The long – and unfinished – path to Remote eNotarization

Remote eNotarization has long been a fascinating – and controversial – topic. A panel discussion at a recent ESRA conference discussed various aspects of online notarization and business and legal perspectives on the subject.

The participants were:

• Pat Fry, Professor of Law Emeritus, University of Missouri-Columbia School of Law
• Nicole Ehrbar, Vice-President of Public Policy, Quicken Loans
• Renee Alberty, General Counsel, Title Source
• Joe Habib, Associate Counsel, Quicken Loans
• Bill Anderson, Vice-President, Government Affairs, National Notary Association
• Michael Chodos, General Counsel, Notarize.com

Ehrbar led off the discussion by noting: “Consumer wants and needs have changed, and that’s also true in the world of notaries.”

She then handed the proceedings off to Anderson, who started by saying: “I’m often asked, ‘What’s a notary and why do we need them?’ Notaries are humans, which I note because in the online world, it’s a word often used to refer to electronic time stamps and such. We mean people licensed by the state in which they live or work, to be an official and impartial witness to the signing of important records.”

He also noted that notaries confirm that the signing parties:

• Are who they claim to be
• Are signing the document of their own free will
• Have a baseline mental competence (required in most states)

Those items are stated on a certificate that’s included with the document. “That certificate is granted a presumption of genuineness by the courts,” Anderson said. “I think that Penny Reed from Wells Fargo said it best when she said that notaries are needed in the real world ‘because we can’t be there.’ Properties are conveyed, medical wishes are respected, and adoptions are finalized all because notaries’ acts are seen as trusted.”

A demo of Notarize.com

Chodos then stepped in to show a video demo of the product offered at Notarize.com and noted that it’s the same process used by competing products. The video described the following scenario in Virginia:

• Someone needs a “minor consent to travel” form notarized so his son can travel overseas.
• He taps the Share icon and selects “Copy to Notarize.” Once it’s uploaded, he taps Next to begin the process.
• He confirms his personal details and payment information, which are mandatory before each notarization.
• ID verification is more stringent than an in-person notarization. It’s confirmed with antecedent proofing, using knowledge-based veroification, including the last 4 digits of their Social Security number.
• The system queries credit files and other sources of information and creates identity challenge questions that only the customer can answer. They must answer five questions within two minutes. If they fail four of the five, they have to start over. If they fail again, they’re locked out.
• Then the customer must have their driver’s license verified too. Each license in Virginia has hidden features that the system can verify when the customer photographs the front and back of their license. That completes the verification process, which takes about a minute.
• Then the customer can fill in their document and confirm that they’re ready to connect with a notary. A notary then begins a live call with the customer and completes the transaction, which is recorded. The notary can ask to see the room the customer is in and can terminate the transaction at any time if they feel that fraud is being committed.
• The notary fills out a certificate the same way they would in person and attaches the digital certificate, so that the digitally encrypted file can’t be altered.
• The entire process takes about six minutes.

Remote notarization

Fry then discussed the various ways documents can be notarized in person. “Assuming you can find a notary who will work with you if you don’t have a prior local relationship,” she quipped before describing the typical notarization process. “That’s been around in various forms since the first Anglos entered this continent,” she said. “It also changed much in concept since then.”

She continued: “Then there’s electronic notarization. The federal ESIGN Act enables it, along with other laws. And I understand that about 1,749 counties in the US now accept e-records for recording. The revised Uniform Law on Notarial Acts explains how you can do it, such as ensuring that an e-record has tamper-evident technology applied.

“Remote is a small subset of electronic recording. I’m deliberately just saying remote because I’m not sure if we’ll be doing it with audio-visual communication in 10 or 15 years. Some lawyers are putting together the case to do remote notarization within UETA and ESIGN. We hope to have an amendment to the revised Uniform Law on Notarial Acts by next June or July that will allow for remote electronic notarization.

“The National Notary Association published a model act last year, and it includes provisions for remote appearances. The National Association of Secretaries of State is working on standards for them too, and MISBO is working on technical standards. Others are working on their own draft statutes for this too, so we should have a strong statutory base for this within a few months, assuming people get behind their states.”

Asked which states are in play, Fry replied: “Lots of them. Some of them basically stutter-stepped – they introduced bills and then put them off. We’ve had enactments of the uniform act in Minnesota, Pennsylvania, Washington, and Colorado. Idaho, Vermont, and DC all have it pending but not enacted. Texas and Nevada and Ohio have passed non-uniform acts, but the Ohio bill was repealed and will be reintroduced next round. And Virginia and Montana had previously enacted legislation for remote appearances.”

Are people ready for this?

Habib responded: “I think we’re ready for it. You can apply for a credit card without the bank seeing your face. Remote notarization goes to third party sources and does forensic analysis of your ID. Biometrics could be involved eventually too. It reduces error and increases the probability that the person is who they say they are – if they’re committing fraud, it will be recorded.

“You can buy things online in chat, in text, and so forth, so the market is ready for this. It will improve security and reduce fraud. Multi-factor authentication will help combat fraud, as will the recordings, depending on how and where they’re stored. Third party vendor analysis and distributing the risk beyond the notary helps too – those vendors are specialized in checking IDs from 50 states and so forth.”

Fry added: “In the paper world, many states have refused to require the notary to maintain a journal. The education that applicants go through isn’t very hard – you can get the test online and take it as many times as you want to pass it. When it comes to persuading states to enact these provisions, it’s easier to persuade them that you need the audio-visual part and having a log.”

Habib said: “As you see technology evolving, commonplace fraud will drop off. High-level fraud will increase, to be true, but safeguards can help mitigate that. It will be hard for someone to pull off a fraud scheme with, let’s say, a mortgage.”

Regarding keeping notary journals, Alberty said: “Just over a dozen states require keeping one. Other states recommend it, but within it, it’s just information about the document and the signer and the fee. There’s no recording of the transaction, like with a remote notarization, but I don’t think they should have to maintain recordings of remote notarizations.”

Anderson added: “The knowledge in the paper world is that the notary keeps control of the paper record and only has to turn in their log when they stop being a notary. But the video recording brings up issues around privacy and so forth.”

Should video recordings be maintained with notaries’ journals?

Habib said: “I’m a fan of divorcing the recording from the journal requirement. I would have it kept with the lender or someone else who can supply the right IT resources and cyber security for that. But some states say the recording should be part of the journal, which could be an issue if the notary holds the files in a hard drive that could be lost or could end up not working with newer operating systems.”

Fry said: “One thing that has happened is it’s become clear that you’ll get opposition from the Secretaries of State – the regulators of notaries – if they’re asked to maintain the journal. The state archive doesn’t want it. But standards are needed. One advantage of standards over statutes they can be modified to keep up with technology.”

Alberty agreed that there needs to be standards. She said: “One of the nice things about the ULC revision and their draft is that you see the notary getting to permit a custodian to hold onto the recording on their behalf.”

What would be the signature record?

Habib replied: “People think of signatures as a holographic signature, but it could be a sound, it could be a click, it could be a thumb print on an iPhone. It needs to have standards, since some states are pushing back on that. The bottom line is that you need a recognition that the event of the signature is passed on.”

Fry added: “All of the statutes so far say you must indicate if it’s been done remotely. I hear a lot of noise that you need to say if it’s been done remotely, and my guess is that in 5 or 10 years, people won’t care that we bothered with that. But to get over the nervousness, it helps.”

Habib said: “Some states are saying it needs to be done in the certificate and others say it needs to be done in the seal. I prefer the seal because then you know where to look. The problem with that is that if a notary has multiple seals, they need to make sure they use the right one. That can be solved automatically – for example, if you’re using a remote platform, you’re using the remote seal. The trend is going toward certificates, but I prefer seals.”

Anderson offered his thoughts on that: “The laws don’t require an image, just the information. If it gets there in text form, that functions as a seal, but a number of states have enacted laws to bridge the gap between the real world and the electronic one and have said the signature and seal need to look like physical ones.”

Who will use this?

Fry said: “We started by looking at a situation where the signer was outside the US, and I heard all kinds of tales. I talked to a colleague who was teaching one summer somewhere in China, and it was a six-hour plane flight to Beijing and the US embassy, where he’d have to go to get a notarization. I’ve heard stories of people outside the US who interrupted vacations or work stays to fly back into the US to find a notary and pay them $25 to handle a paper.

“I heard stories of people who tried to commission notaries outside the US and they wanted the whole document translated first. These are obvious cases for something simpler and less expensive, and even less technologically sophisticated. An electronic platform can handle it more easily and cheaply.

“In the US, it could be someone who is tied up at work in a busy downtown and the notary they would use is an hour or two away but there’s been an accident on the bridge. Or it could be someone in the next office building. The requirement right now is that they not be in the physical presence of each other.”

Anderson added: “When we started working on this what seemed like decades ago, people didn’t really see the value of it. But when the remote concept came in, it clicked that this would provide easier access to a notary.”

Habib said: “There are also service men and women abroad. For example, if they’re trying to close on a property where one person is stationed abroad, that can be a challenge. It’s not a very clean process because that service member might need to get permission to go to another base to access a notary. As long as you can get them an iPad in the field and an Internet connection, they can sign a document.”

Alberty said: “The final thing here is someone who has a disability or can’t leave their home, this gives them access to a notary.”

Fry said: “You can look at it a couple ways: accessibility, such as a disability or being in a remote part of the world, and convenience: as more and more electronic notarizations are done and more home buyers are younger, more people would prefer to do it.”

Are other states accepting remote online notarizations?

Anderson said: “One story I heard was someone outside the country needed a notary to convey power of attorney for a North Carolina property. They went to an online notary and had it done. Initially the recorder in North Carolina rejected it but after talking to the Secretary of State, they found that it was legal in Virginia, where the notary was.”

Fry added: “There have been a couple enactments in at least one of the bills I’m aware of that have said they will only recognize notarizations by out-of-state notaries if the other state’s law was substantially similar to their own.”

Habib said: “This is why there needs to be federal movement on this. Good luck getting 50 states to be substantially similar to this.”

Questions

One person asked: “What about complex documentation, such as multi-page mortgage documents? On a mobile device, that seems to be next to impossible. And how do you ensure that the signer understands what they’re signing? They should have the documents ahead of time so they know what they’re signing.”

Chodos replied: “I think that’s a question about handling mortgages in the real world. We already handle mortgages with large documents at Notarize, and the signer goes through all of them from beginning to end and signs. The concept is the same. The CFPB has the view that enabling electronic processes allows the signer a more realistic chance to review documents before time and ask contextual questions during the process. It has a richer set of opportunities for review and questions.”