Virtual property closures go mainstream, but some states are resisting

Property closings can now take place remotely in most states, a shift that has accelerated as much of life has moved online during the pandemic. Mortgage lenders are also pushing the remaining states to join, though lawmakers have reservations.

Today, 43 states have laws permanently allowing remote online notarization, which underpins virtual closings, up from 22 at the start of the pandemic, according to the National Notary Association. Seven remaining states, including California, Connecticut, Georgia, Mississippi and South Carolina, have not passed such legislation, although the bills are set to become law in Delaware, Massachusetts. and Washington DC.

During a remote closing, home buyers videoconference with lenders, lawyers and notaries who verify identities. Documents are electronically signed.

In a slowing housing market, mortgage lenders say they are prioritizing new technology processes, including virtual closings.

“It’s really not a technological limitation; we now have all the technology to perform a fully digital fence. It’s really legal innovation that needs to happen,” said Brian Woodring, CIO of Detroit-based Rocket Mortgage LLC.

Brian Woodring, CIO of Detroit-based Rocket Mortgage.


Photo:

ISABELLE BOUSQUETTE / THE WALL STREET JOURNAL

California lawmakers have been working to craft legislation that would allow remote online notarization. A bill passed the state assembly this year, but sticking points remain blocking its progress in the state senate.

Assemblyman Frank Bigelow, a Republican who opposed the bill earlier this year, said stakeholders, including some notary and real estate organizations, have raised concerns about several provisions, including one that would subject out-of-state notaries to strict California regulations when performing notarizations for in-state residents.

“While remote online notarizations of documents could benefit California consumers, there were unfortunately several unresolved issues with the measure,” Bigelow said.

The California Association of Realtors and the California Land Title Association wrote in a letter to members of the California State Assembly that the out-of-state notary public provision was “against the doctrine of long date of interstate recognition” as defined in the United States. Constitution. Additionally, other groups objected to a provision of the bill that they said made it too easy for anyone to sue an online notarization platform.

“There have been several attempts to find a compromise in language that would appease both sides, but at the moment we are on hold until we can find something,” Assemblyman Reggie said. Jones-Sawyer, a Democrat who introduced the bill.

In Georgia, State Representative Joseph Gullett, a Republican, sponsored two bills that would legalize remote online notarization. Both stalled.

Georgia requires a closing attorney to be present for real estate closings. Mr Gullet said this has created difficulties in legalizing remote online notarization.

Local lawyers fear that the big real estate companies could end up dominating the closing process, from start to finish, without involving any Georgians, he said.

When the bill was on the floor of the state Senate in 2021, Senator Blake Tillery spoke out against it. Mr. Tillery, a Republican, admitted during questioning that he himself was a closing prosecutor, adding that he did not believe it presented a conflict of interest. Mr. Tillery did not respond to a request for comment.

Another lawmaker who voted to table the bill, Democratic State Senator Elena Parent, said, “I felt there was more to learn about the issue and the filing gave supporters and opponents time to work out a potential compromise.”

Fraud can be a risk in any real estate transaction, including those done remotely. There has been at least one high profile case where fraud has occurred during a remote electronic close.

In 2021, landlord Mohan Fang sued multiple defendants in Washington state, claiming another person impersonated him and fraudulently tried to sell his Seattle-area property for $900,000, documents show. judicial. The case accused the notary of negligence, stating that during the remote notarization process, the notary failed to take appropriate steps to verify the identity of the seller.

At the federal level, the Chamber passed the Secure Notarization Act in late July, which would allow notaries across the country to perform online notarizations remotely. The bill is now going to the Senate.

Write to Isabelle Bousquette at [email protected]

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