The need for nationwide remote online notary standards becomes more apparent each day. Because RON laws are passed at the state level, each state has a different law, and those laws are interpreted differently from company to company and across state lines.
The lack of RON standardization not only results in confusion surrounding the notarial act, but it also can lead to delayed closings and financial consequences. The mortgage industry has spent years driving RON adoption and is finally seeing the fruits of that labor. However, as adoption increases, so should the push for standardization.
Leaving room for interpretation
Try as they might to avoid it, state legislators still managed to leave room for interpretation of their RON laws. For example, many counties in Texas refused to accept remotely/digitally notarized documents for recording even after the state passed its RON law. To address this, Texas amended the law to explicitly require every county to accept RON transactions for recording and, if necessary, have the notary to provide written declaration of the transaction’s authenticity.
However, some county recorders continue to reject the “papering out” of RON documents. This is just one example of the conflicts that arise between notaries and local officials when lack of standardization results in ambiguous RON laws, leaving consumers caught in the crossfire.
Which law applies?
Another common issue facing RON transactions is the perceived lack of clarity surrounding notarial law. Notaries are governed by the laws of the state in which they are licensed.
But when an out-of-state notary is used, many companies try to apply the laws of the state in which the property is located, resulting in a stand-off as each entity attempts to convince the other of its authority on the matter.
Adding to the confusion, some companies require the use of an in-state notary but do not disclose that requirement up front, causing delays at the eleventh hour. What’s missing is interstate recognition of remote/digital notarial acts by all parties.
In the paper world, a notarization by a Florida-based notary, for example, is accepted as valid in every state. The same applies to RON transactions, but because of the lack of standardization, non-notarial parties to the transaction often fail to make this association.
Notarial language and the game of telephone
As states passed RON legislation, they often used laws passed by other states as their foundation, cherry-picking the parts that fit with the model state legislators had envisioned. This practice resulted in a legislative drafting process resembling the children’s game of telephone. As the language changed hands between states, it was altered ever so slightly each time until it ultimately morphed into something completely different while still bearing some resemblance to the original.
For example, some states simply require the digital notary seal to include the words “electronic notary,” others expect the seal to be explicit in noting it is being used for a RON transaction. Still others demand the inclusion of language stating the transaction was “completed via two-way audio, video technology.”
Combined with the confusion regarding which state law applies, the differences in language can not only cause more work for the notary, but it may also negatively impact the closing by calling the legality of the entire transaction into question.
Identifying the client
Identity verification is yet another aspect of RON that lacks standardization. Most, but not all, states require two forms of ID verification: knowledge-based authentication, or KBA for short, requiring the client to answer questions about their personal data; and credential analysis, usually a security scan of the client’s license or passport. KBA is specifically mandated in most states, but can often trip up the client, requiring a second or third attempt at ID verification.
While the Mortgage Industry Standard Maintenance Organization’s RON standards allow for three ID verification attempts in 48 hours, some states have chosen to view the standards more as guidelines and allow only two attempts in 24 hours.
The root cause of this misguided view is the states’ preference for specific technologies versus tech neutrality and leaving the door open for future and more robust identity proofing tools. Instead of allowing the use of technology that incorporates multifactor identity verification, the states have boxed notaries in with specific, and often inferior and antiquated, RON technology requirements, with the net result being delayed closings that frustrate consumers and cost lenders additional time and money.
The impact of lack of standardization
While federal RON legislation has been introduced, it has not yet been passed. Until such time that federal legislation applies to RON, mortgage and real estate professionals are left to push for standardization within our respective industries and at the state level. Without clear standards that can be applied to each and every RON transaction, today’s confusion will remain in place for the foreseeable future.
