New RULONA Amendment Gives More Flexibility
It’s not news to anyone in the title industry that there has been an explosion of interest in remote online notarization (RON) since the start of the COVID-19 pandemic. The past year also saw growing interest in paper alternatives to the RON experience.
Performing a RON requires using electronic documents signed with electronic signatures. That means all parties to the transaction, from the lender to the county recorder, must be willing and able to accept a “native digital” document—a document that has never existed in paper form. It’s clear that the long-term trend of our industry is toward paperless closings, even if there may always be a need for paper in some cases. RON is certainly the future. But, for many, the pandemic put a premium on doing remote closings now. Given the short-term hurdles to achieving digital alignment across the entire real estate industry, remote closings have by necessity included using traditional paper processes.
Since last year, we have seen two principal paper alternatives to RON. The first is commonly called PRON (paper remote online notarization) and the second is known as remote ink-signed notarization (RIN). Both involve the use of pen and paper instead of electronic documents. The main difference between the two is that PRON uses the same fraud-reducing consumer protections as RON, such as third-party multifactor authentication to identify the signer, while RIN lacks such consumer safeguards. Remarkably, in some states RIN does not even require the retention of an audio-video recording of the notarization. Finally, the way the paper documents are physically handled—including how they are transmitted to the notary and when the notary completes the notarial certificate—may vary between PRON and RIN. Performing a proper PRON will result in a single, notarized paper document that conforms to settled notarial law and practice, while RIN often does not.
Thus, PRON is safer and sounder than RIN both for consumers and for businesses (like the title industry) that rely on notarized documents. And by requiring third-party multifactor identity proofing, PRON also aligns with ALTA’s principles for remote notarization.
A New ‘Hip Pocket’ Amendment
The Revised Uniform Law on Notarial Acts (RULONA) was adopted by the Uniform Law Commission (ULC) in 2018 to enable both a fully digital RON as well as PRON. It is now enacted in 17 states and is under consideration in several others. To perform a PRON under RULONA, a notary must meet three requirements relating to how the paper document is handled. First, under §14A(c)(2) a notary must reasonably confirm that the document being notarized is the same document that the remotely located individual signed. Second, §15(a)(1) requires the notary to contemporaneously execute the notarial certificate with the performance of the notarization. Finally, §15(f) requires the notary to securely attach the notarial certificate to the notarized paper document.
Until this year, there were two basic ways to perform a PRON under RULONA to meet these requirements. However, both methods could be a slightly awkward fit for how some real estate settlements are conducted. In response to this concern, the ULC convened a working group in late 2020 to draft a “hip pocket” amendment to RULONA to give state legislatures a thoroughly vetted option to add new flexibility to PRON.
Three Ways to Do a PRON
If a state enacts RULONA along with the “hip pocket” amendment, its notaries will have three different ways to perform a PRON. In each case, the paper document is sent to or printed out by the remotely located individual in advance of the signing session. But from that point forward, how the paper document is handled differs between each method.
Type 1. The first type of PRON works for any kind of notarial act. The notary will get on a webcam, perform multifactor authentication, watch the individual sign the document and perform the notarial act. The key to Type 1 is that the notary complies with §15(a)(1) by completing the notarial certificate on a separate sheet of paper at the time of the signing session. The individual sends the signed document to the notary after the signing session. Once the notary has reasonably confirmed that the received document is what was signed (§14A(c)(2)), the notary will securely attach the notarial certificate to the document (§15(f)). This type of PRON may be slightly awkward for real estate closings where the notarial block is pre-printed in the document and not on a separate page.
Type 2. The second type of PRON works for acknowledgments, which is the kind of notarial act required in most states for deeds, mortgages, powers of attorney, and similar documents. With an acknowledgment, the notary notarizes a document that was previously signed—but how long in the past does not technically matter. The remotely located individual will sign the document in advance and send it to the notary prior to the signing session and performance of the notarial act. All the required steps in the notarization—including multifactor authentication, reasonably confirming what document was signed (§14A(c)(2)), and completing and attaching the notarial certificate (§15(a)(1), (f))—take place at the same time during the signing session. Two basic problems make a Type 2 PRON an uneasy fit for many real estate settlements. First, some closing documents (like affidavits) will contain jurats requiring a verification instead of an acknowledgment. State notarial law may not permit a verification to be performed on a document that was previously signed. Second, if the notary needs to conduct the settlement by walking the remotely located individual through the documents as they are being signed, then two separate webcam sessions are necessary: one for the initial signing session and a second for the notarization after the notary receives the signed documents. This makes coordinating and scheduling a single closing date difficult.
Type 3. The new “hip-pocket” amendment enables Type 3, which is a variation of Type 1. In addition to signing the document, the remotely located individual will also sign a separate unsworn declaration, under penalties of perjury, stating that the document has been remotely notarized. When the notary later receives the signed document and declaration—which must be sent within a specified timeframe (the ULC recommends three days)—the notary can rely on the declaration to comply with §14A(c)(2). That is, the declaration is legally sufficient to confirm that the document received by the notary is the same one that was notarized.
The key to Type 3 is that using a signed declaration permits the notary to override §15(a)(1): The notary may complete the notarial certificate after the signed document is received and may “back-date” the certificate to the date the declaration was signed and the notarial act was performed. In this way, a Type 3 PRON is similar to how documents are handled in some states under RIN.
Other Notable Features
The new amendment to RULONA gives new flexibility to the signing process. It’s designed merely as a safe harbor. It does not create a single mandatory way to perform a PRON. The notary can still perform a PRON under Type 1 or Type 2 and use any other reasonable method to comply with §14A(c)(2) and ensure proper custodianship of the paper document as it’s sent from the signer to the notary. (Examples we’ve seen include having the signer scan and email or fax the signed documents on the day of signing to permit comparison with the wet-ink original, or the use of custom tamper-evident overnight envelopes.)
The amendment also contains one provision unrelated to PRON. Under new subsection (h), the amendment confirms that a notary may administer an oath or affirmation remotely, even if it does not involve a signed document. Prior to the amendment, there was a question about whether a notary could remotely administer an oath at a deposition or similar proceeding because RULONA’s personal appearance requirement (§6) applies only to notarial acts involving signed documents.
Work on the “hip pocket” amendment is complete. It is now officially a part of RULONA. It is currently available for use in any state that has adopted RULONA or is thinking of doing so. The ULC is currently drafting official commentary to accompany the amendment. Formal publication will likely occur later this fall.
Michael O’Neal, vice president of corporate underwriting for First American Title Insurance Co., serves on ALTA’s Digital Closing Work Group. He can be reached at email@example.com.