June 20 2014
Let's think about your signature for a minute. Not just any signature, but the old-fashioned pen-and-ink kind. There's no other signature like it in the world; it's not only unique to you, it's different each time you scrawl it onto paper. So it may seem counter-intuitive that electronic signatures are touted as "more secure" than handwritten ones. How can that be?
Yes, your signature is a unique and special snowflake. That's precisely the problem. Here's why:
Okay, you may be thinking, so ink signatures have weaknesses. But does that necessarily make electronic signatures better? After all, many banks have been slow to adopt e-signature technology and some still prefer traditional "wet" signatures.
It makes sense if you think about it. It's one thing for a buyer and a seller to enter into an agreement, but as the third party underwriting a sale, banks are the ones taking the financial risk. It's understandable that they want to be absolutely sure a signature is valid and can be upheld in case of a legal challenge.
So, what helps make an electronic signature legally enforcable? We'll take a look at Bank of America's famously strict security requirements to find out. In order to be accepted by some banks (and be upheld in court), an electronic signature should:
But wait, there's more! Banks want to make sure you are who you say you are, so most major lenders require advanced identity verification features known as Knowledge Based Authentication (KBA) and individual signer passwords. KBA validates identity by asking a signer random questions about themselves from data pulled from public and commercial sources. An individual signer password means just that--each user must have their own password.
While KBA and signer passwords are common requirements for short-sale and REO transactions, they are not always necessary in every situation. Transaction management platform Form Simplicity recently added both features to its eSign powered by GoPaperless (making it 100% compliant with bank regulations), but both are optional. As you can see in the screenshot below, the solution offers agents an easy way to see which authentication methods each signer is using:
The bottom line is this: know what's required to mitigate potential risks with e-signatures, and before you purchase an e-signature platform, make sure that it meets all requirements. If it doesn't, banks will not only reject your documents, but you could also be putting your business in legal jeopardy.
If you're still feeling nostalgic for handwritten signatures, I'm going to wrap things up on a cheery note. There's a way to combine the security and convenience of electronic signatures with the more personal feel of wet signatures. Many e-signature solutions, including Form Simplicity, offer a "touch signing" feature, which means that users can digitally write their signature with their finger, stylus, or a mouse. It's a signature that's uniquely yours and very secure.
Happy signing, everyone!