When the COVID-19 pandemic hit and stay-at-home orders were passed, businesses were scrambling to figure out how to proceed with their transactions given the restrictions placed on in-person contact. This included the title and closing business. Some states had remote online notarization (RON) laws in place and some did not. Some registrars and clerks had electronic recording (e-recording) in place and some did not. Title underwriters had to find solutions that fit all 50 states so that their agents could continue insuring sales and refinances, closing purchase and loan transactions, and recording documents.
Many state governors and other state bodies issued temporary executive orders or other temporary authorizations: 1) allowing for the use of real-time audio video technology to satisfy the physical presence requirements under applicable law for notarial acts , or 2) removing the requirements for physical presence under applicable law for notarial acts (each a “remote ink-signed notarization” or “RIN”).
You may have heard of RON, but what is RIN and what is the difference between the two?
Remote Online Notarization (RON)
The Mortgage Bankers Association (“MBA”) defines remote online notarization (RON) as “the use of audio/video technology to complete a notarial act when the principle is not in the same physical location as the notary public.” Virginia was the first state to enact a law authorizing RON in 2011. Since then, more than 25 states now have passed statutes allowing RON, with many more in the process of doing so. With remote notarization, a signer personally appears before the Notary at the time of the notarization using audio-visual technology over the internet instead of being physically present in the same room. Remote online notarization is also called webcam notarization, online notarization or virtual notarization. With a “RON” closing, notarial documents are being signed and tamper-sealed electronically, with the notarial seal being applied electronically.
Remote Ink Notarization (RIN)
Remote Ink Notarization (RIN). During periods of state and local stay-at-home restrictions, several states issued emergency Executive Orders or passed temporary emergency legislation authorizing an abridged form of remote notarization that involved wet ink signatures placed on paper documents while a notary in a remote location watched the signor via some form of audio/video technology like Skype or FaceTime (“RIN”). Those Executive Orders and temporary laws are in varying stages, expiring in some states and continuing for the duration of a state of emergency in others.
A typical RIN signing may look like the following:
- Paper closing package is delivered to the borrower;
- Notary examines a government-issued photo identification using the audio-video technology;
- Notary uses the audio-visual technology to witness the borrower ink sign the document;
- Borrower returns the document to the notary (via postal mail, delivery service, or in person); and
- Upon receipt of the package, the notary physically applies his/her notarial seal or stamp to the loan documents.
As of August 30, 2020, there are 27 states that have enacted some form of remote online notarization (RON) law: Alaska, Arizona, Colorado, Florida, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Dakota3, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wisconsin.
While RON closings will continue to proceed as authorized in various states, even after the passing of the COVID-19 pandemic, there is no expectation that the governors’ executive orders and temporary authorizations related to RIN will extend beyond the COVID-19 national emergency.
Knowing that, there are still challenges with every state and county accepting RON documents, including:
- Loan Operating System (LOS) Integration: Software solution creating Smartdoc eNote needs to be integrated with LOS—this can be costly.
- County Register/Recorder: Solution must work in counties that e-record and allow papering-out of mortgage for counties that don’t accept e-recording
- MERS Integration: eNote must be registered with MERS which requires an integration with MERS;
- GSE Approval: Entire eMortgage process must be approved by Fannie and Freddie. Note that Fannie Mae issued updated guidance to lenders on addressing mortgage origination issues during the COVID-19 event, including authorizing lenders to sell loans with remotely notarized loan documents in certain designated states and under specified conditions. In April of 2020, it also issued guidance on “Remote-ink notarizations” authorized by emergency order, and on July 1 issued a COVID-19 FAQ providing updated information on states enacting remote online notarization or other remote notarization implementations during the COVID-19 pandemic. However, this is not necessarily a long-term approval.
- Audit Trail: Solution must date and time stamp each action and retain documents in eVault for 5 year period.
- Title Insurance Underwriters: Not all underwriters will accept a RON document if specific legislation has not been passed in that state.
- Lender: Some lenders are not comfortable accepting e-signed Note.
And while there still remain hurdles, there are strides being made to approve the use of RON technology (post-COVID-19), including:
- The “SECURE Act: On March 18, 2020, Senate Bill 3533, the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (the “SECURE Act”), was introduced as bipartisan legislation to authorize and establish minimum standards for electronic and remote notarizations that occur in or affect interstate commerce. A nearly identical version of the bill was introduced in the House on March 23, 2020 as H.R.6364. If it becomes law in its current form, it would authorize every notary in the US to perform remote online notarizations (RON) using audio-visual communications and tamper-evident technology in connection with interstate transactions.
- MISMO: On April 21, MISMO, a mortgage industry standards organization, announced a new remote online notarization certification program for RON providers and mortgage industry participants and a cost of $5,000 for certification. MISMO also developed and released Remote Online Notarization standards to promote consistency across mortgage industry practices.
Closing all of our real estate transactions completely digitally/electronically is not a question of “if” it will happen, but rather “when” it will happen--in every county, every state, and approved by every lender, GSE and title underwriter. Is your title company ready?