Editors Note: This story was originally featured in the June edition of MReport.
Thanks to countless advances in technology, society relies less on paper and more on digital processes than ever before. This shift has brought with it new methods for traditional processes, like sending an email instead of distributing a memo, accessing bank account information online instead of in person, or video-calling someone instead of waiting on a letter. These changes didn’t happen overnight, but they have become the new norm.
Another change we’re seeing from technology is in notarization, the official process of verifying a document’s signer and the authenticity of the signing process. The paper-based method of having documents notarized can now be an electronic process that reduces paper usage and can even save time and money.
There are two types of electronic notarization available: e-notarization and remote notarization. E-notarization is completed much like a traditional paper notarization, requiring the signer to physically appear before a notary public, but it is electronically notarized using a digital signature. Remote notarization takes it one step further by using audio-video technology to perform an online notarization remotely, giving the signer freedom from having to physically appear before a notary public.
This technology was introduced several years ago, and its implementation is gaining momentum. To see how e-notarization and remote notarization are being used today, take a look at some of their many applications.
Real Estate
Buying property is rarely a quick process. From finding a real estate agent to viewing current listings, making an offer, going under contract, and securing the right property can take weeks, even months. And once you’ve secured the property, another lengthy process, the closing, begins.
For every real estate transaction, there is a series of documents that must be signed by the appropriate parties and notarized. Because of demanding schedules, very few people ever show up to the closing table with every party present. Typically, the seller must go to his attorney’s office to sign the deed and other documents in advance and then have them overnighted or hand-delivered to the buyer’s attorney. The buyer then meets with his attorney to sign the forms, and a settlement agent notarizes the appropriate documents.
The current real estate closing method is not only inefficient, it is also costly. All the fees associated with hand-delivering forms, manually updating paper documents, and physically traveling to an attorney or title agent’s office could be significantly reduced—even eliminated—with remote notarization of e-mortgages.
Landlord Tenant Evictions
To authorize an eviction, a landlord must complete an unlawful detainer document and have it signed and notarized. With remote notarization, this form and all other uniform court documents can be signed and notarized without traveling to physically meet with a notary public. And thanks to legislative efforts in Virginia, uniform court documents can even be submitted to the state’s court database electronically instead of in person.
Powers of Attorney
Because this type of document involves selecting someone to make decisions on another person’s behalf, it must be properly signed and notarized to be valid. Powers of attorney are often associated with wills or healthcare decisions, but they can also involve real estate transactions or finances. With remote notarization, designating a power of attorney is less complicated than with the traditional method, as it can be executed remotely, saving you time and money.
Financial Services
There are certain bank documents, such as loan forms or the opening of a safe deposit box, that require a notarization to authorize the transaction. Bank officials are often licensed to perform notarial acts, and with e-notarization, they can execute them electronically, reducing paper usage and making transactions more convenient for the customer.
With the rise of robo-advisors and digital wealth-management platforms, remote notarization is also a great solution for the investment and securities industry, as it allows users to obtain required notarizations without breaking the digital momentum.
Consumer Use
There are other types of documents, such as a waiver of liability, that often require notarization and can now be completed electronically. The greatest benefit associated with remote notarizations is being able to execute the notarial act from any location at any time of day, making the notarization process much more convenient for the consumer.
Addressing Security Concerns
Since these transactions take place electronically, there are certain authentication measures that must be met to verify the signer’s identity. This is typically done through knowledge-based authentication, a process that presents questions to the signer about personal information found in up to 30 years of public records, such as credit reports, loans, and more. In order to prove his or her identity and gain access to the document, the signer must correctly answer a certain number of questions within a designated time frame.
Once the signer’s identity is verified, he or she then enters a video call with a certified e-notary public. And because the notarization is performed remotely, participants of the video call may be located in different cities or even different states.
To execute the remote notarization, both the notary public and the signer use digital signatures to sign necessary documents. Digital signatures, also known as Independent E-Signatures, are more secure than simple e-signatures because they permanently embed the legal evidence of each signature into the signed document.
Tamper-evident technology found in digital signatures detects any unauthorized changes to a document. The document is also accompanied by a comprehensive audit trail that records each step of the signing process to defend against a legal contest. Each of these features provides immutable legal evidence to prove the validity of both the document and its signatures.
The Leading Legislation
Because individual states determine their notarization requirements, state legislatures play a key role in facilitating the technology’s widespread adoption. Many of them have already enacted or are currently considering bills that would allow the practice.
It all started in 2011 when the state of Virginia introduced the Electronic Notaries Act. This law made e-notarizations and remote notarizations possible by enabling signers from anywhere in the world to appear live before a commissioned notary public on a screen—via Skype, Facetime, or another audio-video teleconference option—and get a document notarized.
Virginia’s standards for the electronic notarization process include three specific things:
- There must be detailed identity authentication measures that confirm a signer is who he or she claims to be. This typically includes knowledge-based authentication, which gives personal and historical questions that the user must correctly answer and which may be one of two or more steps in a multifactor authentication process.
- The metadata and legal evidence of the signing process must be embedded within the signed document. That stipulation automatically rules out most e-signature vendors, since metadata is typically stored on the vendor’s server.
- The document must include tamper-evident technology to ensure that any compromise of integrity in the document would be made known to the parties involved.
Adoption Spreads to Other States
The practice of e-notarization and remote notarization in Virginia has become a pilot program of sorts for the entire country. And as adoption grows, it makes sense that more and more states are enacting laws supporting electronic and online notarizations. The status of legislation has been fluid, but examples include the following:
- Montana became the second state to legalize online notarization in 2015. Signers must be residents of Montana and the transaction must meet specific criteria laid out in the law, which includes that the signer must be known personally to the notary or verified by a credible witness.
- Florida authorized certain law enforcement and correctional officers to administer oaths and affirmations remotely.
- Nebraska passed a law to regulate electronic notarization which is effective July 1, 2017.
- Washington enacted the Revised Uniform Law on Notarial Acts, including electronic notarization provisions, effective July 1, 2018.
- Texas has passed a bill authorizing notaries to perform electronic and online notarizations that is awaiting the Governor’s signature. If signed, it will go into effect July 1, 2018. Pennsylvania and several other states have also introduced online notarization bills in 2017.
These state legislatures are supported in establishing rules for electronic and online notarizations by a number of industry associations.
Looking Ahead
Online notarizations are no doubt the way of the future. They take a process that has historically been cumbersome and inconvenient and make it easy, quick, and cost effective. Plus, remote notarizations are actually more secure and defensible than traditional notarizations since they incorporate strict identity authentication measures, an audio-video recording of the entire process, and tamper-evident notarized documents. As momentum for this technology continues to grow, we can expect to see its widespread adoption in the coming years.