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Conquering the final frontier of the eMortgage

Though we specifically discuss the requirements and nuances of the

mortgage industry in this white paper, the need for secure
management of electronically signed contracts and other electronic
documents exists across many industries. Advanced electronic
vaulting is a technology designed to protect and mange these
documents in the most robust, compliant and secure manner. An
advanced electronic vault may be used in any industry for any
electronic document where legal admissibility, enforceability, and/or
negotiability are a critical business requirement.

I Executive Summary

Legally enforceable electronic mortgage documents must be

Executive Summary......1
The Burden of Proof is Yours maintained and able to be transitioned throughout the life of the loan.
.............................. .......2 Controls and security around post-closing processes, in particular,
A Brief Background.......2
Electronic Vaulting – therefore assume much greater importance. These and other concerns
The Final Frontier.........3
Advanced Electronic Vaulting must be addressed by those forward-looking mortgage companies who
for eMortgage............4 have made the strategic decision to incorporate eMortgages into their
What is it?.................4
eVault Access and operations
Why do I need it?.........5
Success In Action..........6 As adoption of eMortgage processes becomes more prevalent, the
Finding the Best Solution
.............................. .......7 requirement that electronically closed loan packages remain protected
What to look for.........7
Standard vs. Advanced yet accessible to many parties throughout the extended life of the
Electronic Vault Features mortgage becomes more critical. This requirement has resulted in
.............................. .......8
Make sure it plays well infrastructure conflict, risk management issues and process complexity
with others................9
Which model is best?.10 for many organizations. Original documents must remain transferable,
eOriginal Vaulting Solutions with copies forwarded to multiple downstream participants after
closing and throughout the lifecycle of the loan, which can potentially
stretch over decades.

Strict controls must be in place every step of the way to track an

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original document and prove its unaltered authenticity and uniqueness.
It is essential for lenders to manage discreet documents and their
access rights, as well as to perform ongoing audits and establish
legally recognized controls. These critical requirements in the
eMortgage chain can only be bridged through the use of electronic
The Burden of Proof vaulting. “Advanced” electronic vaulting capabilities – such as transfer
is Yours of ownership and the ability to provide legally admissible copies of
A high-profile 2005 legal decision electronic original documents – provide added protection for electronic
involving American Express points
to the risks lenders assume when mortgage and other financial documents (See Standard vs. Advanced
they fail to properly maintain Electronic Vault Features, page 8).
electronic documents in a protected
closed system. In a bankruptcy
proceeding involving a cardholder
and the company, American Express In the following pages, this paper will explore the need for, and the
attempted to collect a debt outside benefits of, such electronic vaulting solutions. While we’ll be focusing
of the defendant’s bankruptcy filing.
There were also two different sets of specifically on electronic vaulting in relation to mortgage banking, the
documents – one the company’s,
the other the debtor’s – each real solution for financial institutions is truly a single horizontal
alleging different amounts in electronic vaulting infrastructure that can provide substantial benefits
across the market segments and products of the entire financial
The judge asked American Express
to provide evidence of the integrity institution enterprise, meeting the needs of multiple business
of their electronic records, and held segments such as mortgage, automotive finance, leasing, student
the proof of accuracy and
authentication of the electronic loans, commercial lending, etc.
documents in question to a
decidedly higher standard than
traditional paper documents. When
asked, American Express was
unable to provide sufficient
evidence to convince the court of
the documents’ integrity. II A Brief Background
Ultimately, the judge refused to
award judgment to American When President Clinton signed the E-SIGN (Electronic Signatures in
Express and dismissed the case.
What’s interesting is that the case Global and National Commerce) Act into law in June of 2000, the
never needed to turn out the way it legislation established the federal validity of using electronic
did. The case came down to the
witnesses for American Express and signatures (and therefore electronic contracts as well) in financial
their inability to properly
demonstrate what happens to a
transactions. To underscore the point, the President electronically
document held in their electronic signed the legislation. Basically, E-SIGN enacted on a federal level
recordkeeping system. Had
American Express presented proof many of the core concepts of the Uniform Electronic Transactions Act
of controlled access to their
database, as well as an audit trail
(UETA), which had already been adopted in some form or another by
with a secure log of activity, the various state governments across much of the country.
case might have had a different
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This case stands as a stark reminder
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of the need for electronic contracts
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and other financial services
documents to be managed and
maintained effectively, no matter
the industry segment. Today’s
The intent of the legislation was to establish that electronic signatures
and records carry the same legal weight as their paper counterparts.
The first section of E-SIGN (101.a) states that a contract or signature
“may not be denied legal effect, validity, or enforceability solely
because it is in electronic form.” However, as evidenced by the ruling
against the credit card company mentioned in the sidebar, in practice
this is not always the case. The fact is, legal challenges to
electronically originated loans have – fortunately – thus far been
exceedingly rare, leaving the financial services industry waiting
anxiously for precedents to be set.

Financial institutions need to both take advantage of the benefits

afforded by electronic signatures and documents (including, of course,
eMortgage documents and eNotes) while still protecting themselves
against any potential litigation. They must establish iron-clad
protection and maintenance of these documents and have the proper
procedures in place to meet any and all legal requirements or
challenges. Advanced electronic vaulting solutions, on their own
or as part of a third party registry system, provide the only
Authoritative Copy
The copy of an electronic proven and accepted manner of doing so.
record that is designated by
agreement of the parties to
the transaction, system rule, Already widely used in other industries with similar business needs
or system design as the
controlling reference copy. In (including automotive finance and equipment leasing – see Success in
the case of a promissory
Action sidebar for more), electronic vaulting affords the financial
note, the Authoritative Copy
is the electronic equivalent institution the necessary protections to securely manage eMortgages.
to the original negotiable
paper promissory note. The very same legal counsels and ratings agencies that support
(Source: MISMO, 10/05/01)
mortgage backed securities have already established and accepted
advanced electronic vaulting solutions as meeting all of their
requirements for securitization purposes.

III Electronic Vaulting – The Final Frontier

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Having established the necessity for financial institutions to manage,
maintain, and protect electronically signed documents and that

MERS advanced electronic vaulting is the means to that end, it’s important to
Mortgage Electronic understand the concept behind the solution. In order for the validity of
Registration System. MERS
was created by the mortgage any electronic document to be upheld in a court of law, or for any
banking industry to
streamline the mortgage electronic document to be sold or transferred to a new secured party,
process by using electronic the financial institution must be able to show the documents under its
commerce to eliminate
control to be the legally binding Authoritative Copies. For example,
there must be a unique copy of the eNote, which can be proven to be
unaltered since the time of signing.

Once an electronic mortgage has been closed and the eNote

electronically signed, a percentage of lenders will then register the
ownership of that loan with MERS. While MERS does an outstanding job
of enabling and maintaining the industry registry of eNotes (and the
other functions MERS has traditionally served) for the financial
institution, there is still more work to be done to both ensure
compliance and legal protection as well as meeting the often more
stringent requirements for resale within the secondary market. In fact,
even MERS itself requires the lender have the ability to store eNotes
and transfer them to investors. This is where the electronic vault
comes into play.

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For an eMortgage to remain enforceable, admissible and negotiable, specific processes must be followed.
Pre-settlement services generate PDF documents which are prepared for an electronic closing. Parties to
transaction sign electronically, either at a settlement office using an electronic signature device or
software, or via
their computer by logging into a secure portal and applying their electronic signatures to the mortgage
documents. Either way, once the signatures are applied, an Authoritative Copy or “Electronic Original®” is
created and is instantly deposited into an electronic vault, where it is held and managed via controlled
access by the vault administrator throughout its lifecycle. All activities and functions affecting the
documents are controlled via and logged by the vault. This includes any Print, Copy or View requests, the

What is it?

Before defining exactly what an electronic vault is, it’s important to

know what it isn’t. File systems and e-mailed copies of documents
most definitely do not meet the criteria of an electronic vault, or the
requirements of the secondary market. Copies created by or stored in

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such systems are vulnerable to tampering and hacking and hold no
verifiable proof of their point of origination, legal validity, uniqueness
or authenticity.

The mortgage industry’s understanding of what constitutes an

eVault Access and electronic vault has evolved over the years. Today’s advanced
electronic vaulting solutions have developed far beyond the traditional
Reprinted from MERS means for securely storing or working with electronic documents.
“Integration Series: Business
Overview”, Dec. 18, 2006. Document and content management systems, for example, while
facilitating the ease of access and sharing of electronic documents, are
If you close loans using eNotes,
buy eNotes, or offer custodial not vaults. There is a world of functionality electronic vaults possess
services for
eNotes, you must have an which eclipse the abilities of even the most robust of these systems.
eVault in which to store them.
You must also have a process
for moving eNotes between So what then is an electronic vault? An electronic vault manages
your eVault and others.
the legally binding, Authoritative Copy of an electronically
Physically moving eNotes signed contract or other document, and possibly its related
happens outside the MERS®
eRegistry process, but when an transaction documents, in a secure location where it is held
eNote changes location that
change must be reported to and transitioned during the entirety of its lifecycle. To ensure
the MERS® eRegistry (as a that an electronic contract remains negotiable and legally enforceable,
Transfer of Location). Some
investors will only accept a the electronic vault permanently binds electronic signatures to the
transfer of Control for an eNote
after they have received the document and creates a tamper-evident audit trail demonstrating
eNote in their eVault. ownership (control) and compliance. As document interaction occurs
While the eVault itself does not throughout multiple stages along the mortgage lifecycle, the vault
communicate with the MERS®
eRegistry, the Location of the controls access and tracks all document activity from closing, through
eNote is a required field on the servicing, and finally to sale or payoff.
system. Therefore, the
owner/operator of the eVault
will be reflected in this field,
and is required to respond to Why do I need it?
transfer requests and receive
notification messages sent Holding eNotes and other loan documents in an electronic vault
from the MERS® eRegistry.
bolsters legal enforceability – of both the electronic original and
Your MERS Business Integration
Resource will work with your properly certified paper copies of the electronic original. It also ensures
eVault provider to ensure it is compliance with the various legislative requirements. A true electronic
vault should provide irrefutable proof that the document in the
institution’s possession is the original, unaltered document. The
electronic vault should also allow privileged access to the documents

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Success in Action
While its use is just beginning to
penetrate mortgage finance,
electronic vaulting has been in without compromising the integrity of the originals.
place and working successfully for
years – to say the least – in other
industries with similar needs and Additionally, secondary market requirements dictate that such
business requirements, most
notably in automotive finance and documents reside within a secure, closed system, and the leading
equipment leasing. ratings agencies have determined – along with their legal counterparts
Each of these two segments has, – that electronic vaulting meets this requirement. A robust
like mortgage, electronic
document legislation in place (in electronic vault also meets secondary market needs by providing the
this case, UCC Revised Article 9- ability to indicate the new owner of a loan post-sale. Advanced
105). Unlike mortgage, neither
segment has the sort of electronic vaulting technology can perform transfers of ownership and
recognized safe harbor of MERS,,
but that hasn’t stopped the location without altering the original or invalidating its
pervasive adoption of eContracts tamper seal.
and electronic vaulting solutions
for their maintenance and
If a mortgage loan has been registered with MERS, the financial
Equipment leases and auto loans institution would benefit from locally mirroring the control activities as
are originated and then bought
and sold, securitized and sold in they occur within MERS. This serves the institution’s own record-
pools, as are tangible-property
backed assets. All of the same keeping purposes as well as providing a safeguard against unforeseen
post-closing requirements found events that may require proof of such controls outside the auspices of
in mortgage apply equally to
these industries – if not more so MERS. Such information should obviously be tied to the eNote and
due to the lack of a centralized
registry. other loan documents, and become part of an ongoing document-
specific audit trail.
The eOriginal eCore® platform is
the advanced electronic vaulting
standard for these industries,
having done some 300,000
Regardless of whether the loan is registered with MERS or not – and
eContracts, $10 billion in there will be many loans which will never touch the registry – the
originations, and more than $1
billion in pooled securitizations. institution must ensure several needs are met:
eCore™ auto finance customers
electronically originate more car
loans in a single week than there 1. Document(s) should be protected, encrypted, and time-date
have been eMortgages to date.
It’s a proven management and stamped
protection method, as testified to
by the mass adoption of eCore™ in
a. The documents should be wrapped in a tamper-evident
automotive finance, as well as seal that will instantly identify and reject any changes to
eOriginal’s record of providing its
vaulting services to these players the document since signing
for years without a single system
2. Privileged access rights to documents must be granted and
error or legal challenge.
The major ratings agencies and
legal counsels – the same who 3. An extensive audit trail must be kept on each document,
evaluate mortgage-backed
tracking several factors:
securities – have acknowledged
and asserted the validity of the
eOriginal eCore® electronic
vaulting solution.. Many of the The Warehouse at Camden Yards, South
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a. Any and all access to the document
b. Any copies made, by whom and for what purposes
c. Any transfer of ownership or custody of the document
d. Any transfer of location of the document
e. MERS registration activities (if registered)
4. Regular integrity checks of the documents must be performed,
ensuring that, byte-for-byte, there has been no alteration or
degradation since signing
5. There must be some manner to destroy an electronic original
while creating a paper document which will thereafter be
recognized as the Authoritative Copy
6. Likewise, destruction of the electronic document after
predetermined periods of time or status changes must be
addressed as well

In the next section, we’ll examine these and other specific criteria
financial institutions should be looking at when evaluating an electronic
vaulting solution.

IV Finding the Best Solution

Given the pressing need to secure, manage, maintain and track

privileged financial documents, particularly those signed with
electronic signatures, institutions should be actively seeking out an
electronic vaulting solution. But the fact is that all vaulting solutions
are not created equal. In fact, many solutions which purport to serve
electronic vaulting needs are not vaults at all.

As already stated, document and content management systems, while

not without their benefits to certain tasks, are not vaulting solutions.
Much of the high level functionality vaults offer is simply not available
in such systems, and would have to be designed, developed and

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integrated at a greater expense of time, effort and money. It makes
much more fiscal and operational sense to look to established, true
vaulting solutions instead.

What to look for

Having established what does not constitute an electronic vaulting

solution, what then should an institution expect from an actual
electronic vault?

Secondary market investors require those loan documents

which are transferable records to reside in a closed system,
with no non-differentiated copies existing anywhere outside of
the secure environment. Copies of loan documents must be clearly
marked as a copy of an authoritative original. A tamper-evident audit
trail should track any and all access or copying. Lastly, the investors
require the capability of electronic pooling and securitization of loans
and their documentation, something a true electronic vault should
perform as a matter of course.

An electronic vault should provide a secure environment that will

ensure that a document remains negotiable, transferable and legally

Above all else, the vault should:

1. Facilitate the identification, handling and holding of legally

admissible Authoritative Copy/Electronic Original® documents.
2. Allow the documents to be transitioned as necessary
throughout each document’s lifecycle.
3. Protect documents using robust encryption, with documents
time-stamped and wrapped within a tamper-evident seal.
4. Keep audit trails on every document, providing thorough access
and transaction histories.

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Though securing and tracking the documents is of primary importance,
the vaulting solution can ensure the negotiability and transferability of
eMortgages and strengthen lenders’ ability to sell them in the
secondary market.

An advanced electronic vault also:

5. Gives the institution the ability to produce legally admissible
print copies of electronic original documents
6. Allows for the transition of documents based upon status
changes, cancellations, sales, foreclosures and other events
7. Allows the institution to permanently destroy or remove the
Authoritative Copy from the vault while creating an enforceable
paper version
8. Integrates retention policies into the solution, with documents

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eOriginal® Vaulting held, transitioned or destroyed as is called for by status
Solutions 9. Allows the pooling and securitization of eNotes for resale
eOriginal eCore® advanced
vaulting technology is offered
through a trio of platform
options, all of which integrate Make sure it plays well with others
with the most popular front-end
signing services and To prepare for the widespread transition to eNotes, any vault under
consideration should include vault-to-vault transfer capability. Vault-to-
eCore™ Enterprise – provides
the most complete advanced vault transfers facilitate the transfer of ownership upon sale of the
electronic vaulting functionality loan. This transfers not only the Authoritative Copy itself, but also may
on the market for all lines of
business. This infrastructure register the new legal control of the eNote with MERS.
software resides behind a
finance source’s firewall and
includes electronic signature An electronic vault should also support the new TOLEC (Transfer of
integration for eClosings and
complete post closing Location of Electronic Contracts) ANSI X-9 standard for moving the
management including pooling,
securitization and vault-to-vault electronic original Authoritative Copy of non-real-estate items of
transfers. property from one vault to another.

eCore™ Vault-in-a-Box® – is a
pre-configured eCore advanced It’s also in the institution’s best interest to choose a vaulting solution
electronic vault that resides at
a finance source’s data center that can easily interface and/or adapt to existing systems already in
to accept and manage in-
use. The provider should make available developer toolkits and the
bound electronic original
documents transferred from necessary application programming interface (API) calls that will allow
various internet origination
channels. Includes hardware for interfacing or integration with existing systems.
and software delivered in one
A single vaulting solution should meet compliance and security needs
eCore™ On Demand – is an in a cross section of industries. Since the electronic signature is the key
On-Demand web service with
eCore™ Enterprise advanced to a completely electronic process, the electronic vault must support
electronic vaulting functions
available on a pay-per-use integration with available e-signature vendors and their technologies.
transaction basis. This on- The solution also needs to work with all the various front-end e-signing
demand vault is accessed via
the web and documents are approaches at use in the industry today, including:
securely controlled. eCore™ On
Demand has low
implementation costs and the • Electronic signature pads
ability to upgrade to eCore™
• Online click-thru – “I Agree”
• Online e-signature services
• Digital signatures (PKI)

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• Tablet PC signature support

As discussed above, the electronic vaulting solution should be able to

incorporate MERS submission for those loans the institution wishes to
register, but should also handle those which will not be registered with
equal ease. Documents stored within the vault should meet E-Sign,
UETA, AFSA/ANSI, MISMO, MERS, UCC Revised Article 9-105 and other
requirements as applicable to the individual document/package.

Lastly, but of extreme importance, the electronic vaulting solution

vendor should be able to show documented credit rating agency
acceptance of validity as well as similarly documented third-party legal
opinions supporting secondary market sales. Electronic mortgages are
still in their infancy but criteria to ensure the validity and enforceability
of eNotes has been established in other industries and put into use in
mass volume.

The same rating agencies and legal counsels that have signed off on
electronic vaulting in automotive finance and equipment leasing (see
“Success in Action” sidebar) – both of which have similar secondary
market needs and business requirements – have come to the same
conclusion with regard to mortgage as well. Therefore, the groundwork
is already laid for transitioning electronic mortgages into the secondary
market and throughout the mortgage lifecycle.

Which model is best?

Electronic vaulting solutions are available in several different

implementation models depending upon individual client needs. These
generally fall into two broad categories: company-hosted vaults and
on-demand, web-hosted electronic vaults. Depending upon the size of
an organization and the scope of its activities, it may make more sense
to go with one over another.

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1. Enterprise Solutions – a company-wide electronic vaulting
solution installed behind the institution’s firewall and integrated
to existing processes. This solution offers larger institutions the
ability to maintain control of the vault in-house. It provides
customizable options for integration into existing business
processes and is ideal for higher volume eMortgage or
eContract processing.

2. Turn-Key Vaulting Solutions – a preconfigured vaulting

solution packaged with the software and hardware necessary
for its use. A turn-key solution establishes an in-house managed
electronic vaulting solution for an institution based upon
accepted best practices. It eliminates the need to “build it
yourself” while providing basic key vaulting functionality
immediately accessible to the business. Implementation is
significantly less involved than with an enterprise solution, but
does not reach the same level of customization, functionality
and integration.

3. On-Demand Vaulting – a web-based electronic vault with a

transaction-based fee structure. This software as a service is a
turn-key solution that can be “switched on” as a web-service,
providing true electronic vaulting capabilities with a minimum of
effort. The transaction-based fee structure means that
institutions pay only according to use, eliminating barriers of
cost and eliminating complex implementation plans entirely.
This solution is best for the smaller organization, or for those
that wish to achieve the benefits of electronic vaulting in an
easier, more immediately affordable manner.

Again, depending upon the individual organization’s size, needs and

scope of operations, one model might prove a better fit than the
others. The expertise and best practices of the electronic vaulting
provider can be of great assistance to the institution as it decides from

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among the options.

V Conclusion

The case for electronic vaulting is abundantly clear in all aspects of

financial services, particularly given the intricacies and demanding
requirements of mortgage lending. Choosing an advanced horizontal
electronic vaulting solution can serve every business segment in which
the institution operates.

By providing irrefutable proof of a document’s originality and

systematically tracking any and all access, copying, or other use of
eNotes and other electronic loan documents, the financial institution
ensures its compliance with the various legislative statutes governing
electronic contracts and signatures, while also protecting its electronic
evidence. Tamper-evident seals, robust encryption and detailed audit
trails all establish both compliance and the legal veracity of

Advanced electronic vaulting solutions go far beyond merely managing

or even securely storing electronic documents. The aforementioned
controls, in conjunction with the blessing of ratings agencies and legal
counsels and coupled with the ability to produce legally admissible
print copies of documents when necessary, provide the institution with
the greatest possible level of protection. Seamlessly integrated with
existing systems and processes, a true electronic vault brings
electronic post-closing processes and procedures in line with both
paper-based and electronic origination functions.

About eOriginal

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e-Original Inc.’s advanced electronic vaulting solutions enable lenders
and investors to eliminate paper while legally protecting their assets as
electronic mortgage documents are managed and transitioned
throughout their lifecycle. eOriginal eCore® technology and processes
create electronic finance documents that are tamper-evident, legally
enforceable, admissible and negotiable. eOriginal solutions are
compliant with ESIGN and UETA, and support the MERS registry.
eOriginal® technology has managed approximately 500,000 electronic
contracts representing over $10 Billion in originations, with over $1
Billion pooled and securitized – all without a single error or legal
challenge. For more information about how to turn eOriginal’s
experience into your advantage, visit or call us at

Copyright © 2007, eOriginal, Inc. Electronic Original, eOriginal eCore, Vault-in-a-Box, Certified Print and Paper Out are
registered trademarks of eOriginal, Inc.

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