Fred Gooch of First American Docutech: National RON Standard Will Boost Lender, Borrower Adoption of Digital Closings
Fred Gooch is operations counsel and senior vice president of Compliance for First American Docutech, a part of the First American family of companies, providing an end-to-end integrated digital mortgage experience that enables lenders to accelerate the real estate closing process.
Prior to the pandemic, the need to improve the overall ease and convenience of notarizing documents to enable borrowers to realize a true digital mortgage experience had been brewing for many years. The emergence of COVID-19 reinforced the need for the mortgage industry to provide borrowers with a more streamlined, safe and socially distant digital notarization experience, and the industry is now seeing rapid acceleration of Remote Online Notarization adoption. For example, Notarize, a leader in RON, reported real estate volume growth of 800% since 2019.
RON gives borrowers the ability to have their documents remotely notarized from anywhere through a secure, two-way audio-video session with a notary, helping expedite the closing process. Moving the traditional in-person notary signing event to a digital experience increases convenience and efficiency and eliminates the need for consumers, notaries, and title and settlement agents to meet in-person for the closing.
However, the current state-by-state legislative and regulatory approach to RON adoption presents a difficult set of challenges for lenders trying to introduce new digital tools to their borrowers. Currently, states decide whether to allow their notaries to perform RON and, if so, the standards for how RON should be performed. While 38 states have enacted some form of permanent remote online notarization law, the standards addressing how RON should be performed by notaries in those states are not uniform. Moreover, other states have not addressed the issue at all or have restricted their notaries from performing RON.
Theoretically, a lender could complete a RON eClosing in all 50 states today by using a remote notary from a state that has enacted a RON law. However, the legality of this approach remains uncertain as it requires the interpretation and interaction of numerous state and federal laws, many of which were enacted prior to the advent of RON. It also leaves lenders with uncertainty around GSE compliance requirements, investor requirements, and covenants in agreements when selling loans to secondary market participants. The key questions for many lenders are whether the investor will purchase an eNote associated with a RON-executed loan and whether a RON-notarized security instrument is legally entitled to be recorded with the county recorder.
This all reinforces the need for uniform standards and nationwide legal certainty that lenders and secondary market participants can rely on.
Traction on Capitol Hill
In May 2021, Sens. Mark Warner (D-VA) and Kevin Cramer (R-ND) reintroduced federal legislation designed to expand the use of RON on a nationwide basis. The Securing and Enabling Commerce Using Remote and Electronic (SECURE) Notarization Act was previously introduced in Congress in March 2020, but it did not advance past initial introduction.
Reintroduction of this legislation to allow nationwide RON and establish nationwide minimum standards for RON reflects the growing demand for digital tools, even as we regain some normality this year. The post-pandemic world looks a lot different than it did in early 2020. The move to digital became a necessity as many parts of daily life went online, and consumers found the digital options to be convenient and practical.
Many industry trade groups and organizations, such as the American Land Title Association, the Mortgage Bankers Association, the National Association of Realtors, and the American Council of Life Insurers endorsed the SECURE Notarization Act. They contend that the pandemic exposed an outdated method that needs modernization to catch up to the 21st century. The goals of the SECURE Notarization Act are to enable RON for all licensed notaries in the country, to establish national minimum standards for performing RON, and to ensure the legality and enforceability of a RON-notarized document in all 50 states regardless of which state’s notary performed the RON. The bill emphasizes the importance of security measures designed to protect the integrity of the notarial act. These measures include the use of multifactor authentication to confirm the identity of the signer, the retention of an audio-visual recording of the signing, and the use of tamper-evident technology.
Now is the Time to Embrace a National RON Standard
Passing the SECURE Notarization Act will enable all U.S. notaries to perform RON and establish a nationwide set of necessary minimum standards for RON. This framework would provide certainty of interstate recognition of RON for consumers, lenders and title insurance providers, thus eliminating some of the roadblocks for RON adoption among loan originators and investors.
The goal of the bill is not to change state laws or limit consumer choice. Taking inspiration from the laws that govern eSignatures, the Electronic Signatures in Global and National Commerce (ESIGN) Act and Uniform Electronic Transactions Act, the SECURE Notarization Act is technology-neutral and does not favor specific technologies or solutions.
Importantly, the SECURE Notarization Act does not replace traditional in-person notarization, which will remain an option for anyone who chooses it. Rather, it simply allows RON as an additional alternative for lenders and consumers. The SECURE Notarization Act preserves and expands consumer choice.
Passing the bipartisan bill would provide the foundation for expanding the use of RON eClosings to all 50 states, enabling lenders and borrowers alike to benefit from safe and efficient digital mortgages.
(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 msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)
