Meet RON.
Even with the uncertainty surrounding coronavirus, every day we work with Buyers who want to buy and Sellers who want to sell. Even as the real estate market marches on, for the time being, Social Distancing efforts continue to reshape the way people interact, work, and also close real estate deals.
Coronavirus challenges have amplified the steady rumble of cries for eClosings to a roar as Buyers and Sellers look for a more convenient way to close.
Enter Remote Online Notarization (affectionately called RON).
RON in its simplest form involves the settlement attorney and the parties sitting at their own computers, communicating through video and audio technology, and signing and notarizing documents with electronic signatures. Virginia pioneered the RON concept a few years ago, and there has been a movement to adopt this nationwide. This is much more involved than services such as Docusign.
Here are the barriers and here is where we stand:
State Laws Allowing RON. Maryland adopted a RON Statute that goes into effect 10/1/2020. By Executive Order, the Governor essentially moved this up to right now, so RON is in effect in Maryland. There is no RON statute in DC.
State Laws Allowing RON Signed Documents to be Recorded. The Maryland Court of Appeals issued an Order authorizing recording of RON documents in Maryland. DC, while not having a similar provision, gives full faith and credit to the signing and notarizing laws of other jurisdictions, and DC will record documents signed using RON in Maryland and any other jurisdiction allowing RON.
Title Insurers Agreeing to Insure RON Signed Documents. The two largest title insurers (Fidelity and First American) have agreed to insure Deeds and Deeds of Trust signed using RON in DC and Maryland, with certain restrictions.
The Technology Being Available to use RON. This right now is one of the biggest hurdles.
Online Platforms. All of the RON statutes and the Title Insurers require using an online platform that uses specific secure technology that (1) determines the identity of the signer using authorized technologies; (2) allows for recording the signing session, including both audio and video, and storing a copy of that recording in a secure electronic vault; and (3) allowing for the electronic signing and notarization of the documents. There are only a few companies out there offering these online platforms that have been vetted and approved by the Title Insurers, and right now getting signed up with these companies is an issue with title companies around the country trying to get approved. Paragon Title is ahead of the curve, having already signed up and working daily to expand the number of approved companies we can use.
Title Companies, Buyers and Sellers Having the Right Technology and Ability to Use It. In order to use this technology, both sides need a computer equipped with both audio and video (most laptops have this – but iPads and iPhones, and similar devices, may not work with a number of these companies yet), a compatible web browser and an internet connection. Paragon Title has all of the technology needed on our end, but it still requires the correct technology on the Seller/Buyer end. It also helps if the Seller/Buyer is somewhat tech savvy so that they have the technology working on their end, and can successfully navigate the online platforms which are right now not as user friendly as they will eventually be.
Lenders Approving the Use of RON. Until recently, FNMA and FHLMC (who combined purchase 60% of residential mortgages from lenders), would not purchase RON signed loans. About a week ago, they changed their position and issued regulations allowing for this, and we expect FHA and VA to be not far behind. But lenders still have to deal with other investors getting on board and approving RON, as well as working through changing their own underwriting guidelines. This has been slow moving and uneven. Some lenders go so far as to restrict Seller documents such as the Deed from using RON. So, in every case involving the Buyer obtaining a loan, the first question must always be whether or not the lender will allow RON.
Real property transfers have been around for untold centuries and change is often slow. We tend to hang on to what we know works and look at every change from every possible angle before it is adopted. That’s good for protecting people, but not so good in the current environment, which is forcing change on the industry at a very rapid pace.
All of us at Paragon Title have been working towards RON for a number of years, and have spent many long nights making sure this works and that the appropriate protections are in place. We believe that, in the not too distant future, this will become a preferred technology for conducting real estate settlements, and we are ready for it.