States Should Permit Remote Online Notarizations for Real Estate Transactions
States Legislatures should adopt laws and promulgate regulations to permit the ability of consumers to choose to conduct their real estate finance transactions using remote online notarial acts.
Notarial acts are a necessary component of the residential loan closing process. As the industry continues to serve consumers' needs by using online, mobile and other electronic means, it has become clear that certain state-based notarial laws and regulations are inadequate to support this technology shift. The limitations with existing laws may result in increased risk to MBA members that seek to serve their customers through the use of these technologies.
- Consumers who want to take advantage of the convenience of remote online notarizations do not have the same options in all states.
- The real estate finance industry must navigate the evolving, but incongruent, landscape among states which can add to avoidable costs that are ultimately passed on to customers.
- Among the states which have enacted legislation to permit remote online notarizations are: Indiana, Michigan, Minnesota, Montana, Nevada, Texas, Tennessee, Vermont and Virginia. However not all of these states have approached the issue in the same manner.
- Lenders and other industry parties to a real estate transaction have uncertainty about their risk as mortgage documentation may change from hard copy to digital and back again at different points in the loan closing and post-closing process.
- Secretaries of State in states which have recently enacted legislation permitting remote online notarial acts are beginning to promulgate regulations to establish standards, for example, for verifying a consumer's identity or for electronic record storage. The real estate finance industry must have a unified, informed and coordinated response to ensure maximum consistency across state requirements.
MBA's Position / Next Steps:
MBA supports providing consumer choice for remote online notarization and will pursue enactment of laws and regulations that support adoption in all states. These efforts will take two forms.
- MISMO Standards: The Mortgage Industry Standards Maintenance Organization (MISMO) has established an Online Notary Working Group to develop standards for credential analysis, consumer identification, audio/visual, retention, privacy, security and other items. These standards will be vendor neutral and are being developed to provide consensus industry input into the rulemaking expected soon in Texas and Nevada. These standards will also serve to inform other states' officials as they discuss moving forward with permitting remote online closings.
- Model Legislation: MBA and the American Land Title Association have drafted model legislation and are working in partnership with their respective members and state and local assoication partners to ensure its passage nationwide to permit remote online notarial acts for real estate finance. The model legislation provides that:
- Consumer rights and optionality are protected in every respect and that the industry's customers always have the choice of using traditional notarization, electronic notarization, or remote online notarization;
- Remote online notarizations are equivalent to traditional notarizations without any additional restrictions or unnecessary barriers;
- The development of technology standards should rely on those established by MISMO, and that all public policy regarding technology should permit flexibility in order to foster innovation and maintain vendor neutrality;
- The development of appropriate safeguards ensure that fraud and capacity issues are appropriately addressed by the remote online notarization process; and,
- Any notarized real estate transaction clearly indicate whether the notarial act was made in-person or through a remote online means.
To pursue state adoption, MBA has created a website resource center as a central repository for infomraiton on this issue and to foster MBA's collaboration with ALTA. The resource center will also serve in both association's engagement with their respective member companies and state and local association partners. Both groups will continue to reaching out to other stakeholders including state legislators. secretaries of state and other state regulators (as well as their associations), real estate finance industry trade associations and others.
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