by Wendy Lee, Esq.

McCalla Raymer Leibert Pierce, LLP

USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY, OR, TX, WA)

One good thing to come out of 2020 is the Washington State Legislature’s adoption of the long-awaited Uniform Electronic Transactions Act (“UETA”). Passed in the form of SB 6028, this law was effective on June 11, 2020, and will allow electronic signatures to replace wet-ink signatures on contract documents. It further provides that any law requiring a record be in writing or a signature be applied will be satisfied if the record is electronic or if the signature is electronically applied to that document. The law further allows an electronic signature to be notarized as long as it complies with the electronic Notary law, which was passed last year in SB 5641, with a delayed effective date of October 1, 2020.  The second good thing to happen in 2020 was the Governor’s Proclamation accelerating the effective date of the electronic Notary law. The original proclamation was set to expire after April 2020, but it has since been extended twice and is now set to expire September 1, 2020.^[1] With both major legal requirements ready and effective, it is now possible in Washington to electronically sign and execute virtually all documents in the foreclosure process at both a servicer and trustee level. 

E-Signatures and Foreclosure in Washington – the foundation has been laid
To have standing to foreclose in Washington under the non judicial foreclosure law (locally known as the Deed of Trust Act), the beneficiary must be the holder of the instrument or document evidencing the obligations secured by the deed of trust.^[2] Furthermore, the trustee must have proof that the beneficiary is the holder of any promissory note in order to proceed to setting a sale. Acceptable proof may be in the form of a declaration by the beneficiary, made under the penalty of perjury stating that the beneficiary is the holder of any promissory note or other obligation.^[3] This document is locally known as the “beneficiary declaration.” The Deed of Trust Act in Washington wasn’t specifically amended by the new electronic signature law, however Washington law, as of June 11, 2020 provides that “A record or signature may not be denied legal effect or enforceability solely because it is in electronic form” and “if a law requires a signature, an electronic signature satisfies the law.”^[4]

Washington’s Uniform Electronic Transactions law is also specifically amending the state’s Uniform Commercial Code (UCC)^[5] declaring that a person having “control of a transferable record is the holder, of the transferable record and has the same rights and defenses as a holder” and “a holder to which a negotiable document of title has been duly negotiated, or a purchaser, respectively” and that “[d]elivery, possession and endorsement are not required to obtain or exercise any of the rights under the subscription.”^[6]

By combining Washington’s UETA (SB 6028) with the state UCC and the Deed of Trust Act, there is a legal basis to allow electronically signed beneficiary declarations, and, using the same foundation, the servicer required “Foreclosure Loss Mitigation Form,” commonly known as the loss mitigation affidavit, which is required to be sent with the Notice of Default,^[7] is capable of being electronically signed. 

• Best practice in this realm is to use a secure electronic database system with password protection, for the electronic signature and electronic record of that signature.This security must be documented and capable of being explained by a corporate witness if a signature is challenged in a contested foreclosure.

E-Notary law becomes effective seven months early due to COVID-19
Washington’s Electronic Notarial Acts law passed April 2019, effective originally on October 1, 2020, but now effective due to Governor Proclamation, is modeled after the Revised Uniform Law on Notarial Acts from 2017.  It will allow a Washington licensed notary, who is authorized to conduct electronic notarial acts, to notarize a document when the signor of the document is not physically present. The following elements are required to comply with this law:

• Notary must have personal knowledge or satisfactory evidence of the identity of the remote individual
  
• Notary must confirm the record before the individual is the same as the record before the notary
• There must be an audio/visual recording of the notarial act
• The notarial certificate must indicate that the notarial act was performed electronically

This revolutionary step in electronic notary law is further supported by the more recently enacted electronic signature law described in the prior section in specifically declaring that an electronic signature may be electronically notarized consistent with SB 5641, tying all these changes in law together. 

Conclusion
While our industry is facing an unprecedented downturn due to moratoria and state law impacts on the foreclosure process, these recent changes in Washington allow us to use the rare downtime in foreclosure processes to enable this new path forward, which will create efficiencies and reduce the spread of germs and more importantly, the COVID-19 virus.

If your company would like help in devising a system to allow electronic signatures or electronic notary processes, please don’t hesitate to contact me at : wendy.lee@mccalla.com.