At the start of the pandemic, notarizing documents entirely by video was a matter of security, when people were eager to refinance their homes or take out loans but were hesitant to gather in person.
Now it’s all about convenience and efficiency.
“I see this as a green fence,” said Gaurav Nagla, head of mortgage products at banking software provider Blend. “You save a ton of paper by not printing and sending mortgage documents.”
Remote Online Notarization, or RON, takes place entirely on audio-visual technology. The majority of states have permanent or temporary RON laws in place, many of which have been enacted during the pandemic. Financial institutions have used it to close and refinance mortgages, close other loans, manage private wealth and more.
Consumers have grown accustomed to making all sorts of secure transactions online during the pandemic, both for security and convenience. This makes adopting RON a key consideration for banks, even in the absence of federal regulation.
“Having COVID to drive RON forward out of necessity has made a big difference to adoption at institutions of all sizes,” said Edward Somers, managing partner of Buckley LLP’s Chicago office. “You didn’t want to lose customers because you didn’t have RON options, or have a customer who stays with you miss or delay critical life events like buying a home s ‘he wasn’t comfortable meeting face to face.”
Some financial institutions, such as the Truliant Federal Credit Union in Winston-Salem, North Carolina, have adopted this practice.
“I’ve been a mortgage lender for 34 years,” said Beth Eller, vice president of Truliant Mortgage Services. “If you look at the consumer experience in the mortgage process, this is the most innovative thing the industry has done.”
Not just another Zoom call
With RON, the signer and the notary will meet via video, where the notary will verify their identity before signing documents electronically. The notary concludes the process with an electronic seal. Most RON platforms create an electronic journal entry and keep a record of the RON event, according to the National Notary Association.
This practice should not be confused with In-Person Electronic Notary, or IPEN, where parties meet in person but use electronic signatures and digital stamps to facilitate the process.
There are nuances with RON that require specialized technology, such as ensuring electronic signatures are tamper-proof and maintaining an audit trail. Providers of this technology claim that RON is faster, has less administrative overhead, and is more convenient than traditional notarization, especially for those stationed overseas or in cases with multiple signers in different locations.
These companies have embellished their products during the pandemic.
Electronic signature company DocuSign launched its DocuSign Notary product in March 2021. The company says it mitigates the risk of identity fraud with secure identity verification technologies and provides a detailed audit trail.
M&T Bank in Buffalo, New York is a customer. “We’ve gotten to the point where notarizing a document remotely with DocuSign Notary only takes five to seven minutes,” an executive at the $149.9 billion asset bank said in a statement. interview with DocuSign. “It provides a better experience for our customers because they can do it from the comfort of their own homes, and it also saves time for our employees.”
Notarize, an online notarization company, says it almost instantly scans approximately 14.5 million compliance rules so clients can be confident that their transactions comply with the RON laws and regulations that exist at the state level. , county and accepting agency (eg Departments of Motor Vehicles).
“Training and certifying notaries at each branch can be expensive, and if someone leaves, the bank needs to make sure they have a replacement,” said Pat Kinsel, CEO of Notarize. “Online notarization not only reduces or eliminates these costs, it allows branches to offer notarization services even when there is no one on staff to provide them.”
In April, Blend introduced its RON Eligibility Engine, which automatically assesses for lenders whether mortgage applications are eligible for RON, based on local regulations and title insurance underwriter policy.
There is always concerns at some lenders about data privacy, the potential for fraud, and what happens if there’s a mistake mid-stream.
Also, there are no federal regulations. The Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020, enabling the immediate use of remote online notarization in the United States, was introduced in the Senate in March 2020 but was not adopted.
Despite a patchwork of state laws, RON should be widely permitted in the United States, as most states recognize deeds performed in other states where it is legal. But financial institutions should always consult their compliance departments or attorneys for the risks in a given state.
“It gets sticky in jurisdictions where the aid isn’t permanent or the law is silent or the government has taken a position that suggests they don’t want RON used in their state,” Somers said. “Financial institutions should carefully assess their own compliance – or that of their provider – before implementing RON.”
RON in action
Truliant, a $4 billion asset, has completed over 200 IPEN transactions since the start of 2020, even before the pandemic. The credit union completed its first and only all-digital, remote electronic mortgage closing in December 2021, before North Carolina’s emergency video notarization law expired that same month.
The transaction involved Truliant in Winston-Salem, a homebuyer in King, North Carolina, and a notary in Charlotte. It took 15 minutes to electronically sign the documents at closing; this part would have taken over an hour and a half with the traditional wet ink signatures.
Eller said his team is awaiting guidance from Fannie Mae and Freddie Mac on the process and requirements for electronic storage of promissory notes.
A more permanent solution is making its way through the North Carolina legislature. “As soon as North Carolina has a permanent RON bill, we will enter this space as quickly as possible,” Eller said. Eller says his colleague who oversees consumer loans at Truliant feels the same way.
“We’re very digitally driven as a credit union,” Eller said. “We like to do whatever we can in the most convenient way for our members.”
She chose DocMagic as the vendor, which she said consolidated many features, such as an electronic vault to store electronic promissory notes, that would otherwise require multiple vendors.
State-level credit union groups have been asset pushing for more user-friendly RON legislation.
BMO Harris Bank in Chicago, a unit of BMO Financial Group of Toronto, farm its first start-to-finish remote home equity line of credit using Blend Close, the digital closing product created by Blend, in May 2020. Currently, the $166.7 billion asset bank BMO is expanding its ability to offer RON closes through Blend Close in other channels and hope to enable remote mortgage closes later this year.