Clark County Leads Washington in Population Growth, E-Recording Innovation
(Paul Clifford is President and CEO of Simplifile, Provo, Utah. Recognized as an e-recording industry founder, Paul previously served as director of corporate and strategic planning for iLumin Corp., where he created a strategic plan for an automated mortgage transaction initiative for Freddie Mac and Fannie Mae. He can be reached at paul@simplifile.com. This is part one of a series on e-Recording.)
Recording is a critical post-closing process that can cause serious headaches for lenders and borrowers if handled incorrectly. Just as mortgage compliance regulations differ from state to state, recording processes can vary from county to county.
In this series, we’ll highlight select counties across the United States to shed light on some of the many nuances that can affect the recording process and why lenders, settlement service providers and county recording offices are collaborating more closely than ever before.
One of the Nation’s Hottest Housing Markets
Located in southwestern Washington, Clark County is the state’s second-fastest-growing county and part of the bustling Portland-Vancouver-Hillsboro metropolitan statistical area, which has topped the S&P CoreLogic Case-Shiller home price index for the past seven months running. The index measures year-over-year gains in home values among 20 of the nation’s largest MSAs.
A combination of factors is likely responsible for the current influx of residents into the area. Like other Washingtonians, Clark County residents pay no state income tax, and although combined state and local sales taxes in Washington are among the nation’s highest, Clark County residents need only cross the river into Portland, Oregon, to enjoy tax-free shopping. Washington’s 2012 legalization of recreational marijuana may be a further draw for some out-of-state transplants.
Whatever the reason for their arrival, the impact of so many newcomers is clear: home prices in the Portland-Vancouver-Hillsboro MSA jumped a whopping 12.3 percent from March 2015 to March 2016, according to the S&P CoreLogic Case-Shiller report. In other words, business is booming for Clark County’s housing industry.
“The historic home price increases we’re seeing in Clark County reflect high demand for housing in the face of relatively low supply. In such a ‘hot’ real estate market, all parties are motivated to complete transactions as quickly as possible,” said Kathy Lee, manager of the Clark County Treasurer’s Office. “Yet historically speaking, the recordation of land records and processing of real estate excise tax has not been a particularly fast process. We decided it was time to do our part in addressing that.”
The Clark County Auditor’s Office began accepting electronically submitted documents for select, non-excise-related real property transactions in 2010. Today, the majority of real estate transactions (both excise and non-excise) in Clark County are e-recorded, saving settlement service providers time and money and increasing borrower and lender satisfaction–but it took a couple false starts to get there.
State Law Sets Stage for E-Recording
When Lee and her county partners set out to modernize the business of recording and processing real estate excise tax in Clark County, she had the law on her side. The Washington state legislature first authorized the electronic recording of land records in 2008 with its passage of the Uniform Real Property Electronic Recording Act. The act also empowered Washington’s secretary of state to create an E-recording Standards Commission to review electronic recording standards and make recommendations for their implementation.
As of June, 29 U.S. states have adopted URPERA, which explicitly approves use of electronic records in real property transactions, including acceptance of electronic signatures, notarizations and payments. Other states, such as West Virginia and Massachusetts, are presently considering URPERA adoption.
Washington’s E-recording Standards Commission consists primarily of county recorders (or “auditors” in Washington) but also includes assessors, treasurers, land title company representatives and other parties involved in real property transactions.
Recommendations from the commission form the basis of Washington’s 2013 Real Property Electronic Recording code, which prescribes the standards that dictate how e-recording is performed in Washington in actual practice. For instance, the code clarifies that both e-recording documents and the software or web portals established to receive them must meet technical guidelines established by the Property Records Industry Association and URPERA. It also sets minimum security standards to protect e-records from alteration or unauthorized access.
A Complicated Recording Workflow
Despite Washington’s e-recording-friendly legal environment, Lee wasn’t sure an end-to-end e-recording platform was feasible for Clark County. As with most jurisdictions throughout the United States, real estate documents in Clark County are entered into public record by a recording office, called the auditor’s office. But the Washington State Department of Revenue adds a wrinkle to this process: real property transactions carry a Real Estate Excise Tax that cannot be processed by the auditor’s office. Instead, these documents must be reviewed by the county treasurer’s office before they can be recorded with the auditor’s office.
REET is a seller’s tax charged on the sale of real property. Whenever real property changes hands, the settlement service provider must complete and submit a REET affidavit to the treasurer’s office, which in turn assesses the REET amount due. The assessed tax must be paid to the treasurer’s office within 30 days of the property sale, and only after the REET is paid in full can the deed be recorded by the auditor’s office.
“Deeds associated with real property transfer require REET and must come through the treasurer’s office,” Lee said. “But other common documents, like liens, are not subject to REET and only go to the auditor’s office. This split workflow was a major roadblock for settlement service providers who wanted to record electronically.”
The Clark County Auditor’s Office began accepting electronic submission of non-excise documents as early as 2010, but adoption was limited; since settlement service providers still had to file deeds and other documents subject to REET in person, many just didn’t bother to e-record the balance of their workload.
In 2012, the treasurer’s office introduced its own online platform, but there were still problems. While settlement service agents could now submit REET affidavits to the treasurer’s office through its online portal, there was still no easy way for them to electronically pay the assessed REET. Plus, settlement service agents weren’t too keen on having to use two separate systems–one for the treasurer and one for the auditor–depending on the type of document to be recorded.
It wasn’t until implementation of an integrated, third-party system (Simplifile) bridging the two offices in March 2015 that Clark County saw significant gains in the efficiency of its e-recording transactions.
“Our new platform serves as the common thread connecting the settlement service provider to the treasurer’s office to the auditor’s office and back again,” Lee said. “Processing REET previously required manual review and data entry that we performed only during defined hours of the day. Now the process is much faster–what used to take 15 minutes now takes seven minutes. The process is also more automated, allowing us to perform this service throughout the business day. Settlement agents can even pay the REET through the system with an easy ACH transaction.”
As a result, Lee added, “nearly 97 percent of transactions we receive [at the treasurer’s office] from large title companies are now completed electronically.” Lee said.
It’s a timely development for a county whose metro area is expected to grow by 725,000 people over the next 20 years. Clark County’s experience could serve as a model for what other counties throughout the nation–even those with complex recording protocols–stand to gain by embracing digital platforms that bring together multiple stakeholders in the real estate “supply chain.”
Stay tuned for our next installment.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor does it connote an endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions; articles and/or Q/A inquiries should be sent to Mike Sorohan, editor, at msorohan@mba.org.)
