Some lenders think the only path to an eClosing is by employing a wide variety of vendors; for example, one vendor for document generation, another for compliance, another for electronic signatures, and so on.

But that’s a misconception. Not only is it possible to have a single-source vendor for all eClosing needs — it’s optimal.

“The lenders I speak to are really interested in using a doc provider that's foundational, that can provide everything,” said Darlyn Buthsombat, an account executive at DocMagic. “They want to use a doc provider that can also do eSign, that can also run all of the necessary compliance checks and have everything that’s needed for an eClose solution.”

An end-to-end technology vendor like DocMagic can provide what lenders need for every step of the eClosing process — something not even all DocMagic customers may realize. Lenders who are using DocMagic for document generation and eSignature are also in position to use the Total eClose platform to conduct any hybrid closing they want, or even a fully paperless eClosing, complete with eNotes, eVault and eNotarization options. 

“Sometimes I will run into a customer that was using another e-signature vendor because they didn’t know that we have eSign available for the disclosures,” Buthsombat said. “And then once they see our solution, they switch because it just makes more sense.”

Lenders who use multiple vendors can run into a variety of issues, including:

• Inefficiencies and errors: Having multiple vendors adds more steps to the process, which also becomes noticeably slower as every step requires a wait for each disparate system to complete its job. Additionally, if a problem should crop up, it may take longer to resolve because of the uncertainty over which vendor may have caused it, forcing lenders to deal with multiple customer service teams. While DocMagic has an open application programming interface (API) to easily integrate with alternate technology solutions, other tech vendors may not have an open API, potentially disrupting the process flow between multiple vendors and resulting in duplicated efforts for the lender. By using a single vendor, lenders get a seamless experience, with the entire doc gen or eClosing process taking place in one environment.
• Compliance: While most vendors run their own compliance, it might only apply to their specific specialty, which could complicate the process. “When the system is using different vendors and they run compliance, it doesn’t know which interpretation to believe,” Buthsombat said. “For example, one vendor may run the compliance audit but not the high-cost test, so that vendor might have a question on their audits or different information relating to the high-cost test. It can create some inconsistency there.”
• Vendor management: It is simply more of a hassle managing multiple vendors versus having one. Multiple vendors lead to multiple logins and passwords, multiple accounts and billing cycles to manage, and multiple onboarding processes and training sessions. There’s also continued education and communication for updates, which can seem repetitive when received from several different providers. Lenders also have to do their due diligence and ensure that every individual vendor is adhering to all compliance and security standards.

Lenders could avoid all these issues by using an effective single-source provider with years of experience and a record of success.

A few weeks ago, DocMagic signed a new client who had been using five separate vendors: one each for document generation, compliance, eNotarization, eVault and ad hoc signing.

However, the client will now get all those services provided by DocMagic.

“They switched to DocMagic because they were looking for a single-source provider,” Buthsombat said. “They wanted to eliminate the additional steps and inefficiency caused by using multiple vendors. Now their eClosing process is more seamless and efficient.”

DocMagic’s Sales Team can be reached at sales@docmagic.com.

Related Content:

• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)
• Magazine survey shows overwhelming demand for eClosings (2/24/2021)

Welcome to Ask the eClosing Team, an ongoing series where DocMagic’s eClosing pros tackle real questions that we’re hearing from lenders. Today’s responses are supplied by eClosing Team member Ron Carrillo, who is also DocMagic’s Business Development Manager.

Why are eNotes better than paper notes?

An eNote is the electronic counterpart to the traditional paper promissory note, so it contains the same information (e.g. home address, loan amount, interest rate, etc.), though eNotes are electronically signed instead of wet-ink signed. On the screen, eNotes look like regular paper notes except that they contain language stating that they require electronic signatures, as well as language referencing eNotes.

“If you peel back the layer of what you are viewing, it is actually MISMO-compliant XML data,” Carrillo said. “This gives eNotes several advantages over paper notes.”

Ask the eClosing Team: What do lenders need to get set up for eNotes?

Here are some factors that give eNotes the edge over paper: 

• Unlike a paper note, it’s impossible to lose an eNote.

When Carrillo asks lenders if they’ve ever lost a paper note, he often gets this response: “Oh yeah. Oh my goodness, yes.”

Simply put, paper isn’t the safest or most secure option. When lenders want to sell a paper note, they have to send the original note via courier to an aggregator, the GSEs, or perhaps an end investor. “And they put hands on that package and pray, ‘Dear, God, don't let this one get lost,’” Carrillo said. “But it happens, and when it happens it's disastrous, because that note is the loan. It's the original, and now that you’ve lost the original, what do you do?”

“The security of an eNote is that you don't put an eNote into a package to be mailed off,” he continued. “It's an electronic document. It goes into the eVault and it can be transferred to the eVault of an aggregator or investor without sending it via courier.”

• The eNote process is simpler, saving time and labor.

After investors receive a paper note, someone has to manually run it through an optical character recognition (OCR) machine to scan it and copy the data. After that, someone also has to eyeball the data that's being copied off the note to confirm it's accurate. “That's a manual task and all of that takes time, right? And they can still make an error,” Carrillo said.

These manual processes, plus the fact that the paper note needs to be physically mailed, could increase investor acceptance time to as much as two weeks. With an eNote, which doesn’t need to be scanned because it is MISMO-compliant XML data, acceptance times are reduced to three to four days.

• Post-closing, paper notes can’t hold a candle to eNotes.

Don’t just take our word for it; you can hear from the lenders themselves why their post-closing departments love eNotes so much.

“There are lots and lots of reasons why an organization should really look at digitizing their mortgage process,” Carrillo said. “It will build efficiency, it will build a better borrower experience, and it will build greater security for their documents and their loans.”

Here are some other common questions about eNotes:

What exactly is an eNote?

Obviously, a paper note is made of paper. An eNote may look like a digital version of a paper note on screen, but it’s not just a scanned PDF version of a paper note.

eNotes are created in a specific file format: XML data. XML (Extensible Markup Language) is made up of text-based code and is one of the most common formats used to store and transport content online. XML stores data in a way that can be easily read by and shared between software applications.

What is a SMART Doc® eNote and why do I need one?

So an eNote is made up of XML data — but how do lenders know exactly what information that XML data should contain, or what format it should take?

Enter MISMO, or the Mortgage Industry Standards Maintenance Organization, a subsidiary of the Mortgage Bankers Association. As its name suggests, MISMO is the mortgage industry’s standards-developing body, and the SMART Doc is MISMO’s technical framework for electronic documents. “MISMO says, ‘This is the way your XML data should look and this is the format it should be in,’ and that's the standard that everyone in the industry has to work toward,” Carrillo said.

While MISMO’s standards are technically voluntary, the major investors — including GSEs Fannie Mae and Freddie Mac — will only purchase eNotes that adhere to the SMART Doc format. To conduct a full eClosing or to use DocMagic’s Total eClose solution, lenders need to be able to generate a SMART Doc eNote, Carrillo noted.

What’s a tamper-evident seal?

Once the eNote has been electronically signed, a tamper-evident seal is applied to certify its integrity.

What that means: It’s impossible for someone to secretly make changes to the eNote. Even if they attempt to make a small change, such as deleting a space and fixing a typo, it will leave evidence that a change happened. Once that seal has been applied, “No one can fiddle with the numbers and fudge something later on down the road. Whatever you see on that document electronically is what it is,” Carrillo said. “If someone were to break that tamper-evident seal, it would indicate that the documents are not fully represented the way they were when they were signed.”

But in the paper world, Carrillo noted, “You can take a note, put some white out on it, and make a change.”

Since there’s no original paper note, how do we know who owns the eNote?

With paper, it’s clear who owns the note: whoever physically possesses the tangible, original paper note (as opposed to a photocopy).

But since no physical form of an eNote exists, how is its owner determined? Especially since each time eNotes are transferred from one stakeholder to the next, a new digital copy is created.

The answer: While several copies of the same eNote may exist, only one is deemed the “authoritative copy” — and whoever has the authoritative copy is the current owner of the eNote.

After the borrower signs the eNote, it is placed in the lender’s eVault, which includes a notation that this version is the authoritative copy. In official parlance, the lender has “retention of the authoritative copy,” Carrillo said.

When the lender wants to transfer the eNote to an investor, they have to initiate a digital transfer of the control and location of the eNote. There are many investors currently using DocMagic's eVault to accept eNotes from DocMagic customers. After the investor accepts the digital transfer, the investor’s eVault will indicate that its eNote copy is now the authoritative copy. While the lender’s eVault may still contain a copy of the same eNote, it will state that it’s not the authoritative copy.

The MERS® eRegistry also notes whenever the control and location of the authoritative copy changes.

What’s the MERS eRegistry?

The MERS eRegistry is the system of record for eNotes; if lenders plan to sell their eNotes, then they need to be registered with MERS.

When the eNote is registered, MERS assigns it a hash — a digital “fingerprint” made up of a string of letters and numbers that uniquely identifies a computer file, or in this case, the eNote — to track an eMortgage throughout its life. The eRegistry identifies the controller (owner/holder) and location (custodian) of the authoritative copy and will also note whenever that changes.

The eClosing Team can be reached at eClosingTeam@docmagic.com.

Related Content:

• Did You Know: You can get all your eClosing needs met by one vendor? (6/16/2021)
• Ask the eClosing Team: What steps should lenders take to get set up for eClosing? (6/2/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)

Atlantic Bay Mortgage Group has processed more than 10,000 eClosings — including thousands of eNotes — with the help of DocMagic’s Total eClose solution.

A long-time DocMagic client, Atlantic Bay processed its first hybrid eClosing in 2018 and executed its first eNote in January 2020; by year’s end, the lender had registered more than 7,000 eNotes. As of May 2021, Atlantic Bay has surpassed 10,000 eClosings, representing more than 20% of all loans originated as paperless closings.

“More than anything, our success has been predicated on being early adopters of RON (remote online notarization) and eNotes, helping settlement agents become comfortable with DocMagic’s software, working closely with our warehouse lenders and investors to accept eNotes, and having a ‘just do it’ attitude toward eClosings with eNotes,” said Christina Brown, Atlantic Bay’s Chief Operations Officer. “All of the legwork that we performed before and in the early days of the pandemic helped us gain a lot of experience and we were able to execute thousands of eClosings. It’s now become a competitive advantage for us.”

This recent success makes Atlantic Bay a leader in the lending space.

“Atlantic Bay exemplifies an incredibly efficient lender that has made all the right moves to fully embrace digital lending and completely remove paper from the closing process with our Total eClose platform,” said Dominic Iannitti, DocMagic’s president and CEO. “When you put the necessary pillars in place like Atlantic Bay has, it paves the way to more scalable operations with paper-free eClosings at the heart of the workflow. … We’re excited to showcase them as a client that’s perfected the eClosing process.”

Total eClose allows lenders to implement every type of hybrid eClosing — including eNote and eNotarization options — as well as a 100% full eClosing. It offers an end-to-end paperless workflow that seamlessly connects every component of the closing process.

Brown said eNotes have been a boon for her company.

“From origination through closing, warehouse lending and onto secondary marketing, we’ve seen a tremendous upside to producing eNotes that has benefited us as a company, our staff and our customers,” she said.

Atlantic Bay has already been conducting eClosings with RON, but plans to increase its volume of RON closings. The lender reports that it has experienced increased accuracy; quicker turn times; strict compliance adherence; better secondary marketing sell-side efficiencies; more warehouse line liquidity; and a straightforward, speedy and pleasant closing experience for borrowers.

Related Content:

• DocMagic client Truliant transfers FHLBank Atlanta's first eNote (4/15/2021)
• DocMagic, Secure Insight partner to create national eNotary training program (3/18/2021)
• Community State Bank now offering paperless eClosings via Total eClose (11/23/2020)

Two U.S. senators from both sides of the aisle have reintroduced a bill that would allow “immediate nationwide use” of remote online notarization (RON) by every notary in the country, more than a year after introducing a similar bill at the start of the pandemic.

The Securing and Enabling Commerce Using Remote and Electronic (SECURE) Notarization Act, co-sponsored by U.S. Sens. Kevin Cramer (R-N.D.) and Mark Warner (D-Va.), would require the use of tamper-evident technology and multifactor authentication during RON transactions to help prevent fraud.

“The pandemic exposed several flaws and outdated methods used in the American economy, and the notary process is a prime example,” Kramer said. “Our bill would bring this process into the 21st century.”

Currently 33 states have permanent laws to allow some form of remote notarization, and 32 of those states permit RON (South Dakota only allows remote ink-signed notarization, or RIN). During the pandemic, 48 states allowed remote notarization, much of that via temporary emergency orders.

The SECURE Act is endorsed by several organizations, including the Mortgage Bankers Association (MBA), the National Association of Realtors (NAR) and the American Land Title Association (ALTA), which reported that RON adoption jumped 547% in 2020 compared to 2019. A number of state chapters are also supporting the bill.

“While the COVID-19 pandemic presented a number of obstacles to essential tasks … many states demonstrated how to effectively deploy this type of technology to meet the needs of Americans,” Warner said.

Last year’s SECURE Act never left the Judiciary Committee. Its most prominent opposition came from then-California Attorney General Xavier Becerra, who informed the committee that the bill “would create significant issues regarding authenticity and the potential for increased fraud.”

California has long been resistant to RON; during the pandemic it was one of only two states that didn’t even pass a temporary order to allow remote notarization.

The 2020 election may have changed the state’s RON landscape a little, however; Becerra is now the U.S. Health and Human Services Secretary. California’s previous Secretary of State, Alex Padilla, is now its junior senator while his replacement, Shirley Weber, has shown an open mind when it comes to RON. She hosted a Zoom briefing on April 28 where she invited experts to speak about its pros and cons.

“I have taken no position on this item. My interest in hosting this webinar is because I want to learn,” Weber said, noting that she’d likely be asked to weigh in on any state RON legislation.

Related Content:

• 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)
• RON update: Remote online notarization sees forward momentum — and a setback (6/26/2020)

Donors at an upcoming Los Angeles-area blood drive will receive a pair of DocMagic’s signature pink bunny slippers.

The drive is being held by Golden Heart LA and Children’s Hospital Los Angeles (CHLA). Golden Heart LA is dedicated to helping children who suffer from life-threatening diseases, disabilities and illnesses. The nonprofit regularly works with CHLA and other organizations to hold blood drives throughout Southern California.

Every month CHLA patients require about 2,000 units of blood and blood components; CHLA collects blood from approximately 800 donors per month to meet this need. A single pint of blood can save up to two patients’ lives.

DocMagic supports several charitable events, particularly those that help children. The company’s bunny slippers are often donated to good causes to thank volunteers and participants. The slippers debuted at a mortgage technology convention in 2016 to celebrate the release of DocMagic’s Total eClose™ eClosing system. Hundreds of conference attendees wore the slippers, which symbolized comfort and borrowers’ newfound ability to close a mortgage loan electronically from the comfort of their homes.

The mobile blood drive will take place from 9 am to 3 pm PT on May 16 in the Denny’s parking lot at 530 Ramirez Street; Los Angeles, Calif. 90012. More details about the event can be found on Golden Heart LA’s Instagram page @GoldenHeartLA, and appointments can be made by visiting https://www.chladonateblood.org/ or by calling 323-361-2441.

Related Content: 

• DocMagic gifts signature bunny slippers to blood drive donors (9/1/2020)
• DocMagic Provides Raffle Donations, Helping NEXT Conference Raise Over $3,200 for Girls Inc. of Chicago (8/29/2019)
• DocMagic Employees Join Together to Support 5th Annual U.S. Red Nose Day Fundraising Campaign (5/28/2019)

Welcome to Ask the eClosing Team, a new series where DocMagic’s eClosing pros tackle real questions that we’re hearing from lenders. Today’s response is supplied by eClosing Team member Leah Sommerville, Senior Account Executive at DocMagic.

What steps should Ienders take to get set up for eClosing?

Lenders embarking on a digital lending journey have several steps they should take to successfully prepare for eClosing.

Regardless of which eClosing opportunities lenders pursue — from hybrid eClosings to a completely digital eClosing — here are the components that are key to a successful eClosing initiative: 

1. Identify an internal eClosing project leader.

Lenders must select an internal stakeholder to lead the transition to eClosing. “Someone needs to champion the eClosing initiative and take ownership of it,” Sommerville said.

Lenders occasionally (and mistakenly) assign someone from their IT team as the project leader, under the assumption that implementing eClosing is primarily a tech project. “eClosing is an operational improvement to increase the entire organization's closing efficiency,” Sommerville said. “The most successful project leader is often an operational manager familiar with the organization’s existing workflow. This insight is important as teams transition to a digital closing workflow.”

Ask the eClosing Team: What do lenders need to get set up for eNotes?

The project leader does not have to be a C-suite level executive, but they should still have the support of and be in constant communication with the executive sponsor. The project leader should also be in a position of leadership, as they will be responsible for setting the organization’s rollout deadlines and adoption milestones and holding the all-important kickoff meeting to ensure the team understands the goals.

Sommerville has seen some organizations fail to successfully scale eClosing adoption when the project leader attempts to implement the eClosing process alone, believing they should have a few solo successes first before convincing others to get on board. “This isn’t a project for one person. The entire team must get behind eClosings as the default option,” she said.

2. Confirm executive commitment for your eClosing initiative.

An eClosing strategy may not always require executive approval to implement, but it always requires executive commitment to succeed. An executive sponsor at the C-suite level must show that they strongly support eClosing — not just with words, but actions.

One large lender that Sommerville worked with had hundreds of branches, all of which were treated as independent entities. While the lender’s executive sponsor supported eClosing, this CEO allowed each branch to decide how and when to implement eClosings. The attitude was, “eClosing is a great option, but it’s up to you.”

“Unfortunately, results were dismal. LO’s didn’t take the initiative,” Sommerville said. “The CEO knew eClosing provides benefits to the company and borrowers, but because she didn’t say, ‘This is how we should be doing it,’ the people on the ground didn’t feel the need to improve how they conducted closings.”

3. Determine your eClosing roadmap.

One of the most important steps for lenders is creating a detailed eClosing roadmap, which should lay out which versions of eClosing they will introduce; planned eClosing options for the future; and realistic rollout deadlines and adoption goals.

Sommerville warns strongly against implementing eClosing without a strategic roadmap. “It’s like being a boat at sea with no rudder. You can’t reach your end goal if you don’t know how you’re going to get there,” she said.

It’s easiest to implement an eClosing workflow with basic eSign Hybrids (which DocMagic refers to as a Hybrid 1); this type of hybrid allows the borrower to preview all documents in advance of the closing and eSign almost 90% of the closing package, papering out only the traditional promissory note and any documents which require notarization. Hybrid 1 eClosings can be implemented in as little as 24 hours and have no barriers to 100% full-scale adoption.

eSign Hybrids can be introduced as a first step for lenders as they prepare to also provide eNotes and/or eNotarization. “A staged rollout allows lenders to crawl, walk and then run for the most successful long-term adoption of this eClosing,” Sommerville said.

While considering their roadmap lenders should set specific target goals, such as the number (and versions) of eClosings they plan to provide monthly and then quarterly compared to their overall loan volume, for example.

Unfortunately, lenders who don’t conduct enough eClosings early during the adoption process are likely to lose momentum. “The largest factor that causes these initiatives to fall off track is when lenders don’t gain enough experience initially,” Sommerville said.

4. Select the right eClosing technology partner.

When selecting an eClosing technology partner, lenders should seek one that offers an end-to-end solution that supports all eClosing workflows. Even if lenders start with a basic eSign Hybrid, they should assume that at some point they may want to also offer eNotes or eNotarization options.

“Lenders want to select a technology partner capable of supporting their immediate and future eClosing strategies, so they have room for growth,” Sommerville said. “Additionally, a robust eClosing platform should include proprietary technology for a seamless experience. By selecting an end-to-end technology platform, lenders are empowered for all eClosing processes and assistance by a single source in the future.”

The right technology provider should also be compatible with the lender’s existing technology partners, such as their loan origination system (LOS), point of sale (POS) or document storage systems. DocMagic, for example, has an open application programming interface (API), meaning that existing integrations are already abundant.

Additionally, eClosing providers should ensure internal users are trained and knowledgeable. Lenders are encouraged to test their new eClosing processes. “We want lenders to be as familiar as possible with the eClosing process before they provide this experience to borrowers,” Sommerville said, noting that DocMagic clients can run as many tests and samples as they need, at no additional charge.

5. Confirm that your external business partners can support eClosing.

Lenders need to confirm if their settlement agents are familiar with eSigning and/or eClosing. Often, lenders are pleasantly surprised to learn that their settlement partners already include some form of eSigning or even eNotarization in their business processes.

While many lenders assume that they’re responsible for training settlement agents themselves, a technology vendor like DocMagic actually handles the agent training and onboarding on the lender’s behalf.

Additionally, most of the settlement agents that Sommerville works with leverage Simplifile for eRecording services. Fortunately, DocMagic has an integration with Simplifile, so settlement agents who use their service don’t even have to leave the Simplifile platform.

Finally, if lenders plan to facilitate eNotes, they must communicate their plans to sell these eNotes to warehouse partners and investors, as well as activate their MERS eRegistry membership as required for eNote registration.

The eClosing Team can be reached at eClosingTeam@docmagic.com.

Related Content:

• DocMagic client Truliant transfers FHLBank Atlanta's first eNote (4/15/2021)
• Ask the eClosing Team: What do lenders need to get set up for eNotes? (3/4/2021)
• Magazine survey shows overwhelming demand for eClosings (2/24/2021)

On April 27, 2021, the CFPB formally announced the delay of the mandatory compliance date of the General Qualified Mortgage (QM) Final Rule from July 1, 2021 to Oct. 1, 2022. The General QM Final Rule removes the requirement that a consumer’s debt-to-income (DTI) ratio cannot exceed 43% and creates a “price-based limit.” Until the mandatory compliance effective date, the CFPB is allowing creditors to follow either the General QM loan definition in effect before March 1, 2021 or the revised Final Rule. The temporary GSE QM loan definition, or “GSE Patch,” which allows loans for sale to Fannie Mae or Freddie Mac (the "GSEs") with a DTI exceeding 43% is also available to creditors until the mandatory compliance date or until the GSEs exit federal conservatorship.

In January 2021, the GSEs entered into an agreement with the Department of Treasury that made changes to the Amended and Restated Preferred Stock Purchase Agreement (the “PSPA”). Under the PSPA, the GSEs will no longer be able to purchase loans that do not meet the CFPB’s revised General QM loan definition set forth in 12 CFR 1026.43(e)(2).

On April 8, 2021, Fannie Mae issued Lender Letter 2021-09 and Freddie Mac issued Bulletin 2021-13 to announce that under the PSPA, loans originated under the prior General QM definition (Appendix Q) will no longer be eligible for purchase. Loans originated under the GSE Patch will only be eligible for purchase if the requirements of the revised General QM loan definition are also met. The changes are effective for loans with an application date of July 1, 2021 or later, and for all loans with settlement dates after Aug. 31, 2021. Therefore, even if the CFPB extends the mandatory compliance date for the General QM Final Rule beyond July 1, 2021, most lenders will need to originate loans that meet the new definition. The GSEs will be releasing additional notices announcing guideline and policy changes.

The amendments exclude government loans that otherwise meet QM requirements, including Section 184 Native American Mortgages and Section 502 GRH Mortgages, which will continue to be eligible for purchase under an FHFA exception.

DocMagic has released a new QM audit that compares the Annual Percentage Rate (APR) to the applicable Average Prime Offer Rate (APOR) and determines if the APR exceeds the price-based limitation threshold. The audit will run concurrently with the previous QM audits until Sept. 1, 2021.

Effective Sept. 1, 2021, DocMagic will be removing options related to the previous General QM definition, including QM audits for DTI and the field for QM DTI Ratio. Additionally, DocMagic will be removing the Temporary Agency/GSE option for QM Type and the GSE Type. Any data received for using the Temporary Agency/GSE options will be routed to the General QM Type.    

Related Content:

• CFPB rescinds 7 pandemic-related policy statements (4/7/2021)
• The new URLA: The No. 1 thing you need to do to ensure you're ready (2/7/2021)
• CFPB issues statement on financial institutions serving LEP customers (2/3/2021)

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)