Rachael Sokolowski and Rick Triola: Impediments to Interstate Commerce Eliminated by Passage of The Secure Notarization Act
Rachael Sokolowski, CMSP, is President of Magnolia Technologies, Fort Lauderdale, Fla., a recognized leader in the mortgage banking industry as both a technology evangelist and subject matter expert who has acted as a trusted adviser, key decision maker and driver of results in industry initiatives. She designed the eMortgage specifications for creation, signing and archival of electronic loan documents, electronic closing systems and the exchange loan information between systems known in the industry as the ‘SMART Doc’ and was the XML architect for the national electronic Note registry, the MERS eRegistry. She is a past recipient of the Mortgage Banking magazine “MISMO All-Star” award (2006) and in 2014 was named as a “MISMO Standards Champion.” She is currently Co-Chair of the MISMO eMortgage Community of Practice.
Residential and commercial real estate closing expert Rick Triola is Founder and CEO of NotaryCam, Newport Beach, Calif., pioneer of the industry’s trusted global platform for supporting all eClosing scenarios–RON, IPEN or Hybrids–in any jurisdiction. He is a two-time winner of the MBA NewsLink Tech All-Star Award (2017 and 2020).
What ever happened to Senate Bill 3533, the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (the “SECURE Act”), bipartisan legislation to authorize and establish minimum standards for electronic and remote notarizations (RON), which was introduced in mid-March? We assert that this question would be on more lips and in more headlines had not nearly every state in the Union either adopted its own version of the law or enacted pandemic-necessitated workarounds.
One of the impediments to business as usual under physical distancing is an inability to properly execute financial and legal documents. For example, and especially critical to our industry, mortgage deeds must be notarized to be accepted for recordation by local county clerks and other recording offices. Imagine for a moment what the last few months of unprecedented loan origination volume would have been like had the states been inflexible on in-person notarization requirements.
As a practice, notarization has always been a state by state patchwork of rules. Some states have published rules for notarization, others have publicly stated that it is allowed, but they have not provided rules-based guidance. Some states are completely silent on it. Now, with 27 states having officially adopted legislation modernizing the notarization transaction (and Hawaii poised to become the 28th adopting state January 1, 2021) and most of those remaining having allowed for emergency rules, combined with hundreds of thousands of successfully completed RON transactions over an 8 year span, we have real world evidence that digitally enabled remote notarizations are safe and effective. However, the emergency rules will expire and California, for reasons neither of us can discern, remains undecided.
As the world’s 5th largest economy and having neither adopted legislation nor enabled a workaround, California’s reticence may, in fact, be an issue. However, it is interesting to note the California Secretary of State released a letter in August saying that although California notaries cannot perform RON transactions, a resident of California is okay to have a document notarized by RON outside of California: “California Civil Code 1189(b) provides that any certificate of acknowledgment taken in another place shall be sufficient in this state if it is taken in accordance with the law of the place where the acknowledgment is made.”
Without a federal act or law enabling electronic notarization across all the states, our situation is similar to the late 1990s, when individual states adopted e-signature laws, but the kinds of electronic signatures cited and the legal recognition of them varied greatly. The Uniform Law Commission (ULC) had created a model state law, the Uniform Electronic Transactions Act (UETA), to establish e-signature uniformity across all the states. States were slow to adopt UETA and there was no provision for interstate or foreign commerce.
In 2000, under the Clinton Administration, the Electronic Signatures and Global National Commerce Act (ESIGN) was signed into law. With that, electronic signature technology became valid and legal in all 50 states, even those states that had not passed UETA. With that, the real estate industry was able to adopt more productive and cost effective digital practices because it allowed us to electronically sign documents with the assurance that those electronically signed documents would be as binding as paper documents.
Some might suggest that the SECURE Act pushed out in March has stalled because really important standards around identity proofing, videotaping and storing the documents were all amiss. However, that does not need to be a deal breaker since language in the model acts, such as that model state law jointly issued by MBA and ALTA, can solve that issue. Further, and in actuality, we have been using RON for eight years, and hundreds of thousands of RON transactions have been conducted worldwide, where there are no boundaries.
Our position is simple: a notary is a notary. Even in today’s paper world, there are rules and regulations around a paper notary or an in-person notary. But what we need is state recognition allowing a notary in Virginia to follow Virginia laws for a signer somewhere outside Virginia and its acceptance outside Virginia as settled law. Even though there are no court cases regarding RON, interstate recognition of notarial acts has been well-settled over generations. According to that precedent, RON being performed within the guidelines of a particular state should be accepted across lines.
Remember, the SECURE Act simply requires a state to recognize a remote notarization performed by a notary public commissioned in another state when interstate commerce is in effect. It does not require anybody to use RON, it just allows for a notary in a state where remote online notarization has been enacted to be valid in another state. The Act has been endorsed by the American Land Title Association (ALTA), the Mortgage Bankers Association (MBA) and the National Association of Realtors (NAR).
We think it is accurate to say that failure to pass the SECURE Act creates an impediment to interstate commerce. Certain documents have notarization requirements. In-person notarization requirements delay their transaction by requiring all parties to physically be in the same location at the same time. Until a document is notarized, a closing or some other business transaction is not complete. In our current situation, there are fewer notaries available and the ones that are available are understandably reluctant to meet in person.
Further, some the workarounds actually introduce a new element of risk. As an example, we’ve seen emergency and executive orders around notarization that allow for notarization to occur in different places and over time on paper. In those cases, a Remote Ink Notarization (RIN) is allowed for which the borrower is sitting in their home and they wet ink sign documents while the notary is watching over Skype or WebEx or Zoom. The documents are then shipped to the notary who notarizes them at a later date, which gets around the in-person requirements, but introduces risk in terms of that time difference between the different signatures and possible changes made on that document after the notary leaves the video witnessing.
Technology is available today that enables notarization when the notary is not physically in person with the signer of the document. RON allows for the notarial act to occur “face-to-face” using electronic signatures, audio and video technologies while digital evidence is stored for a minimum five years. Why not use it especially in these times?
So, why hasn’t the SECURE Act passed? In part, maybe it has been because of the general governmental disarray and continual legislative reprioritization inherent in a pandemic. And, in part, due to the temporary de facto adoption resulting from state-by-state adoptions and emergency rules, perhaps it is because there simply has not been enough pain. Knock on wood, because emergency rules covering electronic notarizations will expire.
Now is the time for our industry to weigh in again on its support for passage of Senate Bill 3533, the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (the “SECURE Act”), and the mostly identical version of the bill introduced in the House on March 23, 2020 as H.R.6364.
Let’s not wait for the pain.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)