out at our audience? John: Yeah. for example. One of my favorite examples is the notion of the truth in lending disclosure boxes. I do have another polling question. And the truth is that with a little maneuvering room the industry might very well be able to come up with better ways to deliver information. In your opinion how would we best influence consumer receptivity or adoption of electronic closings? Press one. These kinds of opportunities I think give us a chance once again to establish the public policy preference for moving forward into an electronic environment. for those of you who may have used one of the tax packages that’s available. I think. That we have somehow not complied with the strict letter of a disclosure requirement. One could do the equivalent (end of tape 1. in terms of giving us the freedom to experiment with some of these alternative delivery methods with the confidence that by attempting to establish an improved process we are not exposing ourselves to spurious claims down the road.. if I can put it that badly. And it seems to me that it would be a really neat thing when you are presented with those disclosures to have. what are sometimes called the four fed.26 with guidance. Buckley: That’s a good point.

press 3. Buckley: OK.. checks. Buckley: Alright. That is an interesting question. I think at this point the question of maintaining fungibility is where we are four square behind a commitment to do so. Now here’s one that’s a very lawyerly question. Article 7 which has to do with bills of lading and warehouse receipts. And we’ve laid this out on the table with the hope that the entire industry will participate and that the entire industry will reach a consensus. relates to the relationship between Fannie and Freddie. The ESIGN Act exempts from its coverage large portions of the UCC. And we are now waiting for other secondary market players to indicate what their intention is. Article 4A funds transfer. which are. Article 5 letter of credit. And press 4 if industry supplied chain adoption of e-commerce. Or the security interest that a lender has in the accounts receivable or the general and tangibles or the equipment or the inventory of a business. Whitaker: Alright. Mr. the Uniform Commercial Code?” Mr. If other incentives or giveaways. “How will the specifications which we’re discussing today become a standard for the industry if they aren’t congruent with those adopted by Fannie Mae?” And I think I know the answer there David. press 2. Jerry. which is securities transactions. “How does the electronic signatures act effect the UCC. That is to say for example. However. Whitaker: Well. Now there are two sect parts of Article 2 of the UCC that are covered by ESIGN in a non-UETA state. and promissory notes. which is secure transactions in personal property. but it’s probably better that you answer that. We are very sensitive to the fact that the industry highly values the fungibility of loan documentation packages between Freddie and Fannie. It exempts Articles 3 and 4. I think the answer to that question is that Freddie Mac is fully committed to the concept that we should have an open process inside the industry to determine how to approach electronic loan documentation. investment securities. And the ESIGN defers to the . Our basic position here at Freddie is that we have laid out specifications on the table for the entire industry. Mr. At this point based on the guidance provided so far by Fannie and based on our preliminary specifications that we have in front of us we do not see any conflict.. Article 6 which is bulk sales. And I pause for just a second because obviously this is an area where phrasing can be everything. you’re right. the security interest your bank has in your automobile. if a conflict were to arise our hope would be that it would be regarded as part and parcel of the uniform instrument process and we would be able to establish a joint understanding concerning what was acceptable. Mr. They are also covered by the UETA. The next question is one that is. Those two particular parts of the UCC are covered by ESIGN. And Article 9.concern payment systems. And incidentally a copy of these documents was sent to Fannie Mae the day they were made public. which is the sale of goods and Article 2A which is the leasing of goods. that is to say securities in the sense of market securities. Article 8. for the transportation of goods. Let’s start with what we know for sure.27 price break. a kind of negotiable document for the storage of. I’ll take that one. That’s Article 2. turn it back over to you. We continue to fully support that concept.

now that’s been a subject of some debate. Now there’s a longwinded answer to a short question. revised Article 8. And in fact it’s kind of funny that one should come because Jerry’s kind of tweaking my nose here because he and I actually aren’t necessarily fully on the same side on that. ‘Funds Transfers’. And revised Article 9 has its own complete self-contained set of rules for electronic security agreements. And for those lawyers on the phone. which allows for an electronic letter of credit and electronic documents. and notices of just about every other kind in stripe. Mr. the UCC is basically left out of ESIGN and the UETA. “Why was the federal ESIGN act necessary?” Mr. And this is simply one. thorough review of the landscape. Or most of it already covers electronics within the context of the act itself. What happened with the UETA is the UETA was promulgated by NCCUSL in July of 1999. Promissory notes are addressed indirectly through the creation of the Transferable Records Section. Article 6 has been recommended for repeal by a recusal. So that it becomes very complex when you say on the one hand. It was left out because it didn’t need to be included. tour de force. Article 7. It has its own set of rules. largely at the request of the federal reserve. They would probably not be covered in a UETA state. Here’s the kind of the if you like the general answer to that question.28 UETA in a state that has adopted the official text version. Article 4A. Now Articles 3 and 4 having to do with checks and drafts used by the banking system were completely left out. Whitaker: Well. Immediately thereafter a very heavily . There are really no writing requirements except with respect to certificated securities inside revised Article 8. concerning securities. It has a basically complete waiver of the statute of frauds incorporated within it. But that’s roughly how 2 and 2A would be effected by ESIGN. They would be covered in a non-UETA state. and the same kind of functionality by using transferable record. Article 8. Nobody pays any attention to it anymore. question. Here’s another one. unamended version of the UETA. negotiable documents of title and warehouse receipts are once again addressed under the Transferable Records Section through their separate approach in transferable record. Buckley: But it’s a very good. That’s why it was left out. So he’s ribbing me a little. once again has its own scheme for electronic communications. But on the other hand the reason for that is that most of it is already covered. The same for revised Article 5. Now I don’t want to get too deep into the federal preemption issue because it’s a quagmire of its own. already provides for the electronic creation of a funds transfer agreement and for commercially reasonable security procedures. But the UETA would produce the same result and they would be covered. financing statements. Article 7 is excluded but you can get to the same kind of concept. Letter of Credit. That is to say a largely unmodified.

Whitaker: Or RESPA. if you have. Buckley: Or RESPA. Mr. concerning the part of the . I think that they. And it’s some indication of the fact that despite the fact that there was a presidential veto at one point based on consumer objections. Jerry. And it shows that electronic commerce has a cachet and has friends in Congress.” There is nothing that prevents one portion of the transaction from being conducted in writing and another portion of the transaction from being conducted electronically so long as you’ve obtained clear consent from the parties involved. it’s also true I think people in Congress wanted to get out in front on this because there is a disposition to try to really facilitate electronic commerce. deep need for ESIGN. All of those laws would not be affected by the UETA at all. it became apparent that while in some states. I believe the thinking in Congress was that by providing a federal baseline and some limits to the extent to which states could individually modify the basic rules of the game that Congress was adding value to the electronic environment and facilitating the process of moving to electronic loan documentation. Beyond that of course you’ve got the whole question of federal law because after all the UETA is a state law. Mr. “Do mortgages that are originated electronically have to be closed electronically?” I assume that when the questioner wrote that they were asking. Mr. At the state level there was a deep belief among policy makers in Washington that a more consistent uniform playing field was necessary to nurture the electronic environment than it turned out was going to be provided by the UETA particularly given what happened in California. that the UETA would move quickly that it was going to move much more slowly in a lot of other states. roughly the ones that have adopted the UETA so far. “If you do the opening package electronically do you have to close electronically?” Mr.. go ahead Jerry. it became apparent that even in the states that were largely enthusiastic about the UETA as written. And I.. And it doesn’t touch the truth in lending act or the equal credit opportunity act or the regulation M rules concerning automobile leasing. thank you. In addition to which. And there was a lot of twiddling that went on. I knew I was leaving a big one out. All those issues the federal arbitration act. Congress did get this passed last year. if you want to add anything to that. And California is a very large part of the financial services market. So at the federal level there was a deep. Thirdly. I guess let’s see. let’s see. the thought that we might have variations which were beginning to emerge in California and Iowa and also the thought that it would take quite a while before UETA would be adopted across the country and this borderless medium required something faster was a strong motivation. There’s another question here about in order to.29 modified and truncated version was enacted in California. Buckley: A summary of what the Congressional thinking was. Yeah. there was still the undeniable temptation or the almost unavoidable temptation to twiddle. Whitaker: The short answer to that question is. you know. “No. So that with respect to state law.

recognizing that there’s going to be significant long term benefit. What that means I think is that the industry is going to make this happen successfully. just as with the automated teller machine they’re going to have to be prepared for a gradual roll out and a gradual building of consumer acceptance. We have our Fed Ex accounts.4 of the preliminary specifications are all about. Mr. Again the important issue will be when does the effective consent occur and does it cover the right portions of the transactions? But there’s nothing in the law that says you cannot do a transaction partially electronic and partially in writing. I cannot remember who said this.30 transaction that is to be electronic. And that the benefit of many of those efficiencies have in fact accrued to the bottom line of the companies that have enacted them and to their customers who have seen either prices drop or have seen prices hold the line. Buckley: And the corollary question is in order to electronically close a loan do you have to do the opening package electronically? And I think the corollary answer is no. I once heard somebody say. Buckley: OK. Whitaker: No. is the question of “What do you do when you’ve got pieces of it on paper and you’ve got pieces of it electronic?” And I do expect that to be a world that we’re going to have to live in for some time. And in fact that’s really what Section 6. Mr. and I wish I could give you the attributio. Whitaker: I think that one of the challenges we face as an industry is that we are being asked in this electronic environment to create out of a whole cloth an infrastructure equivalent to one we have built up over years and years in the physical environment. we have now got pretty clear evidence that over time the efficiencies that have resulted from these infrastructure investments have been enormous. We’re going to live in a world where not necessarily everything will be one or the other. very historically low inflation rate we have had for a number of years. I would not see any reason why you had to. At the same time. And I think we see a lot of the success of this infrastructure construction in the fact that we have a very. And we have our mail management offices. have to belly up to the bar and say “OK it’s time for another round of infrastructure creation”. Mr. We buy filing cabinets. “How will consumers really ultimately benefit from this capability? If lenders have to make use investments and technology changes then consumers may not immediately realize the cost reductions of such advancements. I once heard a gentleman say that itbis a truism about technology in the financial services industry. But there is nothing in the world that prevents a hybrid transaction. that the industry tends to overestimate its impact in the short-run and underestimate its impact in the long run. We build storage facilities. based on the latest productivity numbers that I’m seeing and the numbers that are being discussed I think on a fairly regular basis in Washington. Here’s one regarding consumer reaction. There will be bits and pieces of each. Mr. where people sort the mail that comes into the company everyday. And as near as we can tell. And I think this is another opportunity for us to prove that to be an . There is nothing to prevent that. very large investment in converting to electronic communication for business to business purposes. We have already seen American businesses make a very.

quite comfortable and feel that they have been able to have a better shopping experience. But that side of the transaction. Because there are. a significant number of intangible benefits to consumers once they start to become comfortable with this. I think. I think it was Cameron King of E-loan who estimated at the time that we were considering this legislation. to give more meaningful disclosures to the consumer. So I think that there will be consumer benefits in that area. Mr. And I think that we’ll see the first adopters on the consumer side prepared for the fact that there will not be at the beginning perhaps so much savings as there will be for the larger number of consumers later. I think there’ll be some courageous folks out front who make the investment. And you can drill down with hyperlinks and popup boxes and so forth. Buckley: And the opportunity to shop and to shop. But I really don’t know the answer. So that the consumer really goes ahead at their leisure but when they feel comfortable with the transaction and they don’t have to worry. To some extent I think that this is going to become a competitive advantage issue as much as a cost savings issue for the industry. Jerry. the opening package side. But on top of that there will be anability. Jerry. Mr. and I hope we’ll be able to develop it. We’ll have to work with the regulatory agencies to provide more meaningful disclosures.31 almost universally applicable rule. I think that. I mean the idea that you can ask these questions electronically and not have to be embarrassed to ask them. as you have indicated. Mr. and I’m actually gonna take another minute on this despite the fact that I know we’re coming down close to the end because I think that this is an important point that you’ve raised. that simply being able to do the opening package online would significantly reduce costs because it would be an opportunity for a real time conversation with the consumer. Whitaker: No. which they have now you know 24 by 7. And as well as savings in the near term. to think that the initial impact may be with the initial contact as opposed to the closing itself. I think we’ll see this start out slowly. And he had estimated that the time that there might be as much as a quarter point savings on the origination side. Just as the ATM has produced an enormous number of intangible benefits for consumers. Those hedging costs for loans that weren’t gonna go through could be avoided because you’d have an earlier knowledge of whether the consumer wanted to proceed with the transaction or not. I don’t know whether that’s right or not. And really find out what you’re getting may make consumers who have become electronically savvy. may be a place where there’ll be earlier savings and it will be maybe later before we see as many closings occurring electronically. And you would be able to tell much more quickly whether the consumer whose mortgage rate was locked and with the corresponding hedging going on those costs. Maybe the closing will come off quickly too. Mr. Buckley: And it was estimated at the time. You’d be able to provide the consumer with the disclosures in a real time basis and get their reaction to them. And online bill payment and online account management have . Whitaker: And I think you’re right.

Carry on. It became a real. if none of the above. Buckley: Very good. Press 3. The ability of a consumer who before has. And also having the ability. You know. actually I have two more questions. I wonder as we come here closer to the end if John had any more polling questions left he needed to get through. how would you define an electronic mortgage? If a mortgage was originated and at least preliminarily underwritten electronically. press 2. You have the whole question of convenience. press ‘1’. take the Pepsi in hand. go sit in front of the computer.. And we do have six minutes left in the program. John: Alright. Press 4. A mortgage where all application and documentation interaction is done via the web. Mr. The next one is another multiple choice question. and then we’ll see how much time we have and we’ll give the results of those polling questions. Press 2. eight inches tall. press 1. in case they want to understand the documents better... for the first time a closing presented with a stack of documents. press 3. and then we can do maybe another faxed question. We have the real potential to improve the quality of this transaction. And I think that what you may find as just as with the ATM that as consumers come to appreciate the value of what’s being provided to them on an intangible basis that they come to start to demand it. So maybe I’ll ask one question. Press 5. to perhaps convert those documents into an oral form using text-reading programs. Just as I remember in the 1980s where I was counsel in house at a bank. Jerry. if . for them to have far more effective access through a combination of having home access to documentation on an effective real time basis. To begin with you have the whole question of accessibility. if all of the above. And the more ATMs you had and the larger number of locations you had available. Again on the question. slippers on the feet.. Press 5. if a mortgage that is closed in an electronic environment and signed electronically results in electronic note and recording. one of the things that I see as a potential here is the potential for the vision impaired and for the physically handicapped. it became a real competitive issue within the region which that bank was located whether or not you had the broadest possible disposition of ATMs across that region. a real question. dial into the website through their ISP provider and at their leisure go through the documents they think are significant in case they have questions. I’ll ask my final polling question. if a mortgage where all application and documentation interaction is done via the web. if none of the above. the more likely you were to bring in customers who were fence-sitting concerning which financial institution to place their accounts with. I think that will happen here too as consumers start to realize what kind of benefit they can take away from this process. A mortgage that is closed in an electronic environment and signed electronically which results in electronic note and recording. particularly in the case of the vision impaired. Press 4. John: Yeah. John. To instead put the children to bed at 9:00 at night three or four days before the closing. And you come to find it to be a competitive issue. The question is “How would you define an electronic mortgage?” If a mortgage originated and was at least preliminarily underwritten electronically.32 produced an enormous number of intangible benefits.

The deed was executed and filed electronically. And the mortgage and promissory note were executed and filed electronically. is created by you.. You go and get an electronic signature and you’ll use that. and the counter-party is gonna have to determine what will constitute a signature for the purpose of the transaction. Jerry.. again now. And clearly that is not the case. I think that’s where. I invite you to amend that a little bit further if you want. Buckley: And then. Go ahead and push the right button now.. And those signatures will be determined in the context of each transaction in which you engage electronically.we asked this question earlier. We are at the moment looking at the prospect of doing . if high. “Has Freddie Mac been involved in an electronic mortgage pilot program? Are there any plans in the works to do so? If so have partners or platforms been selected?” Mr. it is the expectation of some people of the press that really your electronic signature is something which you adopt. Not what degree of what security you’ve decided to have with respect to your own signature. you know. Mr. if some. How would you rate your knowledge of this topic now? Press one. and let’s see if I have a quick one here.. And to require something far more rigorous than we actually require at the moment.33 all of the above. Mr. And Jerry. have to determine in some transactions simply pushing an “I Agree” button will constitute a signature... Again we asked this at the top of the show. And finally here’s one that just came in. I hope that. “Are some digital identities better than others? How and when will the consumer decide to obtain the digital certificate in order to electronically sign?” And let me take a quick cut at this one.. Mr. to engage in overkill with respect to signatures. you’ve hit it right on the head. if low. and it’s perceived to be yours and you can treat it as your own. I will say that one of the things that I’m concerned about in this space at the moment is that there seems to be a tendency. really as we’ve had press inquiries and so forth about electronic signatures there is. Whitaker: I think. if low. Jerry. Buckley: OK. In others you’ll have to go through the full PKI process. “How would you rate your knowledge of this topic now?” Press one. John: We’ve got three minutes left and we’ll try to get it in. just handed to me. Press 2. And I’ll have the results for you in a little bit. Press 3. And you’ll. I think we may have to pause for one more question. Press 2. if some. Press 3. And it will really be a question of what degree of security is required by your counter-party. Mr. So you will have many signatures. And they are gonna. The signature is for the benefit of your counter-party so that they know that you’ve agreed.than we actually require at the moment with respect to electronic signatures. because your physical signature is your ink signature. Whitaker: Oh. if high.. John. We did take in a mortgage in early October that was done electronically. How would. Whitaker: We were involved in one mortgage pilot program. Now David. I’ll turn it over to you for maybe another faxed question. please do. Buckley: Alright. with respect to some types of documents. Mr.

a link to those instructions through the EFS Council website. And I just need to thank all of our participants for listening today. 6% voted for a mortgage where all application and documentation interaction is done via the web. you can also. On the question. and only 3% voted low. one. find those. John: OK. And two. David and Jerry. Quickly here are the results for those of you scoring in your office. 3% voted for 2 years. “In your opinion how would we best influence consumer receptivity of electronic closings?” 24% voted education. Nobody voted for other incentives. Again thanks to both our speakers. On the question. Jerry. And 54% voted undetermined. 24% voted for that. “How would you rate your knowledge of this topic?” asked at the beginning of the program: 32% voted high. Nobody voted for none of the above. 49% voted for price break. And 27% voted for industry supplied chain adoption of e-com voted for industry supplied chain adoption of e-commerce. Bub-bye. And I’ll first thank both of you for an excellent presentation. And the final question on. Now with that last word John. “Will your company offer electronic mortgages in the next six months?”. 19% voted for one year. You’ll find that that phone number is listed on your evaluation form. for an excellent presentation. to utilize those instructions and in particular pay attention to the format we have requested for comments. I would ask you to. I think. 52% voted for all of the above. 44% voted some. And since we are out of time we need to say goodbye. On the question. . 47% voted for complexity of doing business. “How would you rate your knowledge of this topic now at the end of the session: 44% voted high. 24% voted low. Your comments and suggestions are important to us and help us to provide you with future quality programming. perhaps we’ve got just enough time for you to squeeze in the poll results. Beyond that I don’t know that we’ve particularly gotten into any specifics. I believe. if you would. 53% voted some. “Do you perceive electronic mortgages as a benefit or a negative to your cost of doing business?” 53% voted for that. And of course. “How would you define an electronic mortgage?” Nobody voted for a mortgage originated at least preliminarily underwritten electronically. gentlemen. Enjoy your evening everyone and you may now disconnect.34 additional work for purposes of our further education and edification. if you’ll go back and check the Freddie Mac website where we have given you the instructions on how to comment. It would be immensely helpful to us if your comments came into us utilizing the format we have requested. On the question. I’m also going to quickly remind everybody that we encourage you to fill out and fax in your evaluation sheet. with that just before we go back to John for the last word on the polls. I would just say to all of those who have participated. 42% voted for a mortgage that is closed in an electronic environment and signed electronically. And with that. thank you. we are out of time.

All rights reserved. This program may not be reproduced in part or in whole without the expressed written permission of Freddie Mac. .35 That concludes this program. Copyrighted in 2000 by Freddie Mac.

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