E-Loans and You

By Kristi Waterworth

We all like to talk about how terrifying that a rise in interest rates can be for a potential borrower, but there’s something a lot more horrifying that we don’t usually talk about: mortgage paperwork. Yeah, I said it. All those piles of pulp, some in multiples, can really add up. That’s why when the idea of e-mortgages was first floated, Realtors, mortgage pros and closers were so very excited.

Despite people within the industry embracing the idea hard, for the most part e-mortgages are still not a thing. The reasons for this are multiple, but the most insidious come down to a lack of guidance on how to notarize electronic documents. Yeah. It’s always the last thing you might think that holds up the process.

Notary Laws and e-Documents

According to an op-ed that ran in HousingWire’s ReWired section, notarial laws are a big part of the issue holding up e-loans. The author claims that most of the state legislatures in the US haven’t reviewed their notary laws for over 50 years, when the world was a very different place. This means that they were conceived before it was possible to video conference or telecommute, and definitely before anyone might want to have digital paperwork.

State laws that request parties to “appear” before a notary are points of serious contention. In the 60’s and 70’s, “appear” was really just one thing: showing up, skin and all. Today, though, you can “appear” at your mom’s house in Delaware from the comfort of your kitchen in Florida. This is the way law works, it’s all subtleties and shades.

A Lot is Resting on the Concept “Appear”

Currently, state-level legislatures are studying the question of what exactly “appear” means. They’re also examining the requirement that notaries must reside within the state they will be notarizing in. It’s an interesting question, for a couple of reasons, really.

First, obviously on something like a mortgage, you want to be sure you have the right person signing the papers. It’s kind of a big deal. But I always wondered why that end wasn’t handled primarily at the bank and a rep sent to ensure the right person got the right loan. Closing day is incredibly nerve-wracking, even for a seasoned Realtor. Maybe especially for a Realtor, since you know all manner of things that can go wrong.

The notary was the one thing that was never an issue, especially on the buyer’s side.

With e-docs, I suppose it’s conceivable that someone would try to force your hand by pretending to be you and signing a note. But they would need fake ID, they’d have to have met with the bank on multiple occasions as you and they’d have to bring a fat check as you. I don’t know anybody who would go that far for a prank.

Maybe my friends are just lame.

The second interesting item here, to me at least, is that this is even a question, really. Not only have real estate contracts, in many markets, gone primarily electronic, a few lenders are allowing for e-Docs for much of the transaction. Allowing virtual notary, with requirements like two-way video, just makes sense. It’s tragic that this is the stumbling block between the mortgage industry and the future.

What Does the Closing of the Future Hold?

Although the real estate industry has long pushed ahead with young technology, banks and title companies have largely resisted change. Things work just fine, thank you and we’re gonna take that as good enough. The thing is that Realtors have been demanding this kind of technology since I was an agent, and I’ve been retired for a full decade.

That means it’s about time that banks, insurers and closers are going to come around to the concept of virtual documents and remote notaries. To be fair, they have a different set of laws that govern them, some that are very specific and dramatic. Realtors have rules, too, but they bind the hands less somehow.

It does seem that a lot of states are finally taking the e-notary and e-document situation seriously and giving it real attention. By the time you’re ready to close on your next house, you may well get to close electronically, or at least have the option. I, for one, would do it in a heart beat. Those stacks and stacks of paper give me nightmares, even now!