Hi
I guess this error is due toTLS, The SMTP server on the server housing IIS (localhost) is configured to require TLS encryption. I am not sure what SMTP service you have installed on the server. If it is IIS SMTP service, go to the SMTP service property -> Delivery -> Outbound Security and make sure TLS encryption is unchecked.
Here is a good thread covering issues that come up on the forums
http://forums.asp.net/thread/1580731.aspx
Best Regards
XiaoYong Dai
Microsoft Online Community Support
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