This article has been updated as of April 3, 2020

By Keith Barrett, Esq.

There is a lot of paper in a real estate closing. Even for those title companies that have gone paperless, a significant amount of paper must still be printed out for the actual closing.

On July 1, 2012, Virginia became the first state in the country to authorize remote online notarization. There are roughly 23 states that have approved remote online notarization laws, yet despite becoming law in Virginia almost eight years ago, it seems only recently we have been bombarded with articles and talks about the promise of e-closings. Most recently, a bill was introduced by U.S. Senators Mark Warner (D-VA) and Kevin Cramer (R-ND) called the “Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (the “SECURE ACT”). This SECURE ACT would permit immediate nationwide use of remote online notarizations. 

It is important to understand the different types of closings, since the word e-closing is thrown around without knowing exactly to what it refers.

• A traditional closing is one in which all documents are signed with wet ink with an in-person notary who verifies identification traditionally (i.e., physically looking at the driver’s license).

   

• A hybrid e-closing involves signing several procedural or disclosure documents electronically, while the remaining documents, including specifically those needing to be notarized, are signed in wet ink with an in-person notary who verifies identification traditionally.

   

• A full e-closing is one in which all documents are signed electronically with an in-person notary who verifies identification traditionally.

   

• Finally, a remote online notarization (“RON”) closing (which is what most people are thinking of when the term e-closing is used) is where all documents are signed electronically and the notary is not in the physical presence of the signatory, but rather witnesses the signing via web conference. It is this last category of e-closings that is most often talked about and has sparked the interest of the industry.

The promised benefits of a RON closing are significant. The convenience is undeniable as the client may conduct their closing from anywhere they have a computer with internet access.  Additionally, the client will likely be able to sign their documents quicker without the need to drive anywhere. This type of transaction will also increase efficiency to the extent it will be a truly paperless transaction. Lastly, with the current challenges and fears presented by the COVID-19 epidemic and the possibility that consumers may be confined to their homes by order of the state, RON closings offer an efficient and elegant solution to keep the real estate market moving forward in these turbulent times.

The reality, however, is that most lenders, because of secondary mortgage market requirements, still require a wet signature on their promissory notes and deeds of trust which prevents a RON closing. In fact, there have likely been more articles written about RON closings than the number of these closings to have occurred. For transactions that accommodate RON closings, certain steps and guidelines must be followed at the request of title underwriters (for example, a verification that the Clerk of the Court will accept electronic signatures and notaries for recording, as well as a verification that any lender involved has approved and will accept the use of a RON closing). Additionally, there are only a handful of technology vendors that are approved by the national title underwriters through which RON closings can occur. 

Perhaps the passage of the SECURE ACT would finally persuade the secondary mortgage market into acceptance of full RON closings. However, in the event our nation or our state faces a shutdown, and in response, lenders finally approve the use of full RON closings, this will create a tsunami of demand from real estate buyers and sellers, whose title agencies will have to run their deals through the four or five vendors approved by the title underwriters. In other words, acceptance of full RON closings could cause a significant wait to get to closing!