Harry Gardner, EVP of strategies for Docutech recently had a chance to chat with
National Mortgage Professional magazine about changes in the industry amidst the COVID-19 pandemic. As the pandemic continues to change the way we live and conduct business, contactless closing are rapidly becoming the new norm. Harry discussed RONs or remote online notarizations and how the industry is adapting to this new normal.
What exactly is a RON eClosing?
In a RON eClosing, consumers can eSign all of the closing documents. No wet signatures are needed, so no face-to-face interaction is required. Along with the disclosures, eNote, lender and title specific documents in a closing package, any documents that require notarization (deed, mortgage, etc.) can be eSigned in an online video session between the borrower and a RON-certified notary public. During the online video session, the notary verifies the identity of the borrower using multi-factor authentication (credential analysis and knowledge-based authentication or KBA), and then interacts with them in real time while they eSign their closing documents. The notary then eNotarizes the relevant documents using a digital notary seal and the notary’s eSignature, and the RON eClosing is complete.
Which states have passed RON laws so far?
As of April 16, 2020, 43 states had approved some level of RON transactions: 23 on a permanent basis and another 20 through emergency authorizations, according to the National Notary Association. Another four states—California, Delaware, North Carolina and Oregon, along with the District of Columbia—have clarified that their notaries cannot do RON at this time. But it’s important to understand that even if a state has not enacted a RON law for their own notaries, RON eClosings can be performed there using remote notaries from any of the states with clear and established RON law.
How do I determine if a loan is eligible for a RON eClosing?
There are three important factors that determine whether a loan is eligible for RON: Investor acceptance, title underwriting and county recording.
Since everything is eSigned in a RON eClosing, your investor must be willing to purchase a RON-closed eNote. In response to the COVID-19 pandemic, Fannie Mae and Freddie Mac have modified their single-family seller guides to provide updated requirements and acceptance for RON. Lenders may now deliver RON-closed eNotes to Fannie and Freddie in 45 states and Washington D.C.
The RON eClosing must also be approved by the title insurer, who has detailed underwriting guidelines that include considerations such as the location of the subject property as it relates to the location of the RON notary.
And finally, you need to be sure that the county recorder will eRecord the loan. Even for eRecording-enabled counties, there are nuances when it comes to eRecording a RON-notarized Deed of Trust document, and so the subset of eRecording counties who are willing to record RON loans is constantly evolving. (There is also an optional process for creating a certified paper copy of the RON-eNotarized Deed of Trust and submitting that to counties who don’t accept the electronic version for eRecording.)
Fortunately, through our partnerships with Simplifile and NotaryCam, Docutech can provide lenders with intelligent “eEligibility” on every eClosing, providing confidence on eRecording coverage for RON eClosings especially.
Is it safe? How does the notary know that the right person is signing?
Yes–from an identity risk, document security, and social distancing perspective, RON (with the appropriate multi-factor authentication, credential analysis and identity-proofing tools) is very safe. Most RON systems can ask the borrowers knowledge-based authentication (KBA) questions, increasing assurance that they are who they say they are, in addition to the standard check of a driver’s license. And, of course, a virtual eClosing allows borrowers to avoid face-to-face interaction, helping mitigate today’s pandemic risk.
For example, Fannie Mae and Freddie Mac require that RON systems meet the following standards:
►Two-factor identity authentication, including using a government-issued photo ID that has a signature, credential analysis and identity-proofing
►Tamper-sealed notarized documents and system security sufficient to: Prevent interference with the authenticity, integrity and security of the notarial ceremony; prevent corruption or loss of the recording of the ceremony, and protect the communication technology, electronic record and backup record from unauthorized use.
►A secure electronic journal of the notarial act including evidence of identity of the signer(s).
►Recording of the notarial ceremony with secure storage for the life of the loan.
What does the SECURE Act do?
The SECURE Act would establish a nationwide set of necessary minimum standards for RON. This nationwide framework would provide more certainty for investors and title insurance providers and could expand the market for loan originators. In today’s environment, where social distancing and the prevention of COVID-19 virus transmission is paramount, passage of this bill into law would mean real estate closings could be conducted with no person-to-person contact, allowing real estate transactions to move forward while dramatically reducing the risk to consumers, real estate and title insurance professionals.
The Act is designed to not preempt or change state laws or impede consumer choice. Like ESIGN and UETA, the SECURE Act is technology-neutral and does not favor specific technologies or solutions. It also adds additional consumer and fraud protection by requiring technology providers to meet a set of minimum-security standards.
The Act is important because RON support is presently controlled only at the state level, by state notary commissions and legislatures. As of late April, 23 states had approved RON on a permanent basis with another 20 passing emergency authorizations. On the other hand, California, Delaware, North Carolina, Oregon and the District of Columbia have explicitly stated that notaries cannot do RON at this time. Adoption of the SECURE Notarization Act of 2020 would provide a framework for broadening the use of RON eClosings to all 50 states.
As of early May, the Senate Judiciary Committee has yet to consider the bill, but supporters are hopeful for a quick passage as part of the ongoing responses to COVID-19.