Notarizing documents entirely over video was a matter of safety at the beginning of the pandemic, when people were eager to refinance their homes or take out loans but hesitant to congregate in person.
Now, it’s about convenience and efficiency.
“I think about this as a green closing,” said Gaurav Nagla, head of mortgage product at the banking software provider Blend. “You are saving a ton of paper by not printing and shipping mortgage documents.”
Remote online notarization, or RON, takes place entirely over audiovisual technology. The majority of states have permanent or temporary RON laws in place, many of which were enacted during the pandemic. Financial institutions have used it for closing and refinancing mortgages, closing other loans, private wealth management and more.
Consumers have become used to performing all kinds of secure transactions online during the pandemic, both for safety and convenience reasons. This makes adopting RON a key consideration for banks, even in the absence of federal regulation.
“As soon as North Carolina has a permanent RON bill, we will move into that space as quickly as we can,” said Beth Eller, vice-president of Truliant Mortgage Services at Truliant Federal Credit Union.
“Having COVID to push RON forward out of necessity made a big difference for adoption at institutions of all sizes,” said Edward Somers, a managing partner at the Chicago office of Buckley. “You didn’t want to lose customers because you didn’t have RON options, or cause a customer that sticks with you to miss out on or delay critical life events like purchasing a home if they were not comfortable meeting face to face.”
Some financial institutions, such as Truliant Federal Credit Union in Winston-Salem, North Carolina, have embraced the practice.
“I’ve been a mortgage lender for 34 years,” said Beth Eller, vice president of Truliant Mortgage Services. “If you look at the consumer experience in the mortgage process, this is the most innovative thing the industry has done.”
Not just another Zoom call
With RON, the signer and notary will meet over video, where the notary verifies their identity before they sign documents electronically. The notary concludes the process with an electronic seal. Most RON platforms create an electronic journal entry and keep a recording of the RON event, according to the National Notary Association.
This practice is not to be confused with in-person electronic notary, or IPEN, where the parties gather in person but use electronic signatures and digital stamps to make the process smoother.
There are nuances with RON that require specialized technology, such as ensuring the electronic signatures are tamper-proof and maintaining an audit history. Providers of this technology say RON is faster, has fewer administrative costs and is more convenient than traditional notarization, especially for those stationed abroad or in cases with multiple signers in different locations.
These companies have been embellishing their products over the course of the pandemic.
The electronic signature company DocuSign introduced its DocuSign Notary product in March 2021. The company says it mitigates risk of identity fraud with secure identity-proofing technologies and provides a detailed audit trail.
M&T Bank in Buffalo, New York, is one customer. “We’ve gotten to the point where notarizing a document remotely with DocuSign Notary only takes about five to seven minutes,” an executive at the $149.9 billion-asset bank said in an interview on the DocuSign website. “It provides a better experience for our customers because they can do it from the comfort of their homes, and it also saves time for our employees.”
Notarize, an online notarization company, says it analyzes about 14.5 million compliance rules almost instantly so customers can be sure their transactions are compliant with RON laws and regulations that exist at the state, county and accepting agency-level (for instance, the Departments of Motor Vehicles).
“Training and certifying notaries in each branch can be costly, and if someone leaves, the bank has to ensure they have a replacement,” said Pat Kinsel, CEO of Notarize. “Not only does online notarization reduce or eliminate those costs, it enables branches to offer notarization services even when there isn’t someone on staff to provide them.”
In April, Blend introduced its RON Eligibility Engine, which automatically assesses for lenders whether mortgage applications are eligible for RON, based on local regulations and the title insurance underwriter’s policy.
There are still concerns among some lenders about data privacy, the potential for fraud and the question of what happens if there is a mistake mid-process.
Plus, there is no federal regulation. The Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020, permitting the immediate use of remote online notarization across the U.S., was introduced in the Senate in March 2020 but has not passed.
Despite a patchwork of state laws, RON should be widely permissible across the U.S. because most states recognize the notarial acts conducted in other states where it is legal. But financial institutions would still need to consult their compliance departments or lawyers for risks in a given state.
“It gets sticky in those jurisdictions where relief isn’t permanent or the law is silent or the government has taken a position that suggests they don’t want RON utilized in their state,” said Somers. “Financial institutions need to carefully assess their own — or their vendor’s — compliance before they put RON into place.”
RON in action
The $4 billion-asset Truliant has completed more than 200 IPEN transactions since early 2020, even before the pandemic. The credit union performed its first and only fully digital and remote electronic mortgage closing in December 2021, before North Carolina’s Emergency Video Notarization law expired that same month.
The transaction involved Truliant in Winston-Salem, a homebuyer in King, North Carolina, and a notary in Charlotte. It took 15 minutes to electronically sign the documents at closing; that part would have taken closer to an hour and a half with traditional wet-ink signatures.
Eller said her team was waiting on guidance from Fannie Mae and Freddie Mac on the process and requirements for storing the promissory notes electronically.
A more permanent solution is making its way through the North Carolina legislature. “As soon as North Carolina has a permanent RON bill, we will move into that space as quickly as we can,” said Eller. Eller says her colleague who oversees consumer lending at Truliant feels the same way.
“We are very digitally driven as a credit union,” said Eller. “We like to do everything we can in the most convenient way for our members.”
She chose DocMagic as her provider, which she felt consolidated a lot of features, such as an electronic vault to store electronic promissory notes, that would otherwise require multiple vendors.
State-level credit union groups have been active in pushing for friendlier RON legislation.
BMO Harris Bank in Chicago, a unit of the Toronto-based BMO Financial Group, closed its first home equity line of credit remotely from start to finish using Blend Close, the digital closing product created by Blend, in May 2020. The $166.7 billion-asset bank is expanding its ability to offer RON closings through Blend Close in other channels and hoping to allow remote mortgage closings later this year. Enthusiasm for RON has risen at the bank over time: In the 2021 fiscal year 51% of customers who applied for a home equity loan on the BMO Harris website chose to close remotely. In the 2022 fiscal year that number jumped to 77%.