The Uniform Electronic Transaction Act and the Electronic Signatures in Global and National Commerce Act were enacted to ensure the legal effect and validity of electronic signatures and documents. As a result of this legislation, the Mortgage Industry Standards Maintenance Organization was formed in 2001 to develop eMortgage and XML data protocol standards for the creation of valid, enforceable, and transferable electronic promissory notes, or eNotes. The resulting standard was termed SMART Doc.
What is a SMART Doc?
SMART Doc is an acronym for Securable, Manageable, Archivable, Retrievable, and Transferable. It is a technical framework for representing documents in an electronic form. The sections of a SMART Doc include:
- Header – information describing the content of the file
- View – the visual representation of the document
- Data – linked to elements presented in the view section
- Digital Signature – includes time and date stamp
- Tamper-evident Seal – ensures document is unalterable once signed
- Audit Trail – contains information about all activity including creation, modification, and signing of the document
The key feature of a SMART Doc is that it inseparably binds the visual presentation of the document with the data contained therein. In other words, what is presented on the screen for a borrower to review and sign is the exact information contained in the data portion of the file and used for the processing of the loan. This linking of the view with the data maintains integrity and accuracy of the data and thus provides great legal advantages.
The SMART Doc standard utilizes XML (Extensible Markup Language), a non proprietary, simple, very flexible text format created to structure, transport, and store information. The utilization of XML facilitates the interoperability between disparate computers and software systems, thus simplifying the adoption and implementation of eMortgages by allowing the use of existing technologies and standards.
The primary benefit of the SMART Doc format is that the original data, document, and signature is used throughout entire loan process, from origination, processing, closing, servicing, and delivery to the secondary market. The automated exchange of data eliminates the rekeying of data, reduces errors and dramatically streamlines the mortgage process. This increased accuracy, reduction of cycle time, and quicker delivery to the secondary market increases lender profitability and reduces borrower costs.
Since the tamper seal and audit trail capabilities are implicit within the SMART Doc, compliance and quality control review is automated, occurs throughout the loan process, and is not dependent upon the physical location of a paper file. These features protect the borrowers interests and reduces lender and investor risk.
In order to meet the credit, legal, and regulatory requirements for the creation of eNotes and to spur the adoption of electronic mortgages, the SMART Doc specification was developed. Before long, the lending industry will be paperless and every loan will utilize SMART Doc technology. Good thing too, since it dramatically increases accuracy, efficiency, security, transparency, and interoperability. Everyone wins and a few trees will be saved too!