The New York Senate has approved Bill 982, which amends state law to expressly allow for execution of a mortgage loan by electronic signature. In connection with this amendment, the term “consummation of a mortgage loan” also was codified for the first time. Prior to the bill's passage, there was no statutory definition of “consummation” and, pursuant to case law (See Murphy v. Empire of America, FSA 746 F2nd 931) consummation was deemed to occur under New York law when the consumer executes and returns the lender’s commitment letter.

Under the newly codified definition, consummation means “when the applicant for the mortgage loan executes the promissory note and mortgage including by electronic signature, in accordance with applicable federal and state laws, rules, and regulations.”

This change has implications beyond New York state law. Under Regulation Z of the Truth in Lending Act, “consummation” is defined as “the time that a consumer becomes contractually obligated on a credit transaction.” The point at which a “contractual obligation … is created” is a matter of state law. The court’s interpretation of consummation essentially placed the timing of consummation into the hands of borrowers, creating some complications as the TILA-RESPA Integrated Disclosure Rule (TRID) requires that the closing disclosure is provided no later than three business days before consummation of the transaction.

This provision is effective immediately.