By Christopher Vinson

 

The buying and selling of real estate is an everyday occurrence. Even during the COVID-19 pandemic, the housing market thrived as homeowners saw large increases in the prices of their homes.[1] A perfect convergence of factors resulted in increased demand for homebuying during the pandemic.[2] The final step in completing such a transaction is the real estate closing process.[3] Historically, this process required in-person notarization.[4] However, over the last decade, and increasingly so during the pandemic, there has been legislation both proposed and adopted digitizing notarization to simplify the process of homebuying.

In 2012, Virginia was the first state to pass Remote Online Notarization (RON) legislation.[5] This law allows a signer, subject to certain requirements, to appear before a notary at the time of notarization using audio-visual technology over the internet instead of being in the same room.[6] The notary as the agent can now confirm your identity, witness your signature, and electronically notarize the document.[7]

Prior to the pandemic, RON legislation had been adopted in twenty-two states across the country.[8] States without RON laws quickly adopted remote notarization during the pandemic.[9] As of August, 2021 fourteen of these states proceeded to adopt permanent RON laws, while the rest allowed their states of emergency to lapse without permanent adoption.[10] Additionally, legislation in the United States Senate was reintroduced to permit RON nationwide.[11] The Securing and Enabling Commerce Using Remote and Electronic Notarization Act (SECURE) would require the use of tamper-evidence technology and calls for multifactor authentication to reduce the risk of fraud.[12] While not yet adopted, SECURE demonstrates the increased nationwide focus on RON legislation.

This widespread adoption of RON legislation amongst the state legislatures saw companies increasingly offer digital closing services to their clients. One survey conducted by the American Land Title Association found that number of companies offering digital closings increased by 228% in 2020.[13] In 2019, only sixteen percent of companies offered digital closings compared to forty-six percent of companies in 2021.[14] This widespread adoption of RON saw its use increase by 547% in 2020 compared to 2019.[15]

Consequently, there has been an increase in the amount of e-mortgages closed around the nation.[16] The first six months of 2020 saw the volume of e-mortgages being purchased by Fannie Mae and Freddie Mac increase compared to prior years.[17] This spike was directly attributed to companies increasing their digital closing capabilities during the pandemic.[18] This followed the modification of Fannie Mae and Freddie Mac policies that allowed those institutions to accept RON.[19]

Digital closings were especially popular with consumers. Most transactions over the last year required remote closings, and one survey found that ninety percent of those customers were satisfied.[20] Eighty-two percent of those respondents also stated that they would prefer e-signing documents prior to closing and roughly two-thirds stated that they would prefer remote closings in the future.[21]

Despite the perceived ease with which RON operates, there are still concerns over its increased implementation. States, such as California, have cited privacy and security concerns in their refusal to adopt RON legislation.[22] There is also the ever-present possibility of identity fraud. In-person verification is an effective safeguard against identity fraud but identification over the internet is slightly riskier.[23] There are also concerns with the execution of the necessary documents.[24] Any defect in the documents would eliminate any of the convenience factor associated with digital closings.[25] However, these issues are fixable, and the increased popularity and exposure of RON during the pandemic likely means that most states will inevitably adopt similar statutes.

 

[1] Jerusalem Demsas, COVID-19 Caused a Recession. So Why did the Housing Market Boom?, Vox  (Feb. 5, 2021, 9:00 AM ), https://www.vox.com/22264268/covid-19-housing-insecurity-housing-prices-mortgage-rates-pandemic-zoning-supply-demand.

[2] See id.

[3] Than Merrill, Everything There is to Know About a Real Estate Closing, Fortune Builders, https://www.fortunebuilders.com/real-estate-closing/ (last visited Oct. 20, 2021).

[4] James Kleimann, Notarize and Realogy Title Group See 200% Spike in RON Closings, Housing Wire (Sept. 9, 2020, 11:18 AM), https://www.housingwire.com/articles/notarize-and-realogy-title-group-see-200-spike-in-ron-closings/.

[5] Diana Sievers, Nearly 10 Years Later, The First State to Enact RON Legislation is Accelerating RON Adoption, Qulia Insight (June 11, 2021), https://blog.qualia.com/ron-adoption-va/.

[6] See Va. Code Ann. § 47.1-6.1 (2021).

[7] Audrey Barker, How Does eClosing with Remote Online Notarization Work?, Spruce (Apr. 1, 2020),  https://spruce.co/blog/how-does-eclosing-with-remote-online-notarization-work.

[8] Jeff Clabaugh, Home Sale Closings can be Done Remotely for Social Distancing, but There’s a Catch, WTOP News (Apr. 13, 2020, 10:45 AM), https://wtop.com/business-finance/2020/04/home-sale-closings-can-be-done-remotely-for-social-distancing-but-theres-one-catch/.

[9] DLA Piper, Remote Notarization is Here to Stay, Lexology (Aug. 4, 2021), https://www.lexology.com/library/detail.aspx?g=3f57867c-4d5f-4b03-8db5-b8f7dad71c2.

[10] Id.

[11] Tim Glaze, Digital Closing have Spiked 228% Since 2019, Housing Wire (July 8, 2021, 11:43 AM), https://www.housingwire.com/articles/digital-closings-have-spiked-228-since-2019/.

[12] Id.

[13] Id.

[14] Id.

[15] ALTA Vendor Survey Shows 547 Percent Spike in RON Use, American Land Title Association (Dec. 8, 2020), https://www.alta.org/news/news.cfm?20201208-ALTA-Vendor-Survey-Shows-547-Percent-Spike-in-RON-Use.

[16] Bill Burding, Remote Online Notarization is the Proper Path Forward for Digital Closings, Housing Wire (Nov. 9, 2020, 12:43 PM), https://www.housingwire.com/articles/remote-online-notarization-is-the-proper-path-forward-for-digital-closings/.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] See Kristina Sherry, Unmoved by COIVID-19, California Remains a Holdout on Remote Online Notarizations, Golden State Lawyer (May 11, 2021), https://www.goldenstatelawyer.com/2021/05/unmoved-by-covid-19-california-remains-a-holdout-on-remote-online-notarizations/.

[23] See Paul Centopani, RON Use Went up in 2020. Here’s Why More Lenders Won’t Adopt it, American Banker (Dec. 30, 2020, 2:02 PM), https://www.americanbanker.com/list/ron-use-went-up-in-2020-heres-why-more-lenders-wont-adopt-it.

[24] Id.

[25] Id.

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