Also known as: transferable records
Written by attorneys · grounded in primary & secondary sources — see below
A contract or other record created, generated, sent, communicated, received, or stored by electronic means that would be a negotiable instrument if the record were in writing. The issuer must expressly agree that the record is a transferable record.
Terra Financial originated an electronic mortgage note for Tristan Thompson and stored it in a secure vault. After default, a servicing company claimed authority to foreclose. The vault audit trail showed Terra Financial never transferred the required digital credentials, so the servicing company lacked control. Only Terra Financial could commence foreclosure.
Triumph Manufacturing issued an electronic promissory note to Theo Thomas for a home loan. The note was created and stored electronically. Triumph expressly agreed in the platform terms that the note would qualify as a transferable record. Because the note would be negotiable if printed and relates to the secured obligation, it satisfied the statutory criteria.
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The person with control of the transferable record is the only party authorized to commence foreclosure. Control is determined by the electronic system's transfer procedures and credentials.
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The record must be created and stored electronically, would qualify as a negotiable instrument if reduced to writing, and the issuer must expressly agree that it is a transferable record.
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No. Servicing status does not substitute for control of the transferable record. The statute ties foreclosure authority strictly to control, not to collection or management functions.
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Control of a transferable record is the electronic analogue of possession. It requires the legal and technical ability to exercise exclusive authority over the authoritative electronic copy through system credentials and transfer steps.
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