At both the federal and state level, remote online notarization (RON) appears to be gaining momentum. But at the same time, the practice is also being scaled back as various states’ pandemic-related states of emergencies come to an end. We break down all the action here.

Federal RON action:

In mid-June, the SECURE Notarization Act — which would allow the use of RON nationwide — was re-introduced in the U.S. House, a month after being re-introduced in the Senate. The bipartisan bill was immediately hailed by a variety of industry groups, including the American Land Title Association (ALTA), Mortgage Bankers Association (MBA), and more.

At least one organization opposes the bill: the California League of Independent Notaries. CLIN is the most vocal opposition in California, a state that itself presented the most vocal opposition to the SECURE Act when it was first introduced last year at the start of the pandemic. That bill never made it out of committee.

The current Senate bill has been referred to the Judiciary Committee, while the House version has been referred to two committees: Judiciary, and Energy and Commerce. 

State RON action:

At least 38 states have permanent laws allowing remote notarization; 36 of them allow RON, while the remaining two only permit remote ink-signed notarization (RIN), in which notarization takes place over video but only with paper documents and wet signatures. New Jersey and Illinois became the latest states to enact RON, with bills signed just last week (however, some state laws, including theirs, have yet to take effect).

Meanwhile, states are beginning to end their pandemic-related states of emergencies, meaning state leaders have to decide whether to extend or end their temporary remote notarization orders.

New York ended its disaster declaration; almost immediately the New York Department of State updated its website to state that notaries can no longer perform their services remotely. Mississippi’s state of emergency is set to end Aug. 15, prompting the Land Title Association of Mississippi to post this tongue-in-cheek headline: “Bye Bye RON/RIN — We hardly knew ye.” 

Other states are opting to extend their temporary laws. Georgia officially ended its public health state of emergency on June 30, but Gov. Brian Kemp (R) signed an executive order to allow remote notarization to continue. Maine recently passed a law to allow remote notarizations until Jan. 1, 2023, while also laying the groundwork for permanent legislation: The new law directs the Secretary of State to conduct a study and develop recommendations for a permanent remote notary law.

What about RIN?

RIN gained popularity during the pandemic as a host of states allowed it on an emergency basis. Unlike RON, it hasn’t been seen as a permanent solution. Fannie Mae’s early-pandemic RIN guidance noted, “We do not expect these temporary governors’ executive orders and authorizations related to RIN to extend beyond the COVID-19 national emergency.”

However, in June, Fannie Mae updated its selling guide to announce minimum standards for RIN for loans issued on or after July 1, 2021. A few days later, Freddie Mac followed suit, while also clarifying that its RIN guidance requires multifactor authentication. The GSEs’ moves appear to acknowledge that RIN may be more permanent than initially expected.

Before the pandemic, two states — South Dakota and Montana — had permanent laws allowing RIN. Now another two states have joined them: Wyoming, which passed a law in February to allow both RON and RIN, and Alabama, which enacted a RIN-only law in April.

And don’t forget IPEN…

RON and RIN have received the bulk of the eNotary attention, but in-person eNotarization (IPEN) has also increased, as the states that passed permanent RON laws usually automatically allow IPEN as well.

However, over the last year another two states enacted permanent IPEN-only laws: Mississippi and South Carolina. The latter is notable because South Carolina was one of just two states (along with California) that, at the height of the pandemic, wouldn’t even pass a temporary order to allow remote notarization.

Mississippi and South Carolina borrowers may not be able to do a RON closing yet — but with IPEN they can now conduct a 100% paperless eClosing.

Related Content:

• Senators reintroduce bill to allow remote online notarizations nationwide (5/18/21)
• Should longtime RON-holdout California allow it? Secretary of State considers it (5/6/21)
• RON update: First new remote online notarization law of 2021 passes (2/12/2021)

The number of title and settlement companies that offer eClosings increased 228% in 2020, according to ALTA’s 2021 Digital Closing Survey of 300 title professionals.

The 2019 version of the survey showed that before the pandemic only 14% of companies offered digital closings. In 2020, amid the COVID-19 crisis and a raft of stay-at-home orders, that figure shot up to 46%.

“Since the onset of the pandemic, title and settlement professionals rapidly adapted their processes to meet the needs of their customers and to continue facilitating safe and secure closings,” said Diane Tomb, ALTA’s chief executive officer.

She added that one of the title industry’s most important tools has been remote online notarization (RON), adoption of which rose 547% in 2020, according to an earlier ALTA survey of vendors.

The 2021 Digital Closing Survey found that 35% of title and settlement companies offer RON technology, while more than 5% of transactions were closed using some version of RON.

“RON is a convenient alternative to traditional in-person notarization for all consumers, but it is especially beneficial to consumers who are unable to easily travel to access notarial services, serve in the military overseas or have time constraints,” Tomb said.

Additionally, 64% of survey respondents expect RON closings to increase in 2021. The factors most likely to affect a company’s timeline to implement RON technology are lender and consumer requests, access to RON providers, and changes to state laws.

At least 36 states have permanent laws on the books to allow some form of remote notarization, and 34 of those states permit RON (the other two states, Alabama and South Dakota, only allow remote ink-signed notarization, RIN, a lower-tech form of virtual notarization that doesn’t use electronic signatures).

Additionally, the federal Securing and Enabling Commerce Using Remote and Electronic (SECURE) Notarization Act has been introduced in both the U.S. Senate and House. It would allow “immediate nationwide use” of RON nationwide.

While RON adoption has increased significantly, paper still comprises the bulk of the mortgage business. Only about 5% of ALTA survey respondents reported that their closings were fully digital, while 85% said all their closings were paper-based.

Additionally, getting set up for RON can be expensive. The average cost of implementing RON, including software, equipment and training, was almost $30,000 per office, according to the survey.

Those who implemented RON, however, reaped some key benefits: 52% of respondents said closing times were lower due to the number of documents that could be signed ahead of time, and 43% reported cost savings.

RON was used most often in transactions involving sellers only (40%), followed by cash deals (23%), refinances (17%) and purchases (14%).

Related Content:

• Senators reintroduce bill to allow remote online notarizations nationwide (5/18/21)
• Should longtime RON-holdout California allow it? Secretary of State considers it (5/6/21)
• RON update: First new remote online notarization law of 2021 passes (2/12/2021)

Mortgage servicers committed several Regulation X violations in 2020, according to a recent report by the Consumer Financial Protection Bureau (CFPB).

“Today’s release of Supervisory Highlights reinforces the importance of the Bureau’s supervisory work, including during the COVID-19 pandemic, to find and correct systemic problems that hurt consumers,” said CFPB Acting Director Dave Uejio.

The report, which was released June 29, didn’t name any lenders/servicers or levy any penalties, although prior CFPB supervisory findings led to more than $124 million in consumer remediation and civil money penalties in 2020.

The CFPB report covered several areas under its jurisdiction — including debt collection, payday lending and more — as well as mortgage origination, servicing and fair lending. The Bureau highlighted mortgage foreclosure issues in particular.

CFPB examiners found that several mortgage servicers violated Regulation X, which requires lenders to provide borrowers with timely disclosures on the nature and costs of the real estate settlement process.

One key violation was that some servicers made the first notice or filing for foreclosure when it was still prohibited. In some instances, servicers filed for foreclosure before they had evaluated borrowers’ appeals, and in others they engaged in “a deceptive practice” when they informed borrowers that they wouldn’t initiate a foreclosure action until a specific date, only to do so before that date.

“The inaccurate representations regarding the day foreclosure action would be initiated were likely to mislead borrowers into believing that they had more time until foreclosure than they actually did,” the report stated.

CFPB examiners also found some lenders ran afoul of Regulation Z by compensating loan originators differently based on whether the loan was a Housing Finance Agency (HFA) loan or construction loan.

Additionally, several lenders reported inaccurate data, putting them in violation of the Home Mortgage Disclosure Act (HMDA) and Regulation C, which requires financial institutions to collect and report loan application data.

The American Land Title Association (ALTA) also noted that the report found some lenders are in violation of Regulation Z due to inaccurately disclosing fees for lender’s title insurance on the TILA-RESPA Integrated Disclosures.

For more information, read the report.

Related Content:

• FHFA director replaced following Supreme Court decision (7/6/2021)
• GSE guidance for revised General QM definition (6/7/2021)
• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)

On June 23, 2021, the U.S. Supreme Court issued a 7-2 decision in Collins v. Yellen, which held that the structure of the Federal Housing Finance Agency (FHFA) was unconstitutional in that Congress overstepped its authority by placing a single director in charge of the agency that could only be removed for cause. 

Under the Housing and Economic Recovery Act of 2008, Congress placed Fannie Mae and Freddie Mac into conservatorship overseen by a new federal agency, the FHFA. The agency was created with a single director, who is appointed by the president and confirmed by the Senate to serve a five-year term. Once appointed, the head of the agency could only be removed by a president for cause, which the decision states is not the same as “at will.” The Supreme Court ruled that the restriction on the president’s ability to remove the agency director violates the Constitution’s basic principle of separation of powers. 

Writing for the majority, Justice Samuel Alito states that the agency’s leadership structure “clashes with constitutional structure” by “concentrating power in a unilateral actor insulated from Presidential control.” Justice Alito also referred to the Supreme Court decision in the last term which struck down similar restrictions on the president’s ability to remove the head of the Consumer Financial Protection Bureau (CFPB), stating that “the Constitution prohibits even ‘modest restrictions’ on the President’s power to remove the head of an agency with a single top officer.”

The Supreme Court decision also ruled against a group of shareholders on a statutory claim that the FHFA exceeded its authority by agreeing to a new variable dividend formula referred to as the “net worth sweep.” The court is allowing the shareholders to go back to the lower courts to agree whether the unconstitutional restriction on removal of the director led to compensable harm.

Following the decision, the White House released a statement advising that the Biden administration would replace FHFA Director Mark Calabria, a Trump appointee, with a director “who reflects the Administration’s values.” Calabria announced his resignation, and within hours, Sandra L. Thompson was appointed as Acting Director, effective immediately. Thompson has been at the FHFA since 2013, serving as the Deputy Director of the Division of Housing Mission Goals, and overseeing housing and regulatory policy, capital policy, financial analysis, and fair lending activities. Prior to the FHFA, Thompson worked for the Federal Deposit Insurance Corporation for 23 years in various leadership roles. In a statement released by the FHFA, Thompson said, “There is a widespread lack of affordable housing and access to credit, especially in communities of color. It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.”

DocMagic will continue to monitor agency announcements for any further developments.

Related Content:

• GSE guidance for revised General QM definition (6/7/2021)
• GSEs announce plans to limit purchases to loans meeting revised General QM rule (5/11/2021)
• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)