Online Notarizations Quickly Gaining Steam with Rapidly Changing Laws and Easing Restrictions

FHFA loosens RONs for Fannie Mae and Freddie Mac; Nationwide legislation supported by major industry trade groups

As shelter-in-place initiatives continue across the country, Congress is considering legislation that would green-light Remote Online Notarizations (RONs) for closing mortgages digitally.  In the meantime, the Federal Housing Finance Administration, which oversees Fannie Mae and Freddie Mac recently eased loan processing restrictions, namely for certain appraisals and RON standards.

This legislation would allow for the notarization process to be done remotely for all mortgage transactions and is an effort to provide a powerful tool as many local title and recording offices remain closed during COVID-19 preventative measures. 

The bill is called the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (SECURE Notarization Act) and was introduced with bipartisan support from Sen. Mark R. Warner (D-VA) and Kevin Cramer (R-ND). A similar bill was also introduced in the House. 

“This is the type of legislation the mortgage industry needs right now,” said Rajesh Bhat, co-founder and CEO of Roostify. “Once law, an end-to-end digital mortgage can be implemented so that mortgages can still close, even in the time of social distancing. We applaud our legislators and support this measure.”

If passed, the SECURE Notarization Act authorizes every notary in the United States to perform RONs, requires tamper-evident technology in electronic notarizations, and provides fraud prevention through the use of multifactor authentication. This follows an already growing market. One provider of remote notaries, for example, is reported hiring up to 1,000 online notaries. And there are plans for some real estate listing services to convert their agents into notaries, as well.

“Americans shouldn’t have to risk their health or safety to execute important financial or legal documents, especially when they could do so from the safety of their own home,” said Senator Cramer. “The SECURE Notarization Act brings the notary process into the 21st century, allowing people to securely complete documents while still following recommended health and social practices amid the coronavirus pandemic.”

“Virginia has safely and securely allowed the use of remote notarizations for years,” said Senator Warner. “At a time when most people should be staying at home, there’s no reason anyone should have to leave just to get notary services.”

Several large trade groups support the push, such as the American Land Title Association, which tracks the closings of local title offices, the Mortgage Bankers Association and the National Association of Realtors.

According to a letter to Congress, NAR urged that: “In much the same way that many are now working remotely, allowing for Remote Online Notarizations will permit a notary and signer, who are in different physical locations, to safely and securely execute electronic documents using two-way audiovisual communication,” writes NAR President Vince Malta.

“This system would facilitate continued transactions and prevent at least some of the market disruption that will occur,” he continued. “Currently, 23 states have approved the use of RON technology. While a number of additional states are debating RON legislation, borrowers in more than half the country remain unable to close on a real estate transaction without an in-person signing.”

However, there will be challenges to implementing such a plan, if it’s successful in passing. For example, many different technologies are used for RONs and it’s not clear how the criteria for approval would be regulated. Furthermore, notaries in the United States are governed locally, so it is unclear how notaries that do not utilize online technology for mortgage closing will be able to implement the new service if passed.