50-state solution

One of the greatest unknowns moving into the new year is the possibility of a 50-state solution to authorize RON at the federal level. At the onset of COVID-19, the housing industry was forced to figure out how it would continue to help Americans fulfill their dream of homeownership amid stay-at-home orders. Many states issued emergency RON legislation to make remote closings possible.

NotaryCam CEO Rick Triola even expressed his hope that we would have a 50-state solution by the middle of 2021.

S.3533 – Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 was introduced in the Senate in March of this year, even as identical legislation was introduced in the House of Representatives. However, neither bill has moved since then.

What is notable about the legislation in the House is its true bipartisan support, Williston Financial Group Executive Vice President of Institutional Services Don O’Neill told HousingWire. The bill in the House has 77 co-sponsors, 40 of whom are Republican and 37 of whom are Democrat.

“It was almost an even split there, which I think is noteworthy given kind of the partisan nature of a lot of legislation that we’re seeing,” O’Neill said.

But despite this bipartisan support, O’Neill said the time to pass the SECURE Act may have already passed.

“I think the window for that SECURE Act was really in March, in April, when we had the highest need for a solution,” he said. “People were at home, they were uncertain about their real estate transactions, and I think we had an ideal environment where it could have been taken up and adopted in that kind of slow adoption and really minimal effort at the federal level.”

And some of the block to that adoption could be due to California and other states that have been slow to adopt RON legislation.

“There’s not a lot of support in California, even at a state level,” O’Neill said. “So when we look at a state like California that has not adopted its own statewide run bill, and you have the senior U.S. senator from the state of California, who has made it pretty clear that she does not support the federal legislation. Until some of that reluctance is abated, I don’t know that we’re going to see a lot of traction.”

But even as adoption slows at the federal level, states have quickly been adopting RON through 20202.

“About two-thirds of states have legalized eNotarization as of today, but we are seeing rapid adoption rates due to the challenges posed by COVID-19,” said Dominic Fahey, States Title vice president of strategy. “In states where RON is not accepted, homeowners and refinancers may see what is known as a hybrid closing instead, where portions of the closing process that have been legalized are carried out electronically, with some traditional, paper elements involved.”

But adoption is only half the battle.

Adoption versus utilization

O’Neill explained that there are two phases to look at when it comes to widespread acceptance of technology.

“I use two words: utilization and adoption,” he said. “So when we start talking about adoption, that’s the states have adopted it, that’s some market adoption. Even when it’s adopted, then how do we increase the utilization?”

And the key to increasing utilization with RON is a timing issue, according to O’Neill.

“I’m absolutely convinced that the earlier the consumer gets engaged in an eCommerce solution, the more likely they’re going to follow that transaction through including eSignature and remote online notarization, rather than introducing that to the consumer at the tail end of a transaction,” he said.

O’Neill explained that the sooner the consumer is oriented toward an eTransaction, the higher the likelihood of utilization will be through the closing period.

Regardless of the speed of utilization, eClosings and RON are growing in popularity, and some experts warn that lenders and title companies that don’t get on board could get left behind.

“Studies show that consumers – now more than ever – expect and demand a simpler, tech-enabled shopping experience, so if you aren’t already embracing eClosings, you’re probably going to be left behind in the next big market shift,” Fahey said.

A new study conducted by ClosingCorp shows borrowers who completed purchase and refinance transaction during COVID-19 were very satisfied with their experience, and even hope eClosings will continue in the future.

Who will use it?

As adoption and utilization grows, O’Neill warned that RON technology may not be the best technology for everyone. He said refinance transactions may be better suited for RON closings.

“Certainly refinance transactions with borrowers that have been added, maybe done a transaction before, they’ve got some familiarity with that loan process,” he said. “I think the electronic RON closings are ideal for that because there’s not a lot of consultation that goes along with them, so the customer experience is a little bit different.”

He said RON transactions are also well suited for remote borrowers, those that are living oversees or in another state or even borrowers with busier schedules or unusual work hours.

“I don’t think it’s going to be as well used with that first-time homebuyer, regardless of their age, regardless of their educational background, they may want to have more of a consultative, face-to-face closing,” O’Neill said.

O’Neill gave an educated guess that if the market seeing adoption rates of about 8% to 10%, it would be a very successful adoption percentage.

“I think if you’re getting upwards of 10% adoption of remote online notary I think that’s going to be very successful because I just don’t see that being a solution for everyone,” he said.

Fannie Mae’s data shows eClosings are still low overall, but rising quickly.

While today we only see about 4% of residential mortgage production involve an eMortgage, that rate is rising rapidly with almost 400% growth year over year.