The Federal Housing Administration (FHA) has announced plans to modernize the application process for FHA mortgage insurance, making the process easier for borrowers and faster for lenders. FHA will begin accepting electronic signatures on third party documents originated and signed outside of the lender's control, such as real estate contracts. A Mortgagee Letter detailing FHA's new streamlined process is posted on the HUD website.

"This is just the beginning of FHA's commitment to use more electronic documents in our loan approval process," said FHA Commissioner David Stevens. "Over time, we will be expanding the number and types of documents with electronic signatures which will be acceptable to FHA."

"We applaud FHA's refreshing attitude toward modernization and making electronic signature capabilities acceptable for its mortgage transactions," said Vicki Cox Golder, National Association of Realtors president.

The FHA expects lenders to employ the same level of care and due diligence with electronically signed documents as for paper documents with "wet" or ink signatures. Lenders are reminded that the electronic signature and date should be clearly visible in the document; and that electronic documents will be subject to the same document retention requirements as paper documents.

This policy is in accordance with Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA), as applicable. It is effective immediately for FHA forward mortgages as well as Home Equity Conversion Mortgages (HECM) (reverse mortgages).