Businesses are quickly evolving their operations in response to the COVID-19 outbreak in the United States. Many consumer transactions are conducted remotely and online today making the pivot easier for some industries, but when it comes to closing real estate transactions, it’s not been so easy.
While the loan application process has become faster and easier with online services available to homebuyers, closing day for most is still notoriously paper-heavy.
Remote online notarization has been around since 2012 as a convenient consumer option that doesn’t require in-person signings with pen and paper. Unfortunately, this option isn’t available in every state.
Convenience is no longer the driving force behind remote closings. Now, title companies, notaries, lenders, underwriters and consumers are looking toward digital closings as a way to maintain their level of operations while protecting the health of employees and homebuyers.
Here are three major ways closing day has changed since the COVID-19 outbreak.
3 Ways real estate closings have changed since COVID-19
- National Notary Association updated their guidance for in-person signings
- Notaries in RON approved states are rushing to get certified in remote notarization
- More state and federal approvals for remote online notarization are underway
National Notary Association updates their guidance
Since remote closings aren’t viable everywhere, the National Notary Association (NNA) is supporting new processes like “window-separated signings” or “porch signings.” In order to ensure the health of those involved in the signing and compliance with state laws, the NNA minimum guidelines were released. Some of those include:
- The notary and signer must be able to clearly communicate with each other by sight and sound through the window and by normal means. Cell phones, FaceTime, Skype or other electronic communication devices may not be used.
- The notary must follow all federal, state and local guidelines for social distancing, health protection, and sanitization when meeting with signers and handling documents, IDs and other materials.
- A neutral area should be designated where items can be placed and picked up by each party to maintain a safe distance.
- The signer must give their actual government-issued ID to the notary for inspection. The ID may not be viewed at a distance or through a window. The notary must also retain possession of the ID until the signing is completed and then return it to the signer.
- All notarial acts must be completed in direct line of sight of the signer through a window or doorway before leaving the signing.
- Reasonable measures should be taken to ensure that the same documents handed to the signer are the same ones handed back to the notary.
Additionally, title companies and law firms are utilizing creative closing techniques like curbside closings to eliminate individuals entering office rooms and to abide by social distancing guidelines.
Notaries in RON approved states are rushing for certifications
Before the outbreak of COVID-19, about 23 states had passed or implemented remote online notarization (RON) bills. While each state has different standards and regulations guiding their notaries on this newest method, there are some common standards.
Common minimum requirements & limitations for remote notarization:
- Notaries must register with their state as a remote or online notary public
- Facetime, Zoom and other conferencing tools are not considered secure for the exchange of non-public information in accordance with the Gramm-Leach-Bliley Act
- Multi-factor methods of confirming the identity of the signer to combat fraud
- An electronic seal and signature must be applied to a document with tamper-proof technology
- The recording on the notarization must be kept for several years (usually 7-10 years) in a secure depository
In our live town hall, Tackling the Learning Curve of Remote Closings, Scott Merritt of Florida Land Title Association mentioned there have been 100-200 applications in the state of Florida every day over the past week. At the beginning of the week on March 23rd, the state had a total of 437 approved remote notaries by Thursday there were 561.
Clearly, notaries understand the current need and are rushing to meet the demand, but many applications are being denied.
Some of the most common causes of the rejections in Florida include:
- No designation of chosen RON service provider
- Missing RON specific clause on Error and Omission Policies (cover page of your policy isn’t adequate)
- Copy of current notary certificate. (If you don’t have the physical copy, notaries must order one through their bonding agency, but you experience a delay of 3-4 weeks.)
- Notaries must have a bond of $25,000 separate from your traditional notary bond of $7,500.
On Wednesday alone, 125 applications were denied in Florida. So if you’re a notary looking to become approved for remote notarization in your state, take the time to understand what additional requirements are needed.
More state and federal approvals for remote online notarization
As more states are issuing stay-at-home orders, the title industry is pushing forward measures to allow remote notarization. More action has been taken on this front in the past two weeks than any time since Virginia became the first state to allow it in 2011.
In New York, Governor Andrew Cuomo issued an executive order authorizing the use of video conferencing tools by New York notaries. The video and signing must be conducted live and in the sight of the notary public, but there is allowance for faxing documents that are signed instead of requiring an application with electronic signing and eSeal capabilities. The order is valid through April 18th.
In New Jersey, the state senate and assembly passed Measure A-3864 to allow remote notarization if the notary has “personal knowledge of the person’s identity, verification of the person’s identity by oath or affirmation from credible witnesses, and two different types of identity as proof to obtain satisfactory evidence of the person.” Notaries are required to make a recording of the notarial act and retain it for 10 years.
New Hampshire’s governor signed an executive order on March 23rd to allow RON with audiovisual recordings. Notaries there are required to keep the recordings as long as they are active notaries.
Wisconsin was set to implement remote closings in 2020, but the Department of Financial Institutions has authorized the emergency use of RON before the official May 1st effective date.
Many other states are adjusting their rules around notarial acts as a result of the COVID-19 outbreak.
The SECURE Act provides a nation-wide remote closing solution
In effort to provide clear choices for a safe closing option during the COVID-19 outbreak, the American Land Title Association and the Mortgage Bankers Association have spearheaded a national solution.
The Securing and Enabling Commerce Using Remote and Electronic Notarization (SECURE) Act is a federal remote online notarization bill that has now been introduced in both the House and Senate. It is not meant to supersede any of the current states with RON laws in place.
Instead, it is meant to allow the following:
- Immediate use of remote online notarization with minimum standards
- Provide certainty for the interstate recognition of RON
While the executive orders and bills being passed by some states provide for a short-term solution, many are inadequate long-term solutions. The technology involved doesn’t provide the proper multi-factor authentication of identity and tamper-proofing of documents.
The SECURE Act provides better protection of non-public information by requiring notaries and closings agents to utilize technology providers with the proper RON safeguards. Facetime, Zoom, and other common video conferencing applications do not meet the minimum standards of SECURE and the ALTA-MBA model RON legislation.
This act will most likely have a sunset clause, so while title agents will want to contact their legislators to show their support of the SECURE act in the interim, agents and agent-attorneys should examine their state’s progress on RON and continue to support those local efforts after the outbreak has passed.
To find out how your state is being impacted, visit ALTA’s page on RON Orders and Guidance.