McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NJ, NV, NY, OR, TX, WA)

Given that we’ve been living with COVID-19 for over a year at this point and given that it is not likely that our nation’s vaccine program will eradicate the disease, it is important to start shifting our thinking away from emergency reactive policies into long-term sustainable practices that will acknowledge that there is a new disease, it is endemic and it isn’t going away completely this year^[1]. To that end, we should consider the need to have strong digital signature processes and begin to adopt electronic and remote notarization practices where allowed in the United States. Remote working and reducing in person contacts will be a focus for many employers into the next few years while we work to strengthen the vaccine programs in this country and around the world. Strong and secure electronic signatures and remote notarization programs will provide a safe and efficient tool for a more modern default servicing practice for servicers, law firms, and trustees alike.

eSignatures
Electronic signatures, otherwise known as eSignatures, is a broad category describing a method for signing a document. A digital signature is an eSignature, but it often uses very specific secure technology to validate the identity of the signer. Though eSignatures have been legal for more than 20 years due to the Uniform Electronic Transactions Act (UETA) and the eSign Act, there is a significant move into the world of more secure digital signatures. A digital signature will require the creation of a digital certificate that is secure and verifiable. When the digital certificate is used on a document, it imbeds a code into the document, and it can also encrypt the document to make it secure and incapable of being altered after the digital signature is affixed.

Servicers and firms should be engaging with digital certificate authorities to enroll employees, create and maintain digital signatures and make sure that electronic signatures can be used in the default process. While we are still in a very paper heavy world in foreclosure, this pandemic certainly accelerated certain movements to virtual practice and emergency orders and statutes were promulgated and enacted to allow less paper. These authorities usually charge on a subscription basis. Some are monthly or yearly, others will be bundled with the licensing fee of a particular software such as DocuSign, Adobe, Nuance, and others.

When shopping for digital signature software important considerations should include:

1. Multi-factor authentication of users accessing the tool: some of the more sophisticated tools are utilizing knowledge-based assessments and picking questions from credit reports like Equifax and other credit reporting agencies.
   
   
2. Audit trails contained within the tool: if the audit trail is being stored separate from the electronically signed document, how does the company access the trail and for how long will that service be made available?
   
   
3. Where is the information stored: Allowing the storage of the document and/or the audit trail on your system of choice so that the provider doesn’t have control or extract extra charges for the storage of the signed document.
   
   
4. What information is stored within the audit trail: The audit trail should contain basic information such as the identity, date, time and IP location of the computer where the document was stored. Other important, helpful features would include the amount of time that was spent reviewing the document before it was signed/closed.

In addition to eSign and state UETA laws, when these signatures need to be proven in the context of a foreclosure case if challenged by opposing counsel or even a judge, we can look at Federal Evidence Rule 901 “Authenticating or Identifying Evidence”^[2] as the guiding standard. The standard isn’t high, but it must be explained in a contested case how the signature was validated and the process the employer used to ensure that the employee who is claimed to have signed was the one who executed on behalf of the company. The audit trails that are contained within many of the industry leading programs are strong, are being tested in courts and are successfully defeating claims when one side asserts that they didn’t sign the contract.^[3]

eNotarizations
The growth of state adoption of legal processes has been remarkable during the pandemic. Through a combination of statute, executive order and actual need, the map of the US is now almost fully colored in with coverage for remote online notarization processes^[4] . Federal legislation, namely the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (SECURE Notarization Act)^[5], was proposed in March 2020. The legislation was designed to put a floor into place, allow every US based notary to perform Remote Online Notarial (RON) acts, it would require multi-factor authorization, allow signers outside of the US to utilize RON (thinking military personnel and their families). There hasn’t been forward progress outside of the committee assignment for the bill but given the amount of work Congress has had to do because of the emergency declaration it’s not a surprise. However, this back-burner project is highly likely to re-emerge.

There are some hurdles to full adoption across all states. Many are going to wait until that occurs before implementing the process. I recently obtained my electronic endorsement on my notary license. I have used RON procedures for some documents I needed to notarize utilizing an online platform. It took me less than five minutes to dial up a remote notary utilizing an app and my phone. The platform multi-factor authentication asked about an address I lived at during college, the address of my first house, and other very specific information that connected me to what was likely my credit profile. I was asked to provide front and back copies of my driver’s license, which was likely quickly validated against state driver’s license records and it allowed me to make a correction on the document in real time before the notarial stamp was electronically affixed by the notary. The entire process was documented via video recording and it cost me $40.

States are limiting which RON platforms can be used and each has its own list. Many providers are working to get on those lists and shopping for the platform can be a bit confusing and chaotic at the moment. The state offices who are administering the program are suffering from work from home delays and state employees are trying hard to keep up with the changes in their operations along with the changes in the law. The dust will settle on all of this and in a few years from now we will be doing most of our notarial actions via at a minimum electronic and likely remote means.

For additional information on the standards being employed by loan originators to comply with GSE requirements, check out the Fannie Mae Selling Guide.^[6] These can be a useful guiding post for what to expect as these processes move into the default servicing realm.

Copyright © 2021 USFN. All rights reserved.

Spring 2021 USFN Report

^{[1] How well will vaccines work? The Economist, February 13th-19th 2021}

^{[2] (a) In General. To satisfy the requirement of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is.}

^{[3] IO Moonwalkers, Inc. v. Banc of Am. Merch. Servs., LLC, 258 N.C. App. 618, 814 S.E.2d 583, 2018 N.C. App. LEXIS 314, 2018 WL 1597441 and Moton v. Maplebear Inc., 2016 U.S. Dist. LEXIS 17643, 2016 WL 616343 (S.D.N.Y. Feb. 9, 2016)}

^{[4] https://www.mba.org/audience/state-legislative-and-regulatory-resource-center/remote-online-notarization}

^{[5] Senate Bill: https://www.congress.gov/bill/116th-congress/senate-bill/3533 and House Bill: https://www.congress.gov/bill/116th-congress/house-bill/6364?s=1&r=63}

^{[6] https://selling-guide.fanniemae.com/Selling-Guide/Doing-Business-with-Fannie-Mae/Subpart-A2-Lender-Contract/Chapter-A2-4-Loan-Files-and-Records/Section-A2-4-1-Establishment-Ownership-Retention-/1645975221/A2-4-1-03-Electronic-Records-Signatures-and-Transactions-10-07-2020.htm?SearchType=SF}