E-Signatures and Remote Online Notarization

E-Signatures and Remote Online Notarization:

The Uniform Electronic Transactions Act (“UETA”) proposed by the Uniform Law Commission (“ULC”) in 1999 presented ways for states to effectuate electronic signatures with the same legal validity of wet ink signatures. At the federal level, the Electronic Signatures in Global and National Commerce Act (“E-SIGN”), was passed by Congress in 2000, authorizing the use of electronic signatures and notarizations for transactions between two or more parties in all jurisdictions where federal law apply. UETA has been adopted by the District of Columbia, Guam, Puerto Rico and every state except Illinois, New York and Washington. These three states have enacted their respective comparable electronic signature legislation in lieu of adopting UETA.

Once the legal basis for electronic signatures was established, states began addressing the need to notarize electronic documents and remote online notarization. Today electronic notarization is legally authorized in all states by E-SIGN and/or UETA. However, as of March, 2020, only 22 states have laws that enable their notaries to conduct remote notarizations. The states that have implemented Remote Online Notarization (“RON”) statutes include Arizona, Florida, Idaho, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, and Washington. As of February 20, 2020, Wisconsin awaits the governor’s signatures to authorize for RON legislation to become effective as of June 1, 2020. Wisconsin will be the 23rd state to pass a RON legislation.

In the 22 states that have already adopted RON statutes, documents executed and notarized remotely and electronically are valid and binding, provided that the notary is physically located in the state of execution for the applicable party. Besides those aforementioned 22 states and Wisconsin, nearly every state legislature has submitted a RON bill for consideration. In response to the COVID-19 emergency, the State of New York issued an Executive Order No. 202.7 to direct “any notarial act that is required under New York State law is authorized to be performed utilizing audio-video technology” provided that certain conditions¹ are met. This directive is effective as of now through April 18, 2020. Colorado trade associations have sent a letter to Governor Jared Polis requesting similar action. In addition, on March 18, 2020, Senator Kevin Kramer, R-N.D., and Mark Warner, D-Va., introduced legislation that would allow immediate nationwide use of RON in response to the COVID-19 outbreak. The Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (“SECURE”) would authorize every notary in the United State to perform RONs, requires tamper-evident technology in electronic notarizations and provides fraud prevention through use of multifactor authentication². Under Senate rules, the bill would most likely be referred to the Senate Banking Committee, which must approve the bill before sending it to the Senate floor. Along with these efforts, national trade associations such as American Land Title Association (“ALTA”) and Mortgage Bankers Association (“MBA”) are pushing for a federal RON provision to be attached to COVID-19 stimulus bill(s). At this time, we are monitoring the future developments of the bills closely.

E-Recording:

Among many title insurance companies, some appear more willing than others to provide a gap insurance for title for the time between closing and recording, regardless of whether the recording offices are open or accepting electronic filings. We have heard reports of First American Title Insurance Company and Old Republic Title Company willing to provide such gap coverage, but the situation is fluid and changing daily. First American Title Insurance Company indicated that it has implemented an internal approval process to evaluate the facts of each transaction to see if and under what terms the company can provide title insurance.

Chicago Title Insurance Company, Fidelity National Title Insurance Company and Commonwealth Land Title Insurance Company issued a statement on March 13, 2020 stating that they will not close a transaction if the appropriate recording offices are closed. However, per the statement, if a recording office is closed to the public, but retains the ability to complete recording of documents electronically, then they will insure title as long as an appropriate tile search is performed and applicable tax information is available prior to closing.

As of January 1, 2020, over 2,000 recording jurisdictions would accept a scanned image of a paper security instrument or electronically prepared security instrument for recordation. However, whether a recording office will accept electronic recording (“e-recording³”) varies by jurisdiction. For example, every county in Colorado, Delaware, Hawaii and Iowa accepts e-recordings whereas only three counties in West Virginia and 20 of 67 counties in Alabama offer e-recording. Currently, Vermont is the only state where e-recording is not accepted anywhere.

Despite the willingness of title insurers’ to provide gap coverage and the availability of e-recording in many jurisdictions of the U.S., it must be noted that in order to e-record a document, the recording office must be “open” with the ability to complete recording even if closed to public access. Amid the COVID-19 crisis, we are noticing many jurisdictions, including the New York County Clerk, with complete closure and inability to record electronically or physically. For more information regarding current status by jurisdiction, please refer to the below table⁴ and the below links to third-party resources.

Key
DLYD: Delayed. Recording may experience a delay.
EREC: E-recording only.
EREC + MAIL: Accepting e-recording and mail.
CLSD: Closed to recording.

For more information please refer to the links below.

https://blog.alta.org/2019/06/the-basics-of-e-recording.html

https://acrobat.adobe.com/content/dam/doc-cloud/en/pdfs/adobe-sign-us-guide-e-signatures-wp-ue.pdf

https://www.nationalnotary.org/notary-bulletin/blog/2020/03/notary-technology-digital-certificates

https://www.docusign.com/learn/us-electronic-signature-laws-and-history

https://www.proplogix.com/blog/remote-online-notarization-a-brief-history-and-how-its-changing-real-estate-closings

https://simplifile.com/services/e-recording/e-recording-counties/

1: The conditions are following: (1) the person seeking the Notary’s services, if not personally known to the Notary, must present valid photo ID to the Notary during the video conference, not merely transmit it prior to or after; (2) the video conference must allow for direct interaction between the person and the Notary (e.g. no pre-recorded videos of the person signing); (3) the person must affirmatively represent that he or she is physically situated in the State of New York; (4) the person must transmit by fax or electronic means a legible copy of the signed document directly to the Notary on the same date it was signed; (5) the Notary may notarize the transmitted copy of the document and transmit the same back to the person; and (6) the Notary may repeat the notarization of the original signed document as of the date of execution provided the Notary receives such original signed document together with the electronically notarized copy within thirty days after the date of execution.

2: For more information regarding the proposed SECURE Act, please refer to the following link to third-party resource: https://www.housingwire.com/wp-content/uploads/2020/03/The-SECURE-Notarization-Act_How-Is-My-State-Impacted.pdf

3: E-recording process works as a submitter electronically prepares, uploads, and submits documents; the county receives the documents electronically for processing and reviews the documents; and after review and approval, documents are processed, stamped, officially recorded with the county, and put on public record.

4: Simplifile. Available at https://go.simplifile.com/en/covid-19-county-recording-status-and-faq. Status as of March 19, 2020.