Remote notarizations have been gaining popularity for the last couple years, but interest in them soared as states put their stay-in-home orders in place. During the two-part webinar series, Ready Set…RON!, Michael Jones, chief financial officer, Thrive Mortgage; Jason Nadeau, Chief Digital Officer, Fidelity National Financial; and Barry Miller, president, The Closing Agent LLC and Barry Miller Law, shared their thoughts on the landscape as well as considerations for those just starting the eClosing journey.
State of things
Nadeau kicked off the series by sharing a bit about the different things being seen in the marketplace, remote online notarization (RON) and remote in-person notarization (RIN). Currently there are 23 states where RON has been adopted. This means in 23 states, documents can be signed electronically by consumers and the notary can electronically sign and seal those documents.
“It (RON) is the preferred method versus the RIN process,” Nadeau said. “As the underwriter, it’s the preferred method because in the states where RON is approved, we have very clear laws and we have very clear guidelines from the secretary of state on how to go about these transactions. We have, as an underwriter, become more comfortable with these processes and become more comfortable that these are transactions we can insure.”
He also noted that RON requires credential analysis and knowledge-based authentication to identify someone, where specific software is used to identify signers, something that can’t be done over FaceTime or Zoom.
Since the pandemic hit, governors have issued temporary executive orders allowing for RIN, meaning the notarization is not digital, the signer still is signing a piece of paper and sending it to the notary to sign and affix their stamp. They do it with a video transaction rather than in-person.
“The other thing that is important to note, and I think is relevant as you think about remote in-person notarization versus RON, is that these particular transactions (RIN) were put in place by governors because you had people who were in quarantine, in hospitals, in the infectious units who needed to sign legal documents and wills, and bringing a notary into that unsafe environment was unacceptable,” Nadeau said. “They wanted to come up with a way to quickly solve that problem. That doesn’t mean it doesn’t apply to us, that doesn’t mean it hasn’t had an impact on real estate, but understand that the goal of RIN emergency orders was really end-of-life activities.”
He said because the focus of these orders was the ability to support end-of-life activities, it is likely that as hospitalizations decline, these temporary orders will be lifted.
Nadeau said that although RIN transactions ultimately end up on paper, it would be wise to have the same sort of guardrails you have in place with RON transactions.
Working together
All three speakers noted that the key thing to making these transactions successful is working together and communicating well with all parties involved.
“One thing that is extremely important that we do as an industry is that we are cautious about our enthusiasm to move forward with remote notarization,” Nadeau said. “What I mean is, for instance, don’t do a RON transaction or a RIN transaction without a lender’s permission. You could end up putting a lender in a situation where they have a loan they cannot sell. You could end up in a situation where you’ve done a transaction you cannot record. You could run into a scenario where, when you get to foreclosure or get to bankruptcy, you won’t have clean title. Or we could run into a transaction where, because someone did a RIN transaction, there is a cloud on title that calls into question if a homeowner actually owns the home.
“These are really important things to consider in our rush to close a customer’s loan. I want to make sure that we are very cautious of the importance of doing it right and getting everyone’s agreement in doing it correctly. I think that it is very critical that we don’t, as an industry, create problems or have a few high-profile transactions go badly as a result of rushing into RIN and set ourselves back and lose the momentum that we are picking up in the industry,” Nadeau continued.
Miller agreed, saying, “You as title agents out there and attorneys have to be real careful about what the lender’s requirements are. The other thing I would suggest is in this time of the pandemic, as they are bending their rules somewhat and you are deviating from your standard closing instructions, is to make sure you get an email in writing to make sure that if you are deviating in any way, you have the lenders approval, because it could cause a problem down the road.”
Jones noted that when his company moved to an eClosing platform, it was challenging to work with title partners.
“Whenever we needed to use our platform for these transactions, there were concerns about that,” he said. “We would even take the step of sending out an email with instructions, log ins, how-tos two weeks prior to our loan closing and we still found that title companies were not reading that. They weren’t reaching out to us for help. It was usually the day of closing that they, all of a sudden, became aware that this was going to be some sort of an eClosing with a RON. I would encourage you all, make sure that communication is there.
“For those lenders who are willing to test the waters and be on a bit of the edge, I would ask that you would partner with them and make sure there are clear lines of communication because there is nothing worse for the lender expecting this to be an eClosing or RON, only to have to paper it out or do something totally unexpected. That can just create challenges.”
Nadeau also said agents should confirm with their underwriter, noting that each underwriter has different guidelines for doing RON – and, in fact, Fidelity has different guidelines by state. Sometimes those guidelines restrict certain types of transactions.
He pointed out that in their guidance on the issue, Fannie Mae and Freddie Mac have made it clear that you cannot force your borrower to conduct a remote transaction. It can be an option, but not something that is forced on the consumer.
Tech
When starting down the remote notarization road, it also is important to ensure the technology you are using is secure.
“What needs to happen from the lender’s perspective is, with all the players that are undoubtedly about to come into the market – which was already beginning to get a little bit more crowded, but now I think it’s going to get very crowded as everyone sees the need for using a RON and going through this process electronically – they really need to be doing a lot of due diligence, because we are talking about very sensitive information that is being shared,” Jones said. “If the note gets misplaced, if the data is compromised, you can really have a big issue. I’ve heard stories of eVaults and closing platforms actually sending the information mistakenly to other parties that weren’t even part of the transaction within their database. It’s important to make sure you are working with a partner that has all that buttoned up.”
The speakers were asked several questions about whether there is a way to do RON without using third-party software, or in a way that gives them more control as the closing agent or attorney.
“Without using a RON specific third-party software, no,” Nadeau answered. “What you do have are two models out there relative to RON providers. There is the model that you see from NotaryCam and Notarize, which is the model where you send them the documents, they use their notaries and then then complete the transaction for you. So in essence, you are using them like a mobile signing service. You then have other providers out there like DocVerify, Pavaso, and Nexus. This second group of companies are not in the business of being a notary company. They are in the business of providing software to title companies who want to perform RON transactions.”
Nadeau cautioned those who may want to develop their own software that there are key components to doing RON transactions in an acceptable and legal manner.
“One, you need an eSigning technology that handles independent digital certificates from a separate independent certificate authority that can tie that certificate into a RON transaction,” he said. “So you have to be an eSigning platform, you have to have audio-video technology, knowledge based authentication that is deeply embedded into the technology. You must have ID scanning, credential analysis integrated into all 50 states for identity verification. And you need to have the audio-video components to record and store it. This is not just Zoom as an A/V solution. You have to be a combination of all those things and frankly, there is really no business scenario for all of those things combined into one, other than our remote notarization transaction.”
Jones added that not only do you have to meet all these criteria, but you have to have it approved by the state regulator.
Issues
One sticking point to doing these transactions is unsuccessful knowledge-based authentication (KBA) efforts, meaning the signer could not successfully answer all the questions.
Miller said these authentication efforts are required to ask five questions which the signer has two minutes to answer four out of five correct. These questions can include asking what color car you had 14 years ago, which may be hard to remember.
“One of the challenges with KBA is, if you vet your signer right before it closes and they can’t pass KBA, what do you do? Then you are scrambling,” Miller said. “I would highly suggest that you pre-vet a few days beforehand to make sure they can pass KBA. Get them credentialed so that you don’t have that last-minute scramble.
“Personally, I think knowledge-based authentication is an antiquated system,” Miller said. “There are biometrics and other platforms that I think are faster and more reliable.”
Another issue is the fact that there are a number of recording offices that do not record RON.
“One common myth out there that I want to make sure everyone is aware of, is that just because a county is an eRecording county, does not mean that they will accept RON notarized documents,” Nadeau said. “Even in states where the law has been passed, some counties sometimes are slow to move on their adoption. We advise all our partners that we work with, and all the agents we work with is, if you want to go down the path of RON, confirm with all the counties where you are operating that they will accept RON notarized documents for recording.”