PERSON OF THE WEEK: Mortgage lenders should keep a close eye on the passage of the SECURE Notarization Act of 2021, which would essentially set a national standard for the use of Remote Online Notarization (RON).
The bill, the previous version of which was not passed last year, was recently reintroduced to the US Senate. Its approval is considered urgent by industry groups such as the National Association of Realtors, the American Land Title Association, and the Mortgage Bankers Association as the use of RON for mortgage closings and other mortgage-related documents increases during the COVID-19 pandemic.
By May, 35 states had passed laws that allowed notaries to perform RONs under certain circumstances.
The revised bill, introduced by Senators Kevin Cramer (R-ND) and Mark Warner (D-VA), empowers notaries to “perform electronic notifications and remote notifications and to set minimum standards that occur in or affect international trade. to require every federal court to recognize certifications carried out by a notary of one state, to require every state to recognize certifications carried out by a notary of another state if the certification was carried out on the basis of a public document, a protocol or a court or is based on this relates to the procedure of the state of the notary or if the notarization takes place in international trade or concerns this … “
If passed, the bill would not prevent states from enacting their own unique laws on the use of RON. Rather, its purpose would be to create a basic standard that should in turn help achieve greater consistency from state to state with regard to the RON rules and regulations.
To learn more about what passing this bill would mean for the mortgage industry and what has changed since the first version was launched, Mortgage Orb recently interviewed Fred Gooch, Senior Vice President of Compliance for First American Docutech.
Q: What has changed with the reintroduction of the SECURE Notarization Act since it was originally introduced in March 2020 that has encouraged this return?
Gooch: The original SECURE Notarization Act was introduced at the start of the pandemic to standardize the various processes that result from the various federal remote online notarization (RON) laws. The past year has only shown the clear need in the industry to modernize the notarial process to deal with unknown circumstances such as a global pandemic. Throughout the pandemic, borrowers and lenders alike have opted for digital financial instruments, and the reintroduction of the bill reflects that the demand for digital tools will remain high even if we get back to some normalcy this year.
Q: As we saw during the pandemic, some shortcomings in the methodology of the notary process have come to light. How does RON support the end user and what does the authorization to use show?
Gooch: The notarial deed is used to verify the identity of the signatory and to confirm that the signatory is both capable of contracting and not exposed to undue pressure to get his signature. Technology for verifying the identity of a signer has advanced dramatically and is widely accepted. The ability to use a video recording of the signing ceremony will create a recording to confirm that the intent was to sign and that the signature was not forcibly applied.
When analyzing the eligibility of RON, there are three pillars to consider: marketability, verifiability and insurability. For marketability, it is important to assess whether the investor will buy the eNote from RON eClosing or not. For registrability, the district in which the property is located must be able to register an electronically notarized security instrument. Finally, for insurability reasons, the title insurer must insure the loan when it is executed with RON e-Closing. If all three of these pillars are in place, the e-eligibility of the closing is very likely.
Q: The notarial deeds are traditionally regulated at the local level. How has this contributed to wider adoption and how has support from trade groups and organizations helped the cause?
Gooch: The states productively passed new RON laws last year. Standardized rule-making processes, such as the Revised Uniform Law on Notar Acts (RULONA) and the MISMO RON certification, have made it much easier for states to draw up uniform laws. There are 35 states that have permanent RON legislation. With the open-mindedness of many states, as well as several groups and organizations supporting such laws, hopefully there will be a statewide standard to relieve lenders trying to juggle state laws that are very similar but might have important differences.
Q: As more states adopt the RON legislation, there are still issues that could arise that would be addressed with a national standard. What are some of these semi-common situations, and how exactly would a nationwide standard help?
Gooch: A nationwide RON law would help remove the confusion that often arises in circumstances where transactions cross state lines. For example, signatures on loan documents for a Texas property could be certified by a Virginia notary using RON. In this circumstance, it would be clear under the SECURE Notarization Act that a Virginia Notarized Notarization would be recognized in Texas. While the laws of Texas and Virginia allow this, a district clerk may refuse the document because they are unfamiliar with Virginia’s RON certificate and seal.
A nationwide standard would provide more consistency and security that could alleviate this type of confusion. Given the way transactions are becoming a more digital process, having a clear standard that crosses state lines is more efficient for everyone involved.