Recently, our own Harry Gardner penned an article for the October issue of Mortgage Banking magazine entitled, “The E-Notarization Challenge: 50 States of Grey.” As Gardner pointed out there, getting all 50 states to fully support electronic notarization is a serious challenge facing the industry. We need to overcome it if we hope to have end-to-end electronic mortgages.
We caught up with Gardner recently and asked him for an update on the status of eNotarization and what has changed.
Q: First of all, why are you watching this issue so closely?
Gardner: The eNotary movement is a significant issue for the mortgage industry if we hope to continue toward fully electronic mortgages. Awareness seems to be growing rapidly, if the recent ESRA (Electronic Signatures and Records Association) meeting in Washington, D.C. is any indication.
Q: What did ESRA members conclude is the best option for overcoming this challenge?
Gardner: We’re discussing two possible approaches within ESRA. One is to tackle it from the public policy perspective. The ESRA Public Policy Committee is beginning an outreach program to the states, their attorneys general and state notary authorities, to help educate them on the eNotarization landscape and to make them aware that the lack of eNotarization presents a real-world business impediment to the modernization of the mortgage industry.
In states without eNotary laws, the purpose of the education is to also get the point across that you don't necessarily need to pass a separate law to enable eNotarization in your state. ESIGN and UETA are over 16 years old now, and they provide a national infrastructure for the legal validity of electronic signatures.
Meanwhile, MISMO and MBA have started a discussion about it as well and have invited all the different parties to the table. At the September MISMO meeting, MBA hosted a roundtable discussion session on Remote eNotarization, where some partipants, particularly the title insurance industry, expressed concern over investor acceptance and the potential for loan pushbacks if a county recorder refused to record a remote eNotarized loan in the county land records.
Q: Is there concern that eNotarization could open the door to fraud?
Gardner: There are concerns, but the good news is that they are unfounded. The notary performs a basic check of a signer's driver's license or photo ID. They don't do an extensive check and they aren't necessarily required to do anything beyond that. It's entirely possible that in the paper world, a notary could be fooled by a forged ID, and that's a readily accepted risk inherent in the process today. The notary’s other primary purpose, whether the documents are paper or electronic, is to witness the signing ceremony and attest that (within the reasonable powers of their observation) the signers did not appear to be under duress when they performed the signing.
Those functions, identification and witness, are no different in the eNotarization world – the only difference is the way the documents are signed. In fact, the identification portion can be much more robust in electronic notary solutions. Pretty much all the solutions out there include advanced options to authenticate the signer's (mortgage borrower's) identity to a higher degree of assurance than what's readily accepted with the cursory driver's license check used in the paper world today.
Gardner and his team will continue to monitor this issue, and we’ll bring you more information in this space in the future.