Life goes on, even when faced with COVID-19. People must sell and buy homes. And with mortgage rates at close to all-time lows, refinancing a home loan to a lower rate and payment could mean the difference between a family being able to weather the storm or capsize in it. But how do documents get signed and notarized when faced with stay-at-home orders, be they government or self-imposed? While both the federal Electronic Signatures In Global And National Commerce Act (E-SIGN) and state-enacted versions of the Uniform Electronic Transactions Act (UETA) authorize notaries to perform electronic notarizations, electronic notarization is different than remote online notarization (RON). Without a state law authorizing the use of RONs, state notary laws require the document signer to be physically present before the notary.
The federal government has yet to pass a pending bill that would require states to recognize RONs. While approximately twenty-two states have statutes in place authorizing RONs, not all of those statutes have been implemented by required regulations. And of course, more than one-half of the states have no statutes. Or had nothing, until now. As of the writing of this Alert, a dozen or more states with no RON statutes had issued temporary, emergency orders or guidance (emergency orders) to facilitate RONs. And a number of states with RON statutes, but with no implementing regulations, have issued similar emergency orders. It seems that each day another is added to the list.
State notary laws typically require that the notary be in the same room as the individual signing the document. A RON process, however, permits the notary to perform notarial acts in a location that is “remote” from the individual, e.g., via audio-visual or other technology. Many of the emergency orders require the individual signor to transmit the signed copy of the document to the notary. Some States also require that both the notary public and the individual seeking services be located in the same state. RON statutes, and the recent emergency orders, will help continue the facilitation of notarial acts while the COVID-19 social distance measures remain in effect.
We summarize below the attempts at a federal level to authorize RONs, state RON statutes and state emergency orders, and guidance issued by Fannie Mae and Freddie Mac (collectively GSEs) regarding the GSEs acceptable standards for RON. But first a few caveats might be in order.
- Most RON statutes require implementing regulations, but not all states with RON statutes have implemented those regulations. Some of the emergency orders noted below are in the nature of emergency regulations. But not all states have issued regulations or emergency orders. Consequently, before using a RON in a state that has enacted RON statutes, lenders might want to check if implementing regulations are required and, if so, whether any have been issued as well as the requirements of those issuances. For example, many states require the notary to have given notice to the applicable state agency, or to have received authority from that agency, to engage in RONs. Thus, before using a notary who will use a RON process, lenders might want to consider confirming that the individual has been granted RON authority.
- ALTA has its own standards for consumer protections and anti-fraud safeguards. Thus, if a document relates to a real estate or mortgage loan transaction that is to be insured by a title insurer, the parties should confer with the title insurer to confirm it will accept the RON process the parties intend to use.
- If a RON in State A is to be used for a transaction involving real property in State B, the parties should verify that State B will accept that RON. In many states, this involves confirming that State B’s notary law expressly provides that State B will accept an acknowledgment performed in another state, and confirming satisfaction of any conditions imposed, e.g., use of State B’s form of acknowledgement versus State A’s form.
- Not all counterparties, warehouse lenders, investors, or others with interests in the transaction will accept RONs. Consequently, it might be prudent for lenders to determine whether all interested parties will accept a RON. See, for example, Fannie Mae, Freddie Mac.
S. 3533/H.R. 6364. On March 18, 2020, the U.S. Senate introduced legislation (S. 3533) that would permit all notaries across the nation to immediately begin using RON. Shortly thereafter, identical legislation was introduced in the U.S. House of Representatives (HR 6364). The bill, “Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020” (SECURE), has minimum standards for remote notarization.
The legislation would require simultaneous communication over an electronic device or process during the notarial act. The notary public would be required to confirm the identity of the individual seeking notary services with personal knowledge, two third-party processes that review public or private data, or an oath or affirmation from a credible witness who is physically with the individual or the notary public or is able to communicate with the individual or notary public simultaneously by sight and sound at the time of notarization. The notary public would be required to create and maintain an audio and visual recording of the act for the duration of the notary’s term, unless State law requires otherwise. The Act would also permit individuals outside the US (e.g., military personnel) to utilize RON services, assuming the minimum standards are met.
The Act would provide that no similar State law is affected, provided the State law mirrors the Revised Uniform Law on Notarial Acts (RULNA). Additionally, the Act would not prevent States from adopting their own RON legislation and, with it, their own requirements and qualifications. However, the Act would preempt any inconsistent State law. Both bills were introduced and referred to committee in their respective chambers but neither has since moved.
States with RON Statutes
Twenty-two States have enacted statutes that authorize RON. Some, but not all, of these states also have implementing rules or regulations. The full list of States with RON statutes includes: Arizona (set to go into effect on June 30, 2020), Florida, Idaho, Indiana, Iowa (set to go into effect on July 1, 2020), Kentucky, Michigan, Minnesota, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah, Virginia, Vermont, Washington (set to go into effect on October 1, 2020), and Wisconsin (set to go into effect May 1, 2020). Of those four states where the enacted statutes are not yet effective, Iowa, Washington and Wisconsin have issued emergency orders to fast-track the availability of RON in those states.
States Issuing Emergency Orders or Guidance Regarding RONs
Rather than wait for a federal solution authorizing RON, or for State legislatures or regulatory bodies to take action, State Governors and other officials have issued Executive Orders and other directives to establish RON standards (some temporary) in the midst of the COVID-19 emergency. We summarize orders of which we are aware as of April 2, 2020.
Alabama. In a Proclamation by the Governor, Alabama Governor Kay Ivey announced that for the duration of the public health emergency, unless otherwise provided, notaries in Alabama are authorized to perform notarial acts virtually through videoconferencing. This authorization extends to notaries in Alabama who are licensed attorneys, or who are operating under licensed attorneys. The Proclamation provides that qualifying notaries may notarize signatures through videoconferencing programs. Qualifying notaries may also virtually confirm witness signatures through the videoconferencing “as though they were physically present at the signing.”
The witness will be considered as being “in person” if the notary public validates the witness’s identity at the time of signing.
The official date and time of the notarization will be when the notary witnesses the signature over videoconference technology. The individual seeking the notarial services must return all the documents to the notary public for certification and execution.
Colorado. On March 28, 2020, Colorado Governor Jared Polis issued Executive Order D 2020 019 that temporarily suspends the in-person requirement for notarizations under C.R.S. § 24-21-506. In the Order, Governor Polis authorized the Colorado Secretary of State to issue temporary emergency rules, standards and processes surrounding RON. On March 30, 2020, the Colorado Secretary of State issued its Notice of Temporary Adoption of Notary Program Rules. The amendment to the Colorado Secretary of State Notary Program Rules includes a “New Rule 5” on remote authorization. The Rule temporarily authorizes and establishes minimum standards for remote notarizations.
A notary must be commissioned in Colorado, and located in Colorado, when the notarial act is performed; the notary may perform a remote notarization only for an individual located in Colorado. The remote notarization system must be sufficient to enable the notary public to identify the individual and any required witnesses; verify that the notary, the remotely located individual, and any required witness are viewing the same record and that all signatures, changes, and attachments to the record made by the remotely located individual and any required witness are made in real time; and record the interaction such that the verifications “may be clearly viewed” later. Additionally, notary publics must record all remote notarizations in their respective notary journals.
The notary public must verify the identity of the remote individual and any required witnesses, with personal knowledge or “satisfactory evidence of identity.” A notary public has satisfactory evidence of the remote individual’s identity if the notary obtains an oath or affirmation from a credible witness who: (i) personally knows the remote individual, (ii) is personally known to the notary public or presents evidence of a government-issued identification, and (iii) is in the physical presence of the notary or the remote individual. A notary public also has satisfactory evidence of identity if the remote individual presents the notary public with a government-issued identification.
There are also requirements that apply to the audio-video recording, including that the notary public disclose to the remote individual that the notarial performance will be recorded and indicate details of how, where, and for how long, the recording will be stored. The notary public is also required to ensure the remote individual explicitly consents to the recording and its storage. Additionally, the notary public must store the recording for ten (10) years. The notary public must make a good faith effort to only include particular information in the audio-video recording, including a recitation sufficient to identify the notarial act. This includes, among other information, a description of the document(s) related to the notarial act, a declaration by the remote individual, and the credible witness’s explanation of how they know the remote individual.
The remote individual must transmit a legible copy of the record via fax, email or other electronic means to the notary public on the same day the notarial act is performed. When the notary public receives the copy of the transmitted document, the notary public must notarize the copy and revert it back to the remote individual.
Connecticut. In Executive Order No. 7K, Connecticut Governor Ned Lamont announced that through June 23, 2020, unless otherwise provided, any notarial act that is required under Connecticut law may be performed electronically, provided that certain conditions are satisfied. The person seeking the notarial act (the Signatory), if not personally known to the notary public or commissioner, must present satisfactory evidence of identity, while connected to the communication technology. The technology must be capable of recording the complete notarial act, and the act must be recorded and retained for at least ten (10) years. The Signatory must affirmatively represent that he or she is physically situated in the Connecticut. The Signatory must send a legible copy of the signed document directly to the notary public or commissioner by fax or electronically on the same day it is executed. The notary public or commissioner may notarize the copy of the document and transmit it by fax or electronic means back to the Signatory. If the notary public or commissioner receives the original signed document with the electronically notarized copy within thirty (30) days after the date of execution, the notary public or commissioner may repeat the notarization of the original signed document. Only a Connecticut licensed attorney in good standing may remotely conduct a real estate closing.
Georgia. On March 31, 2020, Georgia Governor Brian Kemp issued an Executive Order temporarily authorizing RON. The Order is set to expire when the Georgia Public Health State of Emergency ends. The Order provides that any requirement mandating the physical presence of a notary public under O.C.G.A. § 44-2-1 et seq. and § 45-16-1 et. seq. may be satisfied with real-time audio-visual communication technology. The electronic video communication should facilitate simultaneous communication between the parties. This temporary authorization also extends to requirements under O.C.G.A. § 44-2-1 et seq., which mandates the physical presence of an in-person witness to “attest or acknowledge an instrument, document, or deed.”.
Illinois. On March 26, 2020, Illinois Governor J.B. Pritzker issued an Executive Order in Response to COVID-19. In the Order, Governor Pritzker announced a temporary suspension to the requirement that a person must appear in-person before an Illinois-commission notary public. The Illinois Notary Act may be satisfied with a remote notarization via two-way audio-video communication technology. The notary and customer must be physically located within Illinois while performing the notarial act, and the transaction must follow the Illinois Secretary of State’s guidance.
The Illinois Secretary of State guidance provides that the remote notary act must be done by “two-way, real time audio-video communication that allows for direct interaction between the notary and the consumer” with a quality resolution that allows the notary to properly examine the customer’s identification credentials. The notary must retain the audio-video communication for at least three (3) years. The customer must show the notary every document page the customer is signing. The guidance encourages customers to initial each page in an effort to ensure that the notarized document is complete. Illinois notaries may use available electronic or remote notarization platforms that meet industry standards and each of the requirements in the Executive Order.
Iowa. On March 22, 2020, Iowa Governor Kim Reynolds issued an Executive Order temporarily permitting RON, provided the notarial act complies with section 6 of 2019 Iowa Acts chapter 44 (Senate File 475) and the Iowa Secretary of State’s guidance on approved communication technology.
Senate File 475 provides the minimum requirements for notaries utilizing RON. Those include that the notary public have personal knowledge of the individual’s identity or evidence of the individual’s identity by oath or affirmation from a credible witness appearing before the notary public, or by use of at least two different means of verifying the identity of a remotely located individual by a review of personal information from public or private data sources. The notary public must be able to reasonably confirm that the record before the notary is the same record in which the remotely located individual made a statement or on which the individual executed a signature. The notary public must also create an audio-visual recording of the act.
Kentucky. On March 27, 2020, Kentucky Secretary of State Michael G. Adams affirmatively confirmed that notaries may utilize video conferencing to notarize documents while social distancing measures are in place. While Kentucky has already statutorily authorized the use of RON, the statement from Secretary Adams reminds notaries that there is a distinction between using “communication technology to generate a notarized, tangible record” and the “procedure to register as an ‘online notary public’ to perform notarizations” for electronic records. There are higher compliance standards adopted by the mortgage industry for operating as an “online notary public” and generating notarized electronic records. However, a notary public who wants to utilize video conferencing to notarize a document in paper form is not required to comply with in-person requirements. According to Secretary Adams, this act may be done “without much red tape.”
Louisiana. On March 26, 2020, Louisiana Governor John Bel Edwards issued an Executive Proclamation temporarily authorizing RON. The authorization is set to last through April 13, 2020 unless otherwise extended or terminated. The Proclamation authorizes regularly commissioned notary publics who hold a valid notarial commission in Louisiana (including licensed attorneys and individuals commissioned by the Secretary of State) to perform remote notarizations. The Proclamation also provides minimum conditions for remote notarizations. The parties, including the individual seeking notarial services, any required witnesses, and the notary, must be able to communicate during the notarization simultaneously by sight and sounds through an electronic device or process. The notary public must also “reasonably identify” the individual seeking notarial services and create an audio-visual recording of the notarization performance. The notary public must retain the recording as a notarial record for at least ten (10) years, unless Louisiana law provides otherwise. All parties appearing, including the notary public, also must be able to affix their digital signatures to the act such that any subsequent change or modification to the notarial act will be evident.
Maryland. On March 30, 2020, Maryland Governor Lawrence Hogan issued an Executive Order temporarily authorizing remote notarizations and suspending the in-person requirement for notarial acts. Unless otherwise provided, the Order is set to remain in effect until the termination of the state of emergency and the proclamation of the catastrophic health emergency has been rescinded.
The Order provides a minimum set of conditions that must be met in order to conduct remote notarizations. The notary public and individual seeking notarial acts must be able to communicate with each other simultaneously by sight and sounds through communication technology. The notary public performing notarial acts for remote individuals must be appointed and commissioned. If the notary public intends to perform notarial acts remotely with communication technologies, she must notify the Secretary of State of her intention to do so and indicate which communication technologies she plans to use. During the remote online notarization process, the notary public must confirm the identity of the individual seeking notarial services with personal knowledge (i.e. the notary knows the individual) or “satisfactory evidence” of the individual’s identity.
Satisfactory evidence includes government-issued identification that has the individual’s signature and photo, or a verification on oath or verification by a credible witness. The witness must appear before the notarial officer, and the notary public must also confirm the witness’s identify with personal knowledge or with government-issued identification (e.g. passport, driver’s license), which may be presented remotely. Additionally, the notary public is required to confirm that the record on which the individual makes a statement or signs, and the record before the notary public, is the same. The notary public is also required to create and retain an audio-visual recording of the notarial act. Lastly, on the certificate and in a journal, the notary public must indicate that the individual was not in the notary public’s physical presence and the act was performed using communication technology.
New Hampshire. On March 23, 2020, New Hampshire Governor Christopher Sununu issued Executive Order #11 that temporarily authorizes RON. Under the Executive Order, the notarial officer must confirm the identity of the individual seeking notary services through personal knowledge, two different types of third party processes or services where the individual’s identity is verified with data, or with an oath or affirmation from a credible witness. The notarial officer must also record the notarization and retain the recording for the duration of the notarial officer’s office term, including renewals. For individuals located outside of New Hampshire, the record must be intended for a filing related to a matter in New Hampshire or involving property in or a transaction “substantially connected to” New Hampshire.
The individual seeking notary services must send the signed copy of the documents to the notarial officer for certification and execution. The “official” date and time of the notarization will be the date and time when the notarial officer witnessed the signature during the audiovisual telecommunications. The Order does not prevent an aggrieved party from challenging the validity of the record or transaction.
New Mexico. On March 30, 2020, New Mexico Governor Michelle Lujan Grishman issued an Executive Order temporarily authorizing notarial acts through audio-visual technologies provided that certain conditions are met. The Order takes effect immediately and is set to last through June 20, 2020.
If a notary public uses audio-visual technology to perform a notarial act, the technology must provide “direct interaction,” between the parties including the notary, the individual seeking notary services and any required witnesses. During the video conference, all parties must affirmatively state that they are physically situated in New Mexico. The notary must confirm the identity of the individual seeking services and any required witnesses. This may be satisfied if the notary personally knows the individual seeking services or witness or if the individual seeking services provides “satisfactory evidence of identity,” including a valid state-issued photo identification. On the same day the document is signed, the individual seeking services must send a legible copy of the signed document directly to any required witnesses and then to the notary by fax or electronic means. The notary may notarize the document and transmit it back once the notary receives the document with the required signatures.
New York. On March 21, 2020, New York Governor Andrew Cuomo issued an Executive Order related to the Disaster Emergency response to COVID-19. The Order contains a directive from the Governor related to remote notarization. However, it is currently set to expire on April 18, 2020. The directive authorizes the use of remote notarizations, subject to certain requirements. The notary must be shown a valid photo identification during the video conference if the notary does not personally know the person seeking the notary services. The interaction between the person and notary must be live. The person seeking Notary services must affirmatively represent that he is physically situated in New York. The person seeking notary services must send a legible copy of the signed document directly to the notary by fax or electronically on the same day it was signed. If the notary public or commissioner receives the original signed document with the electronically notarized copy within thirty (30) days after the date of execution, the notary public or commissioner may repeat the notarization of the original signed document.
North Dakota. The North Dakota Secretary of State provided guidance on how notary publics may begin performing RON. According to the guidance, the notary public must provide the North Dakota Secretary of State with two pieces of information before performing notary acts online. First, the notary must provide notification that she will be performing notarial acts for remote individuals. Second, the notary public must identify the technologies she intends to use for RON. Potential technologies that notary publics may use include DocVerify, Nexsys, Notarize, NotaryCam, and Pavaso. The technology must comply with the legal requirements in N.D.C.C § 44-06.1. The notification may be provided by email to [email protected], by fax to (701) 328-0107, or by letter to North Dakota Secretary of State, 600 E Boulevard Avenue, Dept. 108, Bismarck ND 58505-0500.
Pennsylvania. Pennsylvania Governor Tom Wolf signed an Executive Order on March 21, 2020. The Order, which is very limited in scope, temporarily suspends the physical presence requirement for court reporters who are notaries public. The temporary suspension is set to last for the duration of the declared disaster emergency.
Vermont. On March 24, 2020, the Vermont Secretary of State’s Office issued Emergency Rules for Notaries Public and Remote Notarization (“Rules”). The Rules do not explicitly authorize electronic notarial acts or RON. Rather, the Rules permit remote notarization over a secure communication link, subject to certain requirements.
The signatory and the notary public must both be located in Vermont when the notarial act is performed. The Rules do not permit electronic signatures, so the signatory and the notary public must both physically sign a tangible piece of paper. The signatory may sign and transmit the signed record to the notary public, who must then affix the notarial act certificate to the record.
The Rules also lay out a process that the Vermont Secretary of State’s Office of Professional Regulation “envisions.” In this process, the notary will record the communication. The remote individual will either send a copy of the document to the notary public in advance of the signing or hold up each page of the document to the video recording device so the notary public may later confirm it was the document signed over the link. The notary public will confirm the identity of the remote individual by personal knowledge, oath or affirmation from a credible witness that appears before the notary public, or two forms of identification shown to the notary public via the video recording. Both the remote individual and notary public must indicate that they are physically located in Vermont.
The notary public is required to maintain the audio-visual recording for a least seven (7) years. Once the remote signatory signs the document, he is required to send a legible copy of the signed document to the notary public. The document must be sent the day it is signed and may be sent via hand, email, fax or other means. The notary public will confirm receipt of the document and also confirm it is the document the notary witnessed the individual sign. The notary public will perform the notarial act on the document the same day the notary public receives it.
Washington. On March 24, 2020, Washington Governor Jay Inslee issued a Proclamation to amend his February 29, 2020 Proclamation 20-05. In the amended Proclamation, Governor Inslee ordered that Senate Bill (SB) 5641, relating to electronic and remote notarial acts and codified within RCW 42.45, take effect immediately. SB 5641 permits an electronic records notary public to perform a notary act for a remote individual using communication technology. Before performing an electronic notarial act, the notary must notify the director of licensing that the notary intends to do so, and must identify the technologies that will be used.
SB 5641 requires the notary to have personal knowledge or “satisfactory evidence” of the identity of the remote individual seeking notary services. The notary has “satisfactory evidence” of the remote individual’s identity through a verification on oath or affirmation of an identified and credible witness appearing before the notary, or by use of at least two different types of identity proofing. The notary must be reasonably able to confirm the record of the statement or documents on which a signature was made. Lastly, the notary needs to create an audio-visual recording of the notarial act and indicate on the certificate that the notarial act was performed using communicate technology.
West Virginia. On April 1, 2020, West Virginia Governor Andrew “Mac” Warner issued an Emergency Rule (Code of State Rules § 153-45) that temporarily establishes a remote notary process that is modeled after national standards. The Rule is set to remain in effect until the State of Emergency ends.
The Rule sets forth procedures for remote notary processes. Under the Rule, the notary and individual seeking notarial services must be able to communicate simultaneously by sight and sound through an electronic medium.. The notary public must confirm the identity of the individual seeking notary services with personal knowledge; identification that includes the individual’s photograph, name and signature (e.g., driver’s license, personal identification card, passport); at least two different third party processes or services; or an oath or affirmation from a credible witness who is physically with the individual or the notary or is able to communicate with the individual or notary public simultaneously by sight and sound at the time of notarization. The witness must have personal knowledge of the individual, and the notary must have reasonably identified the witness. The notary must create an audiovisual recording of the notarial act, including the signing and notarization, and retain the recording for the duration of the notarial officer’s term, including renewals.
If an individual seeking remote notarial services is located outside West Virginia, the notary must be commissioned as an “Out-of-State Commissioner” and have no actual knowledge that the act is prohibited in the jurisdiction where the remote individual is physically situated. The record must be intended for filing in West Virginia, involve property located in West Virginia or a transaction that is substantially connected to West Virginia, or be otherwise permitted under West Virginia law.
After the individual seeking notarial services signs the document, the individual must mail the signed copy to the notary for certification and execution with the notary’s signature and official stamp or seal. The “official” date and time of the notarization will be when the notary witnesses the remote individual’s signature.
Wisconsin. On March 18, 2020, Wisconsin Governor Tony Evers issued Emergency Guidance on Remote Notarization. The guidance provides that Wisconsin will temporarily suspend the in-person requirement for documents requiring notarization and will permit remote notarizations that comply with Wisconsin Act 125. Individuals who wish to utilize remote notarizations are encouraged to follow the “steps” published by the Wisconsin Department of Finance (DFS), which helps ensure compliance with Wisconsin Act 125.
The guidance authorizes notaries to perform document notarizations remotely over live audio and video connection until further notice. Per the guidance, Wisconsin-commissioned notaries who want to utilize RON are required to complete training from a DFS-approved provider and subsequently use that provider’s technology for the notarial act. Title companies and other companies performing real-estate transactions may use approved platforms, which include Pavaso or Nexsys. Businesses may use DocVerify. Individuals who seek notarized documents may use Notarize.com and NotaryCam. The guidance reminds individuals that Notarize.com and NotaryCam may rely on trained and authorized out-of-state notaries. However, notarial acts performed by in-state and out-of-state notaries public have the same effect under Wisconsin law. All five of the mentioned providers (Notarize.com, NotaryCam, Pavaso, DocVerify and Nexsys) meet or exceed the safeguards under Wisconsin law and are approved by DFI.
On March 30, 2020, Washington also issued Emergency Rules to facilitate RON. The Rules include guidance on the application process for a remote notary endorsement, fees for a remote notarial act, authorized remote notarial acts, standards for identity proofing, and standards for communication technology.
Wyoming. On March 24, 2020, the Wyoming Secretary of State issued Guidance on Temporary Remote Online Notarization and offered RON as an “option” open to Wyoming notaries. The RON option is available through July 1, 2020 or until Wyoming Governor Mark Gordon lifts the state of emergency, whichever comes first. In its guidance, the Secretary of State provided a “recommended process” for notaries to perform RON. As part of the process, Wyoming-commissioned notaries should complete the training provided by an approved provider in a contiguous state and use that provider’s technology standards and security features. Once the notary completes the training, the notary should notify and provide proof of completion to the Secretary of State’s office by completing and submitting this form on the Secretary of State’s website titled, “Notice of the Intent to Perform Temporary Remote Online Notarization in Wyoming.”
As a reminder, the guidance also provides that a Wyoming notary may only charge $5 for any notarial act and notaries are still required to comply with the legal requirements for the documents that require notarization. This includes incorporating witnesses, when appropriate, by having them participate remotely.
GSE Guidance Regarding Acceptability of RON
As more states have issued orders authorizing RON, mortgage lenders are eager to incorporate RON into the closing of residential mortgage loans, as long as mortgage investors will accept documents notarized using a RON process. Both Fannie Mae and Freddie Mac have issued guidance outlining acceptable RON standards for mortgage loans that will be sold to the GSEs.
On March 31, 2020 Fannie Mae issued an updated Lender Letter 2020-03 and on March 31, 2020, Freddie Mac issued Bulletin 2020-8. In both the Letter and Bulletin, the GSEs incorporated policies for RON, effective immediately. The policies are set to remain in effect until further notice is provided.
The Letter issued by Fannie Mae authorizes lenders to sell loans with remotely authorized loan documents, provided certain conditions are met. The notarization must be performed in accordance with and be legally valid under the law and regulations of the state, including the UETA, as adopted, and E-SIGN. When required by state law, the notary must be physically located in the state where the notarization is performed and specifically licensed to perform RON. If the remotely notarized document is a security instrument or amendment to the security instrument, Special Feature Code 861 must be delivered with the loan. The loan cannot be a Texas Section 50(a)(6) loan, which allows borrowers to take equity out of a homestead property under certain conditions.
The Letter requires that the county recorder in the state and county where the property is located accept the remotely notarized document for recording, if the loan document must be recorded. The lender must make all selling representations and warranties in the Selling Guide. This includes representations and warranties related to (i) clear title and first lien enforceability; (ii) compliance with laws and responsible lending practices; and (iii) requirements regarding title insurance, including those in B7-2-04. The requirements in B7-2-04 extend to notarized security instruments or amendments to security instruments. Title insurance companies may not take any exception for the remotely notarized loan. Lastly, lenders may not require a borrower to use remote notarization and must have other notary options available for borrowers.
Both the Letter issued by Fannie Mae and the Bulletin issued by Freddie Mac require that the system used for RON meet certain minimum standards. These include (1) a two-factor authentication, (2) tamper-sealed notarized documents and system security to prevent interference and protect the system from unauthorized use, (3) maintenance by the remote online notary of a secure electronic journal of the notarial act and a backup of the record, and (4) recording the notary ceremony and storing the recording for the time required under the law or, if no period is specified, seven (7) years. The lender, however, must maintain the notarial ceremony for the life of the loan.
The Bulletin issued by Freddie Mac also requires certain conditions be satisfied for mortgages closed using RON. Similar to Fannie Mae’s requirements, the mortgages cannot be Texas Equity Section 50(a)(6) mortgages. Additionally, the notary public must be located in a State that authorizes licensed notaries to use RON , and the notary must be licensed to do so. If the borrower and the mortgaged premises are located in a different State than the State in which the notary public is licensed and located, that State must authorize interstate RON transactions.
The lender must obtain a title insurance policy that meets Freddie Mac’s Guide requirements in connection with each mortgage. The title insurance policy cannot make or take any exceptions to the fact that a notary remotely and electronically notarized the closing and post-closing documents. The signers' electronic signatures must be: (i) attached to or logically associated with the closing and post-closing documents and (ii) remotely and electronically notarized using a system that meets the minimum standards. The lender must record the closing and post-closing documents signed and notarized in the applicable public land records recorder's office, in compliance with the Guide’s requirements.
The lender must maintain the recording of the notarial ceremony for the life of the loan and provide the borrower with other notary options permitted in the State where the borrower and mortgaged premises are located, upon the borrower’s request. The lender must represent, warrant, and covenant with Freddie Mac that the lender has confirmed that all electronically created, executed, notarized and recorded documents: (i) comply with applicable law in each State where the mortgaged premises are located; (ii) comply with UETA and/or E-SIGN, as applicable; (iii) are valid, effective and enforceable; (iv) are valid first liens on the mortgaged premises, as required by the Guide; and (v) are recordable in the respective State’s public land records.
For each mortgage closing using a RON process, the lender must deliver the recorded document with the recording information to the document custodian or designated custodian. If, in the normal course of business, the lender becomes aware of any adverse actions (e.g., actual or threatened litigation) that may have an adverse effect on interstate RONs, the seller must promptly advise Freddie Mac.
It is worth mentioning that the Mortgage Industry Standards Maintenance Organization (MISMO) developed its own RON standards in September 2019. Those standards support model legislation developed by the Mortgage Bankers Association (MBA) and the American Land Title Association (ALTA).