Last week the new Secretary of State of California — a state which has been one of the most resistant to remote online notarization (RON) — held a lively and heavily attended Zoom briefing to discuss whether California should allow the technology.

Dr. Shirley N. Weber, who was sworn into office in February, invited experts to discuss the pros and cons of RON. She stressed that she has not yet taken a position on RON but sought to learn as much as possible, noting that she’ll likely be asked to weigh in on any legislation.

“We in California are concerned about [RON] because we surely want to make notarization convenient, we want to make it accessible to so many individuals and utilize the tools that are available now to accomplish that, but we also want to do it by protecting the interest of Californians against fraud,” Weber said.

Here are the 5 main hurdles to eClosing implementation — and how to overcome them

Interest in the April 28 informational briefing was so high that attendance instantly reached the maximum capacity of 500 people and several people were initially locked out of the Zoom as a result. Weber marveled that by the end of the almost two-hour-long meeting there were still 488 people watching. “Clearly this is an item of concern,” she said.

More states have been enacting permanent RON laws (distinct from the emergency orders that were passed in response to the pandemic). Since Wyoming became the first state this year to enact RON, another three states — Kansas, New Mexico and West Virginia — have jumped on board, which means 32 states now have permanent RON laws. Three states also allow remote ink-signed notarization (RIN).

California currently has a bill, AB 1093, that would allow RON.

However, its historical opposition to RON is well known; during the pandemic, California was one of just two states that didn’t even pass an emergency order to temporarily permit remote notarization. When bipartisan federal legislation was proposed last year to allow RON nationwide, then-Calif. Attorney General Xavier Becerra urged Congress to abandon the effort, calling it “a solution in search of a problem.” Such opposition from a large and powerful state likely helped doom the bill’s chances.

For the briefing, Weber invited three experts to make or break the case for RON in California:

Lori Hamm, Notary Program Specialist at the Montana Secretary of State’s office

Hamm oversees the RON program in Montana, which enacted its law in 2019. Some of her key points:

• RON is used for a lot more than just mortgages. In Montana, most of the remote notaries are lawyers and paralegals who practice elder and estate law. “They realize the benefits of having the audiovisual recordings to substantiate the capacity and willingness of the principals, and of course the benefits of social distancing when dealing with vulnerable populations,” she said.
• Many of the temporary emergency RON orders are insufficient. They’re “stretching the concept of personal appearance and contemporaneous completion of the notarial certificate to what I think is a dangerous degree,” Hamm said. “And I suspect that there will be a number of notary authorities who may get rich as expert trial witnesses as some of these laws get challenged down the road.”

Matt Miller, President and Founder of The California League of Independent Notaries

Miller acknowledged that there is an appetite for RON, but said he still had several concerns. Some of his key points:

• Data privacy is a major concern. At a time when there are still too many data breaches, Miller said it’s worrisome that an online notarial transaction collects even more personal data than a traditional notarial transaction, such as identity credentials, facial features, a person’s voice and the contents of personal legal documents.
• Liability protections for online notaries aren’t strong enough. RON platform providers handle the identity validation that, in a traditional notarial transaction, would normally be done by the notary. However, if the provider “fails to vet identity properly and then fraud occurs, these companies could point to the notary and effectively shield themselves from all liability,” Miller said. “This is undesirable for practitioners and potentially harmful to the public.”

Craig Page, Executive Vice President and Counsel at the California Land Title Association (CLTA)

Page said CLTA employs thousands of notaries and notarizes millions of documents in the state. Some of his key points:

• CLTA had previously opposed RON — but not anymore. Three years ago, CLTA came out against a RON bill. Now they firmly support the practice. So what changed? Page said over the last few years other states have strengthened their laws to make them more secure; MISMO has been setting stringent standards; California passed laws to further protect consumer privacy; and RON platform providers, facing increased competition, have improved their systems.
• California’s anti-RON stance hurts it on the secondary market. At the federal level, Fannie Mae and Freddie Mac both accept RON closings. “Because we don’t have a RON program in California, this unfortunately puts California-generated loans at a disadvantage when it comes to marketability in the secondary market to investors,” Page said.

One facet of notarization unique to California is that notaries are required to keep the signer’s thumbprint in their notary journal. Miller noted that this requirement helps deter fraud and has been used by the state’s criminal justice system to solve crimes involving “fraud, abuse, and even murder.”

Page responded that while the thumbprint requirement has been useful, RON’s audiovisual requirement — capturing a potential felon’s image, voice, mannerisms and identity credentials — would serve as a stronger deterrent to crime.

Miller and Page also clashed over the fact RON is already affecting mortgages in the state. Miller noted that currently, a California resident can use an online notary in another state, possibly one with lower standards. He called for legislation to disallow that practice.

Page, however, said that according to the U.S. Constitution’s interstate commerce clause, documents legally notarized by RON notaries in other states must be accepted in California. Thus, the state’s current antipathy to RON merely ensures that California’s mortgage closing business goes to other states’ remote notaries.

“Numerous large county recorders in California are accepting RON-notarized documents from out of state,” he said. “Madam Secretary, I would argue that this fact alone behooves California to pass the RON programs as quickly as possible.”

The bulk of the briefing’s attendees were notaries. Their questions included how much it costs to become a remote online notary; how the e-signing and identity verification works; and technical questions about software and video storage.

In response to a query about how long it takes to become a remote notary, Hamm said that during the first six months of Montana’s law, only about a half-dozen notaries got qualified to conduct RONs. Then the pandemic hit.

“We went from six to 298 in about six weeks,” she said. “Things like pandemics certainly change the landscape.”

Before ending the briefing, Weber promised that her office would continue to monitor RON efforts in the state. She added, “Change is never easy, it’s always difficult, but … oftentimes when change happens people are surprised that it took so long for them to realize that change can be good.”

Related Content:

• RON update: First new remote online notarization law of 2021 passes (2/12/2021)
• RON update: Remote online notarization sees forward momentum — and a setback (6/26/2020)
• RON vs. RIN (remote ink-signed notarization): What's the difference? (6/10/2020)

DocMagic is teaming up with New Jersey-based Secure Insight to set up a training program on remote online notarization (RON) technology and processes. The move will establish a database of notaries who have been fully trained and certified on DocMagic’s industry-leading, 100% paperless Total eClose platform. The partnership combines DocMagic’s technology and Secure Insight’s unique database and individual training for notaries.

Amid rising demand for digital closings, lenders have a growing need to tap well-qualified eNotarization professionals who can ensure deals close smoothly and on time. This new certification program, which reaches the greatest number of notaries with a working knowledge of Total eClose, is poised to significantly move the adoption needle.

"Ultimately, this partnership creates a better RON process for lenders and borrowers alike, benefiting all users involved in the eClosing process," says Dominic Iannitti, president and CEO of DocMagic. "Lenders are operating at maximum capacity right now with an influx of mortgage applications that they must ultimately close on as efficiently as possible amid heavy loan volume. Our new certification process will ensure lenders that RON eClosings will be handled quickly and efficiently by a ready supply of proficient eNotaries.”

Secure Insight’s extensive national notary database can now be easily accessed to find notaries who are qualified to complete seamless, compliant eClosings using RON technology.

"One of the primary challenges in facilitating RON transactions is that lenders are hesitant to entrust the closing process with a notary that may be ill-equipped to effectively perform an eClose transaction," says Andrew Liput, CEO at Secure Insight. "Teaming with DocMagic allows us to identify properly licensed, experienced and trained professionals whom lenders will feel comfortable leveraging to perform the specialized functions surrounding these unique transactions.”

Related Content:

• RON update: First new remote online notarization law of 2021 passes (2/12/2021)
• Remote online notarization (RON) has several benefits beyond safety (10/22/2020)
• RON update: Remote online notarization sees forward momentum—and a setback (6/26/2020)

The first remote online notarization (RON) law of 2021 has passed, and it has a surprising detail—it also expressly enshrines remote ink-signed notarization (RIN) in the state’s statute.

On Feb. 9, Wyoming Gov. Mark Gordon (R) signed SF0029, which the state Legislature had passed during an eight-day virtual session. This move means there are now 29 states with permanent RON laws on the books.

In addition to RON, the new Wyoming law also includes clear provisions allowing for RIN, a lower-tech alternative to RON in which a borrower connects with a notary via an audiovisual program (such as Zoom) and then ink-signs a paper document before mailing it to the notary to complete the process. Before the pandemic, Wyoming was one of a dozen states that did not allow either RON or in-person eNotarization (IPEN).

Take a look at the state of RON around the nation:

• Here are the 29 states with permanent RON laws: Alaska, Arizona, Colorado, Florida, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin, and now Wyoming. 
• While a RON law is on the books in 29 states, some haven't taken effect yet (or are only currently in effect due to emergency orders). For example, Wyoming’s new law isn’t effective until July 1, but the state currently allows RON via emergency guidance that expires the same day the new law takes effect. Louisiana’s law will take effect in 2022, unless a federal law is enacted sooner.
• Vermont is another RON state with an asterisk. It passed a permanent RON law in 2018, but RON transactions aren’t allowed until the Vermont Secretary of State issues guidelines for it, which hasn’t happened yet. However, last year the Secretary of State did issue emergency rules allowing RIN—while expressly clarifying that RON was still not allowed.
• South Dakota had previously been lumped in with the RON states, but its law actually permits a very limited version of RIN. The state only allows remote notarization of paper documents, and only by notaries who can identify signers through personal knowledge. South Dakota's law was enacted in 2019, a year before the concept of (and term for) RIN became popularized due to the pandemic.
• Wyoming’s new law appears to be the first time since the pandemic that a state has passed a permanent law allowing RIN. The move is surprising because RIN laws have largely been seen only as temporary measures—not as permanent legislation. When Fannie Mae issued its RIN guidance, it noted, “We do not expect these temporary governors’ executive orders and authorizations related to RIN to extend beyond the COVID-19 national emergency” and encouraged lenders to only consider RIN if RON wasn’t available. (A dispute over the validity of emergency RIN orders caused a brief dustup in Michigan late last year.)
• With the exception of California and South Carolina, almost every state has taken action to allow some form of remote notarization via permanent legislation or temporary emergency orders, several of which have been renewed multiple times as the pandemic continues.

Wyoming may be the first state in 2021 to enact a permanent RON law, but in all likelihood it won't be the last.

Related Content:

• Remote online notarization (RON) has several benefits beyond safety (10/22/2020)
• RON update: Remote online notarization sees forward momentum—and a setback (6/26/2020)
• RON vs. RIN (remote ink-signed notarization): What's the difference? (6/10/2020)

Brian D. Pannell, DocMagic’s Chief eServices Executive, examines some of the key changes the mortgage industry has seen over the last year.

What a difference a year makes. A year ago, many lenders in the mortgage industry were still inching their way toward an electronic closing. Now, after facing an unexpected pandemic, most lenders realize that paper-intensive processes are outdated and they are clamoring for some form of digital transformation.

Looking back to an industry-wide survey of lenders that DocMagic conducted near the end of 2019, the contrasts to today are stark. Lenders’ pre-COVID attitudes toward digital readiness have shifted dramatically compared with what we know now, after 10 months of a deeply shifted post-pandemic mindset.

Here are some paradigm shifts I witnessed in the mortgage industry from last year to now:

#1: Lenders had been hesitant to overhaul their existing systems, preferring to cobble together a solution that fit into their current infrastructure. They no longer have that mindset.

In 2019: The reason you saw lenders using so many disparate software applications was because they’d been leery of upsetting their existing workflow. The mentality was, “I’d rather stick with what works than worry about trying to improve it.” So instead of upending legacy systems—loan origination systems, in particular—to create a more streamlined process with a single software provider, many lenders simply cobbled together solutions that fit into their existing infrastructure, despite the fact that multiple integrations like this are far costlier than using a single-source provider.

Today: A company’s long-term product strategy may have been developed over years of experience—but can it be expanded in months? Some of the ways that lenders have been operating are now being challenged. So, how quickly can you pivot to something else? Because if lenders can’t pivot, they may find themselves left behind.

Analysis: In 2019 we asked lenders to name their biggest challenge to adopting a digital mortgage strategy; survey respondents’ top answer was system integration (48%). When it came to updating their mortgage processes, many lenders had been content to move slowly, believing they could take their time to modernize their systems. However, as borrowers’ pandemic-driven preferences have shifted toward demanding more options for remote closings and notarizations, and as more lenders recognize the benefits of going digital—among them increased accuracy and speed, enhanced compliance, and a higher return on investment—lenders are realizing that they need paperless processes sooner rather than later.

#2: For many lenders, investor interest in fully digital mortgages was still low enough that it wasn’t worth the cost to install new systems. That’s no longer the case.

In 2019: The upfront cost of upgrading systems didn’t make sense if you didn’t have the volume. Organizations interested in implementing a digital mortgage process would raise a lot of questions with regards to, how do I get paid, how do I get funded, who am I going to sell my loans to? There was often a concern about generating the savings per loan to pay for the cost to install these systems.

Today: We've heard for a long time that Ginnie Mae and the 11-member Federal Home Loan Banks were on the cusp of accepting eNotes; they both began doing so in 2020. The fact that both are now accepting eNotes is crucial because it introduced a whole new level of participants to the eNote world. Between the FHL Banks and Ginnie Mae, there are a lot of advancements in the ability to make those eNotes saleable. 2020 was the year of the eNote.

Analysis: The foundation of a 100% paperless mortgage is the electronic promissory note (eNote). While eNote registrations were steadily on the rise before the pandemic, in 2020 they reached their tipping point, boasting almost 463,000 registrations—a 264% increase over the previous year. One key reason for this jump is the fact that, after years of planning, Ginnie Mae and the FHL Banks system finally joined Fannie Mae and Freddie Mac and began accepting eNotes as collateral. The impact on the mortgage industry can’t be overstated: With these two major players on board, the pool of investors willing to buy digitized mortgages has vastly increased.

Additionally, along with this greater acceptance of eNotes, there has been a corresponding increase in eWarehouse lenders—which has also been critical to increased adoption of digital mortgages.

#3: Prior to COVID-19, many lenders’ primary focus, as it related to digital mortgage decisions, was to improve the customer experience. Now, lenders are focused on meeting borrowers’ vastly changed risk tolerance.

In 2019: As far as what moves lenders to go digital, of the organizations we surveyed, the prime motivator was to improve the customer experience, with 86% of respondents citing this as a reason for adopting new software. This was followed closely by the desire to reduce errors (85%) and improve security (83%).

Today: As we continue to find ourselves within a pandemic-operating environment, borrowers’ risk tolerance must increasingly be taken into consideration. The borrower has a new risk tolerance for in-person contact nowadays, and lenders need to be able to execute on that from borrower to borrower. A lot of people have a very low tolerance, especially folks who are high-risk. They’re not going to tolerate putting themselves and their families in a situation where they need to leave the house and go to another location to execute an in-person closing. As an industry, we need to reduce the amount of in-person contact that’s occurring.

Analysis: Before the pandemic, lenders’ primary reason for offering eClosings was to improve the customer experience. That’s still true, but whereas before COVID-19 lenders provided electronic mortgages as an optional convenience, now they have become a necessity. Borrowers want more eClosing options, whether hybrid or 100% paperless, both for their safety and because pandemic restrictions have made people less mobile. If an eClosing is the only process borrowers will accept, lenders don’t have any choice but to give borrowers the experience they demand.

#4: Some states were still on the fence about remote notarization a year ago, but the overwhelming majority are now allowing it—in some form.

In 2019: When I went to North Carolina and spoke to closing attorneys, they told me there would never be remote online notarization (RON) in N.C. The reason? They wouldn’t know who the notary was at that point and they wanted to have the notary there. It also made sense because they didn’t want their business to come from outside the state.

Today: As the pandemic hit and as jurisdictions were making adjustments to allow for and minimize in-person contact, they had to come up with new ideas for notarization. In response, concepts like remote ink-signed notarization (RIN), or online in-person eNotarization (IPEN) were introduced. The advent and the necessity of coming up with unique ways to execute on any notarization came into play because there simply wasn't enough time to push through all of the regulatory concerns and considerations associated with RON and to make it more mainstream. Some states were able to accomplish it, but others had to make accommodations in order to support it. Looking ahead, if 2020 was the year of the eNote, 2021 could very well be the year of RON.

Analysis: Due to the pandemic and social distancing guidelines, states have welcomed all forms of remote notarization, including RON. Almost every state now allows some form of remote notarization, mostly via temporary emergency orders passed in response to COVID-19. These methods include RON or lower-tech alternatives such as RIN, online IPEN, or PRON (paper remote online notarization).

In addition to the spate of temporary orders, permanent RON laws also saw an increase in 2020, with an additional seven states jumping on board to bring the nationwide total to 29 by year's end. North Carolina also made remote notarization legal—albeit via a temporary law that’s set to expire on March 1, 2021. Still, it’s a once-unthinkable turnaround for a state where closing attorneys swore only a year ago that RON would never be allowed.

Leading up to this point a lot of lenders had been trying to convince themselves to make the switch to eMortgages, but there was no definitive tipping point. Now you have a pandemic. There's your tipping point.

Related Content:

• Relive some key mortgage industry milestones in 2020 (12/29/2020)
• The current state of eClosings: A Q&A with DocMagic's compliance chief (12/17/2020)
• Brian D. Pannell honored with HousingWire's 2020 Tech Trendsetters Award (12/4/2020)

2020 has been a year unlike any other—and that includes for the mortgage industry, which faced some of the biggest changes the industry has ever seen.

DocMagic has been tracking these momentous changes on our blog. As we say good-bye to 2020, we highlight some of the biggest mortgage stories of the year:

#1: The rise of eNotes

In 2019, there were over 127,000 eNotes registered on the MERS eRegistry. In 2020, through November, the number skyrocketed to over 407,000—a 264% year-over-year increase. At the same time, the number of companies transacting on the eRegistry rose 121%. It’s official: 2020 was the year of the eNote.

Another major event took place in 2020 that also pushed eNotes forward: After years of planning, Ginnie Mae and three members of the 11-member FHL Banks system began accepting eNotes as collateral. The other members will eventually follow suit.

“The fact that both are now accepting eNotes is crucial because it just introduced a whole new level of participants to the eNote world,” said DocMagic’s Chief eServices Executive Brian D. Pannell. “So, between the FHL Banks and Ginnie Mae, there are a lot of advancements in the ability to make those eNotes saleable.”

#2: The rise of RON

At the beginning of the year, 22 states had a remote online notarization (RON) law on the books. In 2020 another seven states jumped on board—Hawaii and Pennsylvania were the latest to enact a law—bringing the total to 29 states.

On top of that, a Senate bill was introduced at the federal level that would have allowed RON use nationwide (though it didn't pass), and several other states permitted RON for the first time ever—albeit via temporary emergency orders that were passed at the height of the stay-at-home orders. Many of the emergency actions have been repeatedly extended as the pandemic drags on.

As a result, RON transactions have increased 547% in 2020, according to a new survey from the American Land Title Association of vendors working in the RON space.

RON had already been increasing—due to a host of reasons that have nothing to do with social distanced-based safety—but the events of 2020 have given the practice a huge boost.

#3: And don’t forget RIN

Even though the demand for remote notarization was high, several states weren’t yet ready to commit to RON. Enter remote ink-signed notarization, a lower-tech and less secure alternative in which borrowers use a videoconferencing program like Zoom or FaceTime to connect with a notary and wet sign a document that is then physically mailed to the notary for their stamp.

Several states passed emergency orders to allow RIN, even ones that already permit RON, like Michigan and Texas.

RIN has several drawbacks, however, and draws its legitimacy solely from emergency orders. In Michigan, some RIN closings were even at risk after the state Supreme Court ruled that the governor didn’t have authority to extend her emergency powers—which allowed RIN—without the legislature’s approval. The legislature had to later pass a law to ensure that RIN transactions were valid.

#4: The new URLA is coming—at last

Fannie Mae and Freddie Mac announced back in 2016 that they were unveiling a new Uniform Residential Loan Application (URLA) for all lenders who intend to sell their loans to the GSEs; the mandated use-by date was then pushed back twice, with the latest delay—from November 2020 to March 2021—taking place this year as a result of the pandemic.

It looks like the latest deadline will stick. If so, lenders need to be ready by March 1, 2021, but they can get started now—the new URLA’s earliest effective date is Jan. 1, 2021.

#5: DocMagic employees shine

It was a banner year for DocMagic employees, several of whom were honored with industry accolades. This included DocMagic CEO Dominic Iannitti’s Lending Luminary Award; Lori Johnson’s HousingWire Insiders Award; Leah Sommerville’s Top 40 Under 40 honor; Brian D. Pannell being named a Thought Leader and HousingWire Tech Trendsetter; David Garrett’s appointment to the MISMO Residential Standards Governance Committee; and Chris Lewis’s recent Trailblazer Award by PROGRESS in Lending.

Related Content:

• Survey: Homebuyers adapt to eSignings, remote closings during pandemic (10/29/2020)
• An eClosing Q&A with DocMagic's director of enterprise solutions (9/9/2020)  
• County recorders, eRecording, and RON—by the numbers (7/8/2020) 

The mortgage industry is undergoing unprecedented change, and lenders are weighing the move to eClosings—because in the current environment, it’s no longer a question of if, but when. Gavin Ales, DocMagic’s Chief Compliance Officer, shares his insights about the compliance issues these lenders are facing.

What is still needed to make eClosings—including eNotes—more mainstream?

eNotes and eClosings need to be more readily accepted by investors. Lenders need all or most of their investors to be willing to purchase the loans; otherwise, they’ll be forced to arrange specific transactions with specific investors. Lenders will be able to close a much larger number of loans electronically when they don’t have to do all the extra leg work of checking in with their investors to confirm that they’ll accept an eClosing.

Both eNotes—which are faster and more secure than paper notes—and eClosings require more global acceptance at county recorders’ offices. For example, a particular state’s law may allow an electronic notary on a mortgage, but if the recorder’s office won’t accept it electronically then that still presents a barrier. Lenders aren’t able to realize the full benefit of an eClosing if they still have to print it out and record a paper document.

The country is moving in the direction of digital mortgages; several states already allow electronic notarizations and more will be allowing the practice, but despite that, there is still the practical problem that not all county recorders have a process to electronically record a document. The laws have passed but the processes needed to carry them out are still not in place, so lenders may face a situation that even if a state allows eNotarizations, there may be recording offices that can’t process them.

What is one impediment to eClosing that is often overlooked?

One critical issue facing lenders is the availability of notaries who are able to conduct eClosings. In some cases, both the state and county recorder may be on board, but the difficulty may become finding an electronic notary. That’s something lenders aren’t thinking about. Having a ready and reliable supply of e-ready notaries would help lenders turn out eClosings just like any other loan. Even if a lender and investor are on board, an electronic notary still must be available. In a lot of states, electronic notaries must be specially registered, and the number of electronic notaries in those states are naturally lower.

What guidelines and regulations should lenders be aware of as they start to implement eClosings?

Lenders should first be aware of their own state laws as to what’s allowed and not allowed when it comes to notarizations. Some states require that lenders use a specific system or limit provider options to an approved list. Lenders also need to pay attention to investor guidelines, as to whether or not they accept electronic documents. Then the user must ensure that they have the full workflow covered, including setting up an eSign system, getting eVault access, and becoming a MERS member with access to the MERS eRegistry. Lenders also have to ensure their documents comply with Fannie Mae and Freddie Mac’s guidelines, such as having tamper-evident seals. Vendors such as DocMagic can ensure these requirements are met as part of our document generation solution.

From a compliance standpoint, how is RON an improvement over in-person notarizations?

Remote online notarization (RON) is a huge improvement over in-person notarization. Right now, there’s the obvious reason—in the middle of a pandemic, RON is far safer for people than being forced to meet in person to notarize loan documents. But even without a pandemic, RON would be the better choice, particularly when it comes to security. RON employs high-tech methods such as knowledge-based authentication and credential analysis to validate identification. In addition, the electronic document files must contain tamper-evident seals and the video of the signing session usually has to be stored for 10 years, both of which help to make the notarization process safer and more secure.

RON also makes it easier for borrowers to review loan documents ahead of the closing and for lenders to spot mistakes, such as missing signatures, sooner. RON is the culmination of a truly paperless eClosing.

Where is the state of eClosings headed next year?

eClosings will only grow in popularity. One look at eNote registrations is an indicator—they were already on the upswing, but the numbers have exploded compared with just last year. So far this year more than 400,000 eNotes have been registered, a 264% increase over last year, and the pace shows little sign of slowing.

The pandemic—and social distancing guidelines—have forced everyone’s hand. More companies are conducting business remotely and remote transactions have become more mainstream. Now that so many people are working from home, society is also moving away from the idea that everyone has to be in the same place when they’re working together. That mindset has also affected the mortgage industry, with more states allowing remote notarization and more borrowers wanting to conduct closings remotely. eClosings are just going to increase from here. The industry isn’t going backwards.

Related Content:

• DocMagic offers clients automatic audit of NMLS identification numbers (12/8/2020)
• IRS releases new form 4506-C (11/16/2020)
• CFPB's 5-year TRID assessment produces mixed results (10/15/2020)

(Update: On Nov. 5, Michigan enacted HB6297, which confirms the validity of remote notarizations performed between April 30, 2020 and Jan. 1, 2021, and HB6296, which requires registers of deeds and financial institutions to accept electronic documents notarized during that same period. The state later extended the deadline for both laws to July 1, 2021.)

When the pandemic hit in March, Michigan already had a law on the books that allowed remote online notarization (RON) closings. But the state took it a step further when Gov. Gretchen Whitmer (D) declared a state of emergency and issued a series of executive orders, including one allowing the use of remote ink-signed notarization (RIN), a lower-tech alternative to RON.

"We conclude that the Governor lacked the authority to declare a 'state of emergency' or a 'state of disaster' … after April 30, 2020, on the basis of the COVID-19 pandemic," Justice Stephen J. Markman wrote.

The Oct. 2 ruling, plus a related ruling on Oct. 12, nullifies hundreds of Whitmer’s emergency orders, including the one that authorized RIN, which allows notaries and borrowers to use audiovisual technology to remotely notarize and ink-sign paper documents. 

“Hundreds, if not thousands, of mortgages have been recorded in Michigan since the start of the pandemic, many employing notarization processes approved by the nullified Executive Orders, and have been thereafter accepted for filing by county recorders,” noted an analysis by law firm Manatt, Phelps & Phillips, LLP. “Many [mortgages] may have been recorded using RIN or other procedures that were approved by order but not part of the statute itself.”

While the analysis found that RIN was likely legal up until Oct. 12, “borrowers and their lawyers will doubtless argue that mortgages submitted for recording in reliance on the emergency orders are somehow void, and lenders will doubtless be considering various potential fixes to avoid this otherwise likely line of collateral attack.”

To clear up any confusion, the authors urged the Michigan legislature “to move quickly to ensure the validity of mortgages recorded under the expanded procedures.”

While RIN closings have become more popular in recent months due to COVID-inspired social distancing guidelines, the mortgage industry's response has been mixed. Fannie Mae’s RIN guidance encouraged lenders to consider RIN only if RON wasn’t available, due to the RIN emergency orders being temporary.

“I see RIN as essentially using new technology to hold onto an old way of conducting notarizations. That seems oxymoronic,” said Gavin Ales, DocMagic’s Chief Compliance Officer. “It’s adding in extra steps when you don’t need to because you can conduct actual remote online notarizations using available software.”

Nonetheless, some states are still supporting RIN use during the pandemic. Minnesota, which also has a permanent RON law, recently passed legislation to temporarily allow RIN, while last week the governor of Tennessee—another state with a RON law—extended his executive order allowing RIN through the end of the year.

Permanent RON laws, meanwhile, are now on the books in 28 states. The latest state, Hawaii, passed its law on Sept 15, making it the sixth state to take action this year.

Related Content:

• Survey: Homebuyers adapt to eSignings, remote closings during pandemic (10/29/2020)
• Benefits of remote online notarization (RON) can't be overstated (10/22/2020)  
• RON vs. RIN (remote ink-signed notarization): What's the difference? (6/10/2020) 

Remote online notarization (RON) eClosings have been on the rise during the age of COVID-19, as they’re seen as the safest closing option during a time when social distancing is paramount.

“It’s the nirvana of every stakeholder’s closing experience because the borrower can join the eClosing from the comfort and, more importantly, the safety of their home,” said DocMagic Senior Account Executive Leah Sommerville.

However, RON eClosings include several other benefits which make them an increasingly popular choice in the mortgage industry, regardless of whether there’s a pandemic taking place.

1. It’s easier for borrowers to review closing documents.

With RON and other forms of eClosings, borrowers typically receive all documents before the closing, giving them plenty of time to review the entire closing document package and raise any issues.

“If you’re a first-time homebuyer, it can be intimidating to show up and be expected to sign a stack of documents that you’ve never seen before,” Sommerville said. “Even seasoned borrowers can be intimidated by the in-person closing session. eClosing provides borrowers the opportunity to review all of their closing documents in advance and contact their lender, settlement agent, attorney, or even parents if they have any questions."

2. Lenders can spot mistakes sooner.

In the paper world, lenders often email their loan documents to their business partners (e.g. the title agency, settlement agent, or attorney for review) and then wait for the closing package to be mailed back with title documents added—which the lender unfortunately won’t see until they get the closing documents back with all the signatures.

“Often, lenders receive returned closing packages with signatures or documents missing,” Sommerville said. “No one wants to send a mobile notary to revisit the borrower because the original notary’s signature is missing or the notary stamp is smudged. These issues are eliminated with any version of eNotarization and eClosing.”

Such mistakes also compound the negative effects, Sommerville noted, with more fees incurred as the lender continues to hold the note, unable to sell it to the secondary market until these issues can be resolved.

3. Settlement agents stay involved.

A common misconception about RON is that it takes control of the closing out of the settlement agent’s hands. With RON, the settlement agent can still be involved in the eClosing and signing session.

Some RON providers will allow the settlement agent to join the session as an observer. Additionally, both the settlement agent and the lender, who aren’t required to be present for the closing, can log into the eNotary platform and see when the closing is scheduled, which increases transparency for all stakeholders.

4. There’s built-in protection and compliance.

RON laws have a variety of requirements to protect stakeholders. For example, the eNotary must have a record of the ID validation (most commonly knowledge-based authentication and credential analysis), which confirms that the borrowers’ identity is valid and not fraudulent. DocMagic and our electronic notary partners can conduct these ID validation requirements with the borrower on behalf of the lender.

Most states also require that video of the RON closing session is stored, usually for 10 years. Florida even requires the video to be stored in two locations.

Additionally, the documents must contain tamper-evident seals. DocMagic’s eSignature platform applies a time- and date-stamp as soon as the borrower eSigns, with a tamper-evident seal on each document. If a document is modified post-closing then the signatures are voided, according to Sommerville.

“RON is the greatly needed improvement to the current in-person, paper notary closing process because of the enhanced borrower experience, reduction of errors, increased transparency, and confirmation of compliance,” Sommerville said.

Related Content:

• 5 key questions about ID validation during RON (8/12/2020)
• RON update: Lots of forward momentum—but also a setback (6/26/2020)
• RON vs. RIN (remote ink-signed notarization): What's the difference? (6/10/2020)

The pandemic has forced a lot of change in a short amount of time in the mortgage industry. DocMagic's Director of Enterprise Solutions, Chris Lewis, shares his insight about eClosings in the age of COVID-19. (Note: This interview has been adapted from in the August edition of The MORTGAGE BANKER magazine.)

Things are moving so fast with the uptick in lender rush to perform eClosings that we’ve never been busier here at DocMagic. Whereas over the years eClosings were slowly but surely moving toward greater marketplace adoption, the rapid onslaught of COVID-19 absolutely sped things up virtually overnight. Add unprecedentedly low rates into the equation—sparking a refi boom—and things have hit a level of adoption that is on turbo with eClosing and dynamic document generation usage.

2. During the pandemic, has DocMagic had to make any adjustments to the way it handles eClosings and remote online notarization (RON)?

DocMagic has been doing eClosings for years—long before the term became a catchy buzzword. Furthermore, before the term “digital mortgage” caught on, we were busy automating eMortgage processes, which was the same thing. With respect to where we were at during the pandemic, the main adjustment we made didn’t have anything to do with the technology; we mastered the solution long ago. We just had to start implementing and training lenders on our Total eClose platform remotely, as the country was and still largely is under work-from-home orders depending on the state the lenders operate in.

Chris Lewis: Don't rush to implement RON; take these 3 steps instead

We worked diligently to arrive at a remote onboarding model that effectively supports distance-based implementations involving multiple teams and parties—all performed remotely. We quickly perfected implementing, training, and fully onboarding new clients remotely, to the point that once implemented, the lenders were off to the races and performing eClosings with ease and efficiency.

It’s tough enough for companies to turn on a dime and establish a work-from-home infrastructure due to a rapidly spreading pandemic. From an operations management perspective, our client services team did an amazing job transitioning to functioning virtually while simultaneously coordinating an influx of new client implementations—also done virtually.

3. What are the less-obvious advantages to using eSignatures and RON to close a mortgage loan?

The use of eSigning gives both lenders and borrowers greater transparency and control of the overall process. Borrowers can easily access and sign documents within a secure digital environment. It’s fast, easy, and completely trackable. The detailed traceability of eSignings enables lenders to more effectively manage the workflow from anywhere and store signed documents securely with an encrypted, tamper-proof seal. This helps in two key areas, as paper-based wet signatures are much tougher to track and access, especially as loans exchange hands on the secondary market and are then serviced.

First, it helps tremendously with ensuring compliance and that the data on every single document is accurate and consistent; it’s also easy to demonstrate proof of compliance in the event of an audit. Second, it helps prevent instances of fraud, especially when the loan file, data, and documents are all stored in a GSE-certified eVault.

When it comes to remote online notarizations, the convenience and enhanced speed gained in signing documents requiring notarizations are immeasurable. What’s more, use of RON technology fills the final void in establishing a 100% paperless closing process. The hybrid model has almost become mainstream. Borrowers are now expecting that option. Moving forward, lenders should always be focused on offering a fully paperless option for borrowers to take advantage of in the states that permit it.

4. In the pandemic environment, is compliance tougher or the same where eSignatures and RON are concerned?

A lot of states have different rules behind the acceptance of RON technology. For example, some require an attorney to be present and some do not. Some states didn’t offer RON at all but were considering it. So it has always been something that vendors need to stay on top of.

The pandemic resulted in a huge spike in the need for RON technology due to social distancing requirements and borrowers’ fears of contracting the virus. Consequently, many states started implementing emergency measures to help notaries do their jobs safely and effectively. However, some states haven’t implemented RON guidelines, or had stopgap measures which prevented fully leveraging RON technology, or offered some lower-tech alternatives to RON such as remote ink-signed notarization (RIN).

Like with RON, RIN permits notaries to use videoconferencing technology to legally notarize documents remotely. However, it requires actually wet-signing paper documents as opposed to utilizing eSign and eNotary technology. So the RON vs. RIN difference adds a bit more confusion to the already constantly changing and complicated state regulations. Some states allow RON, some allow RIN, and others allow both. In that regard, it just requires more attention to what the states are doing. But that’s the technology provider’s job to worry about, not the lender.

5. Are eSignatures and RON the new norm for the mortgage industry?

Yes. Like work-from-home orders essentially serving as a giant case study that proved the telecommute model actually works, the same goes for eSignings, RON, and eClosing technology. It works, and it works very well. It’s just unfortunate that it took a pandemic to move the adoption curve in the right direction. But ultimately, it’s going to serve the mortgage industry well by further automating the paper-based processes of yesteryear that was hampering business-to-business as well as business-to-consumer efficiency.

Related Content:

• Ginnie Mae, 3 FHLBanks start accepting eNotes (8/5/2020)
• MortgageCountry closing loans in 13 days using DocMagic solutions (7/21/2020)
• RON update: Lots of forward momentum—but also a setback (6/26/2020)

Lenders who are interested in a remote online notarization (RON) closing often have questions about how the identity validation works. Here are some of the most common questions and answers about it.

1. Can borrowers simply show an ID while on camera?

No. During a typical in-person session, the notary primarily verifies the borrower's state- or federal-issued ID to confirm their identity. During a RON closing, however, it's not enough to just flash your ID on camera. States that allow RON usually require that a borrower’s identification be verified via knowledge-based authentication (KBA) and/or credential analysis.

2. Do lenders have to provide these requirements?

No. When you work with DocMagic and our partner NotaryCam, we handle these technical requirements in-house, including any variations in states’ RON ID validation requirements.

3. What is knowledge-based authentication (KBA)?

KBA requires the borrower to provide information about themselves via personal questions that only they should know the answer to. A third-party technology provider will provide the borrower five questions in the form of multiple-choice inquiries. Some examples of these questions include: Which property did you live at in the last five years? Which university did you attend? What type of car have you driven?

The borrower has two minutes to answer all the questions, must get four out of five correct, and is allowed two attempts to complete this task. If the borrower fails both attempts, they must wait 24 hours before trying again.

However, in the rare instance that a borrower cannot complete the KBA portion of the ID validation, it’s always possible to simply paper out those notary document or pivot to an eClosing that includes In-Person Electronic Notarization.

4. What is credential analysis?

This is the process by which third-party technology is used to confirm that a borrower’s government-issued ID is valid. The most common forms of acceptable IDs include valid driver’s licenses, state identification cards, or passports (the identification must not be expired or else it is automatically invalid).

NotaryCam requires the borrower to submit a photograph of the front and back of their government-issued ID in advance of the RON eClosing. The credential analysis technology confirms that the ID is valid and that all security elements are present. When the borrower enters the RON session, they show this same ID to the eNotary via their camera so that eNotary can confirm that the borrower matches the ID and is the appropriate signer.

Many times in the paper notarial process, notaries are unable to determine if the ID is fraudulent and expiration dates are often overlooked, said Leah Sommerville, a senior account executive at DocMagic. Credential analysis eliminates these issues.

5. Why is ID verification more secure in a RON closing?

“RON is an improvement to the current face-to-face notary process because of these ID valuation requirements,” Sommerville said. “The increased compliance and confirmation/recordation of compliance are significantly beneficial to all stakeholders.”

RON providers are also required to record the entire RON signing session and store it, usually for 10 years. That means a visual record is kept of both forms of ID validations, providing additional protection for all stakeholders in the closing process.

Related Content:

• County recorders, eRecording, and RON—by the numbers (7/8/2020)
• RON update: Lots of forward momentum—but also a setback (6/26/2020)
• 3 reasons why underwriters haven't jumped on the RON bandwagon (6/24/2020)