The COVID-19 pandemic is speeding up the revolution in how real estate and loan closings are conducted. Even before social distancing and shelter-in-place became common words in our vocabulary, the federal government and many states recognized the public’s need and desire for electronic signatures in lieu of wet signatures and face-to-face meetings and enacted legislation to authorize electronic signatures and remote notarization on legal documents. The arrival of COVID-19 has made the implementation of these solutions critical.

Effective as of January 1, 2015, the U.S. Small Business Administration (“SBA”) authorized lenders to utilize electronic signatures in connection with 7(a) and 504 loans, provided they comply with the performance standards outlined in Appendix 8 of the SOP on SBA Forms and other documents requiring signatures. These performance standards are designed to ensure electronic signatures are legal and binding. Until the urgency created, in part, by COVID-19, many lenders, attorneys and closing agents have been reluctant to research and implement these standards since wet signatures and face-to face closings were the norm and did not pose a health risk to their employees, customers or agents. Another reason lenders have been reluctant to proceed with electronic closings has been the requirement to set up an eVault or location for the physical computer file holding the copy of the promissory note in electronic form, also known as the eNote.  Additionally, to the extent that a document requires a party’s signature to be notarized, electronic closings were not possible since the foundation of the notarial act is based on the person whose signature is being notarized to personally appear before the notary.

While many states have begun to re-open their economies and allow businesses to operate, it could be a long time before the closing process returns to “normal”…whatever that means.  Since the end of March, 2020, there have been reports of closings taking place outside of the office on card tables and folding chairs, in parking lots, and even via drive-through arrangements through vehicle windows (I’ll have a large fries with that Note and Mortgage, please….). There have also been reports of lenders, attorneys and closing agents adopting various forms of closings that combine electronic and wet signatures. Below is a general discussion of the new wave of closings that allow us to conduct closings over a computer, laptop, tablet and smartphone. So….are you ready to meet RON?

Approximately 18 states have revised their notary public laws to authorize interactive audio-video conference to qualify under the “personal appearance” requirement. This is referred to as Remote Online Notarization (“RON”). Many more states have authorized RON on a temporary basis during the coronavirus emergency. The gist of RON is as follows:

• A signer and notary public use audio and video communication to notarize a signer’s electronic signature on electronic documents. 
• While a notary and the signer see and hear each other via their computer screen, they no longer have to be in each other’s actual physical presence. 
• Since RON doesn’t require the signer and notary to be in the same location, the notarization is typically done via webcam. 
• RON requires an identity verification process and secure video communication that is stored for a specified duration. Depending on the state, there may be additional requirements. For example, many states require the RON technology vendor to be registered with the Secretary of State. 
• FaceTime, Skype, Zoom and similar platforms are not acceptable for purposes of RON. 

Effective as of January 1, 2020, Florida’s notary public law was revised to allow for RON. Before an existing Florida notary public is permitted to notarize documents online, the notary must:

• Pass a two-hour state-approved RON course.
• Submit evidence of obtaining a bond and an errors and omission insurance policy.
• Pay the registration fee and register with the State.  
• Work with a state qualified RON service provider to obtain knowledge-based authentication to verify the credentials of the signer utilizing technological credential analysis and identity proofing via the online presentation of a government issued form of identification. 

Other states have similar requirements for becoming a remote online notary. Closing agents who are not state registered remote online notaries may retain a state qualified RON service provider to handle the entire closing process. 

In the states that have enacted RON, a signer may be physically located in a different state or country than the notary. However, irrespective of where the signor is located, the notary must always be present within the notary’s commissioning state, territory or jurisdiction when the remote online notarization takes place. During the notarization, all communication with the signer must be live in real time. During a RON closing, all documents are in digital form and are electronically signed. The documents requiring notarization are electronically signed as part of the online interactive two-way audio communication with the online notary. The online notary electronically notarizes using the online notary’s electronic signature and digital notary seal. The remaining documents are electronically signed, which may or may not occur during the online audio-video session. After being fully executed, the recordable documents are submitted for electronic recording. If electronic recording is not available in the jurisdiction where the documents will be recorded, it is important to check with the applicable jurisdiction to ascertain if they will accept paper copies of the electronically signed and notarized documents. This process is known as “Papering Out” and may involve obtaining a certification that the printed version is a true copy of the electronic version.

Although many states have embraced RON, there are varying degrees of acceptance at the county level for the recording of documents utilizing RON, even among jurisdictions that accept electronic recording of documents. The county recorder ultimately makes the decision to record, so it is important to check with the jurisdiction where the documents will be recorded before proceeding with the RON closing. In addition, if the instrument to be recorded is being insured by a title insurance company, you must check with the title company for any specific transaction related requirements, such as whether there are limits on coverage for RON transactions. Many title companies have recognized the unique problems created by in-person closings during the coronavirus emergency and are working on ways to be more flexible with their underwriting requirements.

Given that all jurisdictions have not yet accepted RON, lenders, attorneys and closing agents, along with title companies, have been quick to invent and utilize other types of closings that combine digital and paper documents in order to limit the number of documents required to be signed in person, such as:

• Hybrid eClosings whereby some of the documents are in digital form and electronically signed, and some of the documents are in paper form and signed the old-fashioned way with pen and ink on paper in the physical presence of a traditional notary public. Traditional recording methods and rules would govern this type of closing. 
• In-Person eClosings (“IPEN”) whereby all documents are in digital form and electronically signed. The documents requiring notarization are electronically signed and electronically notarized in the physical presence of a notary authorized to perform in-person electronic notarizations and the recordable documents are submitted for electronic recording, if available in the applicable jurisdiction. 
• Remote notarization of wet-signed documents whereby a RON service provider is utilized to allow an online notary to view the wet-signing of paper documents and take the acknowledgment over the RON platform. After all documents are signed, the original executed documents are sent by overnight delivery to the online notary for certification and execution by the online notary and affixation of the notary’s official stamp or seal. The original wet-signed documents are then transmitted to the lender, lender’s agent or to the title agent and the documents to be recorded are sent to the recording office.

During these challenging times, lenders, attorneys, closing agents and title companies will be asked to adapt to new ways of handling and conducting closings in a safe environment while at the same time ensuring the enforceability of documents.  To discuss how Fogel Law Group may assist you in a closing using RON, please contact the firm.