The unprecedented events of March 2020 have sparked a revolution in the conduct of business around the United States and the world, and the real estate industry is no exception. Until recently, not much had changed in the mechanics of real estate closings since the advent of the typewriter. Even with the promulgation of the Uniform Electronic Transactions Act (UETA) in 1999, the passage of the federal Electronic Signatures in Global and National Commerce Act (ESign) in 2000, the availability of optical scanning and e-recording, and the increasing use of escrow closings and electronic funds, most closings required a certain amount of paper, in part because of recording office limitations and natural reluctance to adopt new technology on the part of governmental agencies, title underwriters, attorneys, and lenders.
In particular, nothing could replace the traditional embosser or rubber stamp for those documents that require jurats or acknowledgments. Although from time to time industry groups and leaders discussed proposals to implement notarization of a remotely located individual using audio/visual technology (remote online notarization, or RON), concerns about privacy, security, and fraud, along with technological limitations, prevented these solutions from being widely adopted.
The limitations of paper closings were brought into sharp focus as businesses and government offices around the United States scrambled to adjust to COVID-19 and the requirements of social distancing. Although many states deemed legal and title services to be “essential” and therefore exempt from stay-at-home orders, attorneys, lenders, title agents, and county offices worked to accommodate remote or e-closings to limit face-to-face contact and the risk of transmission of the virus between employees, closing agents, and clients. Suddenly, physically appearing before a notary became difficult, if not dangerous, for a significant portion of the population, and an industry notorious for changing slowly and reluctantly was forced to revolutionize its processes overnight.
Among other things, the industry revisited the implementation of RON in closings. RON first became available in the United States in 2012, when Virginia authorized the use of both electronic notarization (notarization in person using electronic signatures and stamps) and RON. Other states soon followed. According to the National Association of Secretaries of State, 23 states currently allow some form of RON, and an additional 12 states have legislation pending to address it. See Nat’l Ass’n of Sec’ys of State, Remote Electronic Notarization (2020), https://bit.ly/2vvG9Cc. In response to COVID-19, more states implemented RON on an emergency basis, and legislation was introduced in the US Senate to authorize the use and acceptance of RON and electronic notarization in interstate commerce. S. 3533, 116th Cong. (2020).
Industry organizations and state governments take several different approaches to electronic notarization and RON, often based on model or uniform laws. Both the National Notary Association and the American Land Title Association, in collaboration with the Mortgage Bankers Association, promulgated model acts in the late 2010s. See Mortg. Bankers Ass’n, Remote Online Notarization, https://bit.ly/2u79J0q (last visited Apr. 2, 2020).
The Revised Uniform Law on Notarial Acts
In an effort to synchronize the existing statutes and model laws and set forth a framework for future statutes, the National Conference of Commissioners on Uniform State Laws published the Revised Uniform Law on Notarial Acts (RULONA) in 2018. RULONA, https://bit.ly/39XZvik. It was a significant update and revision of the Uniform Law on Notarial Acts, first published in 1982. Although the model acts were intended to communicate to the states the best practices desired by each of the groups drafting the model acts, RULONA—like UETA, the Uniform Commercial Code, and other uniform laws—was designed primarily to encourage uniformity among state laws in the subject matter it addresses. Compare Unif. Law Comm’n, What is a Uniform Act?, https://bit.ly/2GEu2VI (last visited Feb. 16, 2020) (describing objectives of uniform acts) with Unif. Law Comm’n, What is a Model Act, https://bit.ly/2RGY2a3 (last visited Feb. 16, 2020) (describing objectives of model acts). As a result, RULONA not only addresses electronic notarization and RON but also provides a framework around which states may build their notary legislation and administrative rules.
In publishing RULONA, the Uniform Commissioners aimed to address several areas where they saw a need for updated or new legislation, such as requiring notaries to keep a journal (although the Commissioners acknowledge that this requirement is not without controversy), addressing licensing requirements (which currently vary widely among different states), and implementing prohibitions to attempt to reduce the incidence of notarial fraud and deceptive practices. More than anything, the Commissioners make clear, “[t]he Act seeks to provide integrity in the process of performing notarial acts.” RULONA, Prefatory Note.
To implement RON and electronic notarization, Section 2 of RULONA expands the definitions of “signature” and “official stamp” significantly. A signature, under RULONA, includes both a traditional “tangible symbol” and “an electronic signature that evidences the signing of a record.” RULONA § 2(12). An “official stamp” can be an image created by a rubber stamp or embossing device or “an electronic image attached to or logically associated with an electronic record.” RULONA § 2(8). These definitions allow for a person to sign a document electronically and for a notary to acknowledge the signature by means of an electronic stamp, but they do not change the requirement that the signer appear in person before the officer taking the acknowledgment. Thus, Section 6 of RULONA states “if a notarial act relates to a statement made in or a signature executed on a record, the individual making the statement or executing the signature shall appear personally before the notarial officer.” The comment to this section states, “[p]ersonal appearance does not include an ‘appearance’ by video technology, even if the video is ‘live’ or synchronous. Nor does it include an ‘appearance’ by audio technology, such as a telephone.” Electronic notarization, therefore, allows the signer and the notary to avoid the use of paper, pen, and ink, but they must still sit together in the same room to create the record.
Using RON, however, the signer and the notary no longer need be in the same room or the same state, although the notary must be located in a state where the notary is authorized to act. See RULONA § 14A cmt. The signer may even be located outside the United States as long as two requirements are met: one, the record being notarized “is to be filed with or relates to a matter before a public official or court, governmental entity, or other entity subject to the jurisdiction of the United States” or involves property located within the United States or a transaction “substantially connected with” the United States; and two, “the act of making the statement or signing the record is not prohibited by the foreign state in which the remotely located individual is located.” RULONA § 14A(c)(4). The second requirement is tricky, and, although the comment to the section indicates that the Commissioners did not intend “to impose a requirement upon a notary public to translate, understand, or interpret the laws of foreign countries,” there does not currently appear to be a safe harbor for determining whether a RON request violates this requirement. In the comment, the Commissioners express the hope that the US State Department will provide a list of foreign countries that would seek to impose a penalty in the case of a remote notarization. In the absence of such a list, it is questionable whether many individual notaries will take the risk of performing a RON for individuals located in foreign countries, although some online notary services do currently advertise the use of their platforms to US citizens living or traveling abroad. See, e.g., Notarize, Traveling Abroad? Here’s Where to Find a Notary Public (June 14, 2018), https://bit.ly/2RWfgyM; Safedocs, Notarize Your Documents Online in Minutes, https://www.safedocs.com/ (last visited Feb. 16, 2020).
To be effective under RULONA, the RON process must meet the following requirements:
- The notary and the signer must be able “to communicate with each other simultaneously by sight and sound.” RULONA § 14A(a)(1)(A). As discussed above, Section 6 of RULONA makes it clear that one or the other—only sight or only sound—is not enough to make a remotely performed notarial act valid, but Section 14A provides that proper use of communication technology to allow an individual to appear before a notary remotely qualifies as “personal appearance” for purposes of Section 6. Id. § 14A(b).
- The notary may perform a notarial act for a remotely located individual if the notary knows the individual personally, has evidence of the individual’s identity “by oath or affirmation from a credible witness appearing before the notary public,” or obtains evidence of the remotely located individual’s identity “by using at least two different types of identity proofing.” Id. § 14A(c).
- The notary must be able to “reasonably . . . confirm” that the record with respect to which the notary is being asked to perform a notarial act is the same record that the remotely located individual is signing or has signed. Id. § 14A(c)(2). The comment to Section 14A suggests that the signer could e-mail the document to the notary or mail or overnight the “wet ink” original to the notary, who could then hold the document up to the camera or read a portion of the document out to the individual to confirm that the record is the same. Or, the comment suggests, “a notary public might verify the record by means of a secure electronic signature tied to the tamper-evident electronic record which the notary public is notarizing.” Id. cmt. These security measures are included in many commercially available e-sign platforms, such as Adobe Sign and DocuSign.
- The notary or a person acting on behalf of the notary must create and retain “an audio-visual recording of the performance of the notarial act.” Id. § 14A(c)(3). RULONA’s default rule for retaining the recording is ten years, but, as described below, the commissioners make it clear that the individual states can and should adopt their own rules regarding record retention. Id. § 14A(f).
- The notarial certificate “must indicate that the notarial act was performed using communication technology.” Id. § 14A(d). The Commissioners provide a model short-form certificate in Section 16 of the Act.
- The notary must notify the state’s commissioning officer or agency that the notary will be performing RON before beginning to do so. Id. § 14A(g). The Act does not specify training or commissioning requirements for performing RON, but states typically require some sort of educational course or testing beyond that required for a traditional notary public commission before performing RONs. For example, in Ohio, an attorney can be commissioned as a traditional notary public, and that commission has no additional education requirements and no expiration date. To be commissioned as a remote notary, however, Ohio attorneys must take a two-hour course and pass a test, and the remote notary commission must be renewed every five years. Ohio Rev. Code Ann. § 147.63(D).
- The Commissioners do not indicate a preference for details such as a method of confirming the record being acknowledged or technologies approved for use with RON but instead leave it to the individual state authorities (typically the Secretary of State of each state) to make rules governing the specifics of the process. Id. § 14A(h).
A central concept to both RULONA and the other model laws is that of “identity proofing,” which RULONA defines as “a process or service by which a third person provides a notary public with a means to verify the identity of a remotely located individual by a review of personal information from public or private data sources.” Id. § 14A(a)(3). The comment to Section 14A indicates that the commissioners were deliberately vague in describing the methods of identity proofing required by RULONA to allow for growth and changes in technology. Id. cmt. Currently, as the comment describes, most RON platforms rely on a combination of knowledge-based authentication and credential analysis. Knowledge-based authentication requires the signer to prove her identity based on information that is pulled from publicly available records. For example, before establishing an audio-visual connection with a notary, the RON platform may require the signer to enter some personal information (such as name, birthdate, driver’s license number, etc.) and then require the signer to answer a number of questions based on public information (e.g., “which of the following is your high school alma mater?” or “which of the following is a street you have lived on?”). If the signer answers correctly, the platform proceeds to the credential analysis portion of identity proofing, usually involving scanning the signer’s driver’s license or other identification, or the notary visually confirming the identification.
RULONA provides a basic framework for identity proofing and requires that RON include two methods of identity proofing, but other sources are much more specific and detailed in their requirements, and there is disagreement over whether two sources of identity proofing are adequate. For example, the Mortgage Industry Standards Maintenance Organization’s Remote Online Notarization Standards require that, in addition to being visually confirmed by the notary, the credential offered by the signer must
pass an authenticity test, consistent with sound commercial practices that: 1. use appropriate technologies to confirm the integrity of visual, physical or cryptographic security features; 2. use appropriate technologies to confirm that the credential is not fraudulent or inappropriately modified; 3. use information held or published by the issuing source or authoritative source(s), as available, to confirm the validity of credential details; and 4. provide the output of the authenticity test to the notary.
See Remote Online Notarization (RON) Standards, Mismo.org, https://bit.ly/36BfBfK. Obviously, simple visual confirmation or a credential by a human being would not satisfy these requirements, which contemplate a more robust and automated process.
MISMO also imposes more requirements for the knowledge-based authentication process than does RULONA, such as requiring the signer to correctly answer four out of five questions with a minimum of five possible answer choices per question within two minutes. Similarly, the American Land Title Association specifies that any RON legislation meeting its standards must provide for three (not two) methods of identity authentication and singles out RULONA as being deficient in this respect. See American Land Title Association, https://bit.ly/2GELlG8.
In considering these requirements, it is important to remember that one of the primary aims of RULONA is uniformity, rather than best practices. It is intended as a framework around which state legislatures and administrative agencies may build a more robust set of RON requirements appropriate to practices on the state and local levels. The Commissioners intended the details to be taken up through the administrative rule-making process on a state-by-state basis. See RULONA § 14A(h) cmt. In addition, the Commissioners were concerned that making the requirements for electronic notarization and RON too specific or too closely tied to existing technology would result in RULONA becoming quickly outdated and tried to be as broad as possible in authorizing the use of new technologies, as long as those technologies comply with the basic requirements of the Act. As the comment to Section 2 of RULONA states, in the discussion of the definition of “electronic,” “the listing of specific technologies in this section is not intended to be static or limited to those created or in use at the time of the adoption of this Act. As electronic technologies continue to develop and evolve, even if they involve competencies other than those listed, they are also included in this definition if they perform the function of generating, transmitting, or storing information in an intangible format from which the information may subsequently be retrieved and viewed in a perceivable format.” Id. § 2 cmt. In addition, the definition of electronic signature includes “any electronic symbol, sound, or process attached to or logically associated with a record and executed or adopted by an individual with the intent to sign the record.” Id. § 2(3). It is difficult to imagine, for example, a county recorder accepting a record that has been signed with a “sound,” even if that sound is acknowledged by a notary (although Sections 4(c) and 20(c) of the Act allow electronic records to be “papered out” if a paper copy of the record is required). That said, it is entirely possible that, at some time in the future, signing documents using a sound may become commonplace and, if so, RULONA allows for the sound to be notarized.
Implementation of Remote Online Notarization
Until very recently, although RON had made a splash and was being discussed in publications, at seminars, and among practitioners, it did not appear to have much of an effect on the actual practices of the real estate closing industry. Acceptance of documents executed using RON technology varied widely among lenders, title insurance underwriters, and governmental agencies. Some stakeholders raised privacy concerns, but others suggested that RON makes it difficult to tell if the signer is acting under duress, even wondering if someone off-camera could be holding the signer at gunpoint. As a practical matter, becoming fluent in the RON process takes time and practice, particularly for signers and notaries who are not accustomed to using audiovisual technology. Performing RON with any degree of competency requires notaries to have up-to-date hardware, sufficient bandwidth, and familiarity with the RON software platform they select.
COVID-19 forced the industry’s hand. Although, at this point, it is impossible to tell whether the changes to business practices that the virus required will be permanent, a truly electronic closing is more probable today than it ever has been in the past. When the crisis has past, we may lapse back in to our traditional ways, but it is likely that at some point, the rubber stamp and embosser in your desk drawer will go the way of the Betamax and the rotary phone.