Notary Legislation: What to Know? Where Do We Stand?

New technologies introduced to the real estate settlement services industry have changed the
traditional process of notarizing documents at a real estate settlement. States are now considering
comprehensive changes to decades-old law concerning the notarization of recordable documents
and making space for electronic notarization and web-based acknowledgments. The changes these
states usher in are varying and significant.

This research paper focuses on the differences between the most important respective state
legislation and understanding the potential impacts each may have on public Notaries, the
acknowledgments we depend upon to create validly executed deeds and mortgages for our
customers and the segments within our industry who depend upon these services as a profession.

We begin with the basics of notarization and the advent of technology in each area and argue that
a compromise balance between emerging technologies and traditional norms of notarization are
necessary to preserve important safeguards that all Notaries provide, while also acknowledging
the efficiencies and advantages of modern technology and how it can improve the real estate
settlement experience for consumers.

What Is E-Notarization?

Electronic notarization or e-notary is essentially the same as a traditional “paper” notarization

except the document being notarized is in digital form, and the Notary signs with an electronic
signature. Depending upon state law, the information in the Notary’s seal may be placed on the
electronic document as a graphic image or other available means. But all other elements of a
traditional, paper notarization remain, including the requirement for the signer to physically appear
before the Notary.

Every state has enacted some form of e-notarization law whether through adoption of the Uniform
Electronic Transfers Act (“UETA”) or by its own state law. All states except Illinois, New York
and Washington have adopted the UETA or a variation of it. New York and Washington permit
e-notarization on land records only.

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What Is E-Recording?

Electronic recording is the process of electronically recording documents by submitting, receiving

and processing documents for recording via the Internet that would otherwise be sent to a county
clerk or recorder’s office by express mail or courier service.

In 2000, the U.S. Congress passed the Electronic Signatures in Global and National Commerce
Act, or ESIGN, facilitating the use of electronic records and electronic signatures for both
interstate and foreign commerce transactions.

The ESIGN Act ensures that contracts entered into electronically relating to any interstate or
foreign commerce transactions are both valid and legal. According to ESIGN, a contract cannot
be denied validity, legal effect, or enforceability solely because it was formed using an electronic
signature or an electronic record. In other words, electronic signatures (e-signatures), as well as
electronic records (e-records), are viewed as equally binding and valid as they would be in
handwritten or paper format.

What Is Webcam Notarization?

E-notarization is not webcam notarization. Similarly, Texas is not yet Virginia. This is important
because both states are currently the legislative standard bearers of the “e-notarization” and “e-
notarization plus webcam notarization” movements in the United States, respectively. More on
those important differences in a moment, but first the aforementioned definition.

Webcam notarizations make use of video and audio technology on the Internet to allow signers to
personally appear before and communicate with the Notary at the time of the notarization. With
traditional notarizations, the signer is in the Notary’s physical presence. In webcam notarizations,
the signer is not in the Notary’s physical presence.

Webcam notarizations have pronounced present and future impacts on the real estate settlement
process. For example, imagine a situation where a U.S. Citizen on vacation in Grenada is trying
to sell their home in the United States but cannot be reached to execute paper documents or who
cannot travel to Barbados where the lone U.S. Embassy or consulate in the Western Caribbean is
located to arrange for a consular notarization. What can you do to accomplish the goal of
settlement?

Webcam notarization provides the opportunity for the parties to use a qualified webcam Notary,
for instance, one from Virginia, who then could provide notarial access to the vacationing seller
via an electronic and video format (i.e., Skype, DocuSign, etc.).

Is such a notarization valid if the property in question is, for argument’s sake, an Ohio property
even though the Notary is in Virginia?

The answer depends on the jurisdiction in which the property is located, which is a problematic
outcome for those interested in the efficiencies provided by webcam notarization. The legal result
is still somewhat illusive and open to interpretation.

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What Do States Say About Webcam Notarization?

To date, only four states – Texas (effective July 1, 2018), Nevada (effective July 1, 2018), Virginia
(2011), Montana (2015) permit webcam notarizations. Ten other states (Colorado, Indiana,
Kentucky, Maryland, Minnesota, Missouri, Nebraska, Ohio, Oklahoma, and Pennsylvania) have
considered bills to expand e-notarization to include webcam notarization, but have not yet passed
them. More bills are on the way in 2018 and beyond.

The history of state intervention on this issue has been back and forth. In the aftermath of the
Virginia bill in 2011, Ohio and Oregon issued consumer alerts on their secretary of state websites
warning Notaries and the public that signers must appear in person before a Notary in order to
have their signatures lawfully notarized. The Ohio legislature has since moved in the direction of
approving webcam notarization, although that effort has not yet resulted in law.

Iowa revised its Notary statutes to prohibit document signers from appearing remotely before an
Iowa notarial officers and defined “personal appearance” as a physical appearance before an Iowa
notarial official. Iowa went even further to require such personal appearance to acts performed
outside of the state as a qualification for acceptance in Iowa.

Georgia took the Iowa example and went in a different, yet sovereign direction. Georgia requires
other jurisdictions to have substantially similar laws as Georgia’s for a notarial act performed in
those jurisdictions to be recognized in Georgia. Since Georgia does not currently permit webcam
notarization, this legislation effectively blocks it from occurring without a legislative repeal of the
current Notary statute.

State Law Concerning the Notarial Act:

States have undisputed authority to qualify applicants for a Notary commission and regulate the
notarial acts performed by Notaries within its borders. Each state has widely dissimilar
qualifications for obtaining a Notary commission. Consequently, the arguments in favor of state
control over the issue are long-standing. One looks to the law of the jurisdiction where a notarial
act is performed to determine what constitutes a valid notarial act.

Because a state like Virginia permits webcam notarization for those who are authorized under
Virginia law to perform such services, the law would presumably stand in any jurisdiction.
Constitutional law dictates that “[f]ull faith and credit shall be given in each state to the public
acts, records, and judicial proceedings of every other state. And the Congress may by general laws
prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect
thereof.”

Therein lies the heart of the current problem. Some states, like Iowa and Georgia, do not appear
to desire the adoption of webcam notarization or be burdened by another state’s adoption of
webcam notarization. Confusion between jurisdictions is the result. And because those states
limit the efficacy of webcam notarization, it is uncertain whether widespread adoption of the
technology itself is currently possible.

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Where Are We Going?

There is a definite financial interest in expanding the reach of webcam notarization, e-notarization
and e-recording to all corners of the real estate settlement services industry. Cottage e-notarization
companies and settlement providers have already prepared the means to deliver the technologies.
In order to accomplish this end, statehouses are considering the necessary legislative changes now.

There are two main notary legislation models being promoted in statehouses around the United
States. The first is the 2011 Virginia model which can be classified as the most expansive model
in existence. The Virginia model not only permits e-notarization and webcam notarization, but it
also creates a pathway to permit Virginia Notaries to notarize documents even when the Notary is
not present in Virginia.

The second model is the 2018 Texas model. It is classified as the next most expansive e-
notarization legislative model and does differ slightly from Virginia’s approach. Both Texas and
Virginia make the following regulations regarding e-notarization and webcam notarization:

 Must be licensed as a notary prior to notarizing an online document. However, each

state requires a separate commission to perform online notarizations.
 An individual may personally appear before a notarial officer by interactive two-
way audio and video communication but notarial acts are limited to electronic
records. Paper records are prohibited (Montana permits paper records to be
notarized electronically).
 Must identify the person creating online signature by: a) personal knowledge, or b)
remote presentation of gov’t issued ID, credential analysis of the ID, and identity
proofing the person (asking knowledge based questions). In Virginia finger print or
facial scanners may be used.
 Requires online notary to take reasonable steps to ensure that the two-way video
and audio communication is secure.
 Signatory does not have to be physically located in the state to execute the
documents.
 Notary must keep its online signature secure and under his/her exclusive control.
 Notary signature on the notarized document must be capable of independent
verification and renders any subsequent changes evident.
 Notary must keep a secure electronic record of notarized electronic documents
performed under audio and video communication. Record must be maintained for
5 years.

The Texas model differs from Virginia in that Texas:

 Requires the certificate for an online notarial act to indicate that the appearance was
accomplished using audio-video communication.
 Sets a maximum charge of $25.
 Is silent as to requiring or not requiring the Notary to be personally located in the
jurisdiction to notarize a document.

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The American Land Title Association (ALTA) and the Mortgage Bankers Association (MBA)
have each collaborated on combined model legislation that most closely resembles the 2018 Texas
model. Both assert that “[webcam] notarizations are seen as a valuable consumer benefit, and
the real estate finance industry would like to be able to offer them to consumers... [b]oth MBA and
ALTA believe obstacles that might inhibit the use of remote online notary should be removed for
those who want to use this type of service and more common standards should be accepted.”

The difference between the ALTA/MBA model and the Texas model are the following:

 Reference to future standards developed by the Mortgage Industry Standards

Maintenance Organization (MISMO) to aid Secretaries of State with expert input.
 Influence of the National Association of Secretaries of State (NASS) who
participated in stakeholder meetings with ALTA and MBA.
 Federal policy maker input.
 Creates “paper out” language that provides legal certainty to recording “papered
out” copies of digital real estate records.

It is clear from reading ALTA and MBA guidance on this subject that the industry has expressed
a definite preference to move towards accepting remote online notarization (webcam) and e-
notarization as standards of practice for all real estate settlement providers. While not requiring
such a move, the financial incentives will move the market in that direction organically. ALTA
and MBA do not express an explicit preference away from traditional “paper” settlements, but one
is not challenged to read the handwriting on the wall for one.

What Is NAILTA’s Position on E-Notarization and Webcam Notarization?

The continued growth and proliferation of e-notarization and webcam notarization is inevitable.
There are distinct benefits to expanding state laws on Notaries and acknowledgment to include the
availability of webcam notarization, including consumer cost efficiencies and settlement
conveniences. Our sources of business – referral parties such as lenders, mortgage companies,
real estate firms, and attorneys – expect us to implement these technologies in order to remain
competitive.

While independent land title agents are certainly one of the main providers of real estate settlement
services, we do not profess to be the only such provider or the most important on this issue. There
are tens of thousands of Notaries nationwide who will be impacted, both positively and negatively,
by e-notarization and webcam notarization expansion.

We know these individuals. We work with them. We hire them. Naturally, we have concerns for
them. Some Notaries will not be able to offer expanded electronic notary services due to cost and
experience factors. Those that cannot offer the expanded services will resist the change. While
there are institutional Darwinism measures present in every business segment, especially with the
advent of market-disrupting technologies, we argue that they should be dealt with in a way that
minimizes systemic risk to the real estate settlement services industry as a whole.

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Before wholesale adoption of electronic notarization plus webcam notarization takes place, we
support the initiatives of the National Notary Association, the American Association of
Notaries and the various state Notary associations to control the growth of these notarization
models for the benefit of their members. We would defer to them, in particular, as to the best
course of action as it directly impacts their membership. Having reviewed their position papers
on the subject, we believe they share our concerns about widespread adoption without careful
consideration of economic impacts and security concerns.

NAILTA supports an expanded e-notarization model law that, in line with existing uniform
guidance such as the Revised Uniform Law on Notarial Acts (RULONA) would include
webcam notarization provisions under improved state guidance.

The main concerns for NAILTA members are twofold. First, how do we prevent the increased
fraud risk that comes with any cyber-related or cyber-transmitted act? Second, how do we prevent
the technology from being used to disrupt our members from the real estate settlement process?

To address the first point, NAILTA members support model e-notarization and webcam
notarization legislation that includes:

 Expanded notarial certificates that provide full electronic (scanned) copies of the signor’s
identification presented to the Notary at the settlement.
 Expanded notarial certificates that provide full electronic (scanned) copies of the Notary’s
identification.
 Mandatory filing of such an expanded certificate with any e-recorded document.
 Protection of a consumer’s option to select “paper” real estate settlements without penalty
to the consumer or settlement provider.
 Acceptable and uniform cybersecurity criteria for applicable electronic notarization and
webcam-based notarization systems.
 Separate and additional training, application and approval of online Notaries through
processes instituted by state legislation and implemented by the respective Secretary of
State.

To address the second point, NAILTA members support legislation that would encourage small
business regulatory impact analysis for each of the real estate settlement service industries
impacted by potential legislation. These forms of analysis already exist in all states as a part of
ordinary lawmaking, but rarely contemplate the interconnected nature of real estate settlement
providers across the pool of actors in their analysis or, in other cases, is not performed.

Notaries help close real estate mortgage loans. They work directly with title agents and escrow
agents. They have direct economic contact with lender, mortgage broker, realtor, title agent,
attorney and consumer alike. A cost increase to the Notary will be shared throughout that chain.
If the increase is dramatic, this will ripple through the entire community. If too great, it may lead
providers to leave the marketplace, thereby increasing costs for consumers. This needs to be
carefully analyzed to protect small business operators. To the extent there are economic impacts
to small business owners, those should be mitigated at the discretion of state legislators in

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consultation with the real estate settlement services industry, and particularly with the notary
associations themselves.

The problem with enhanced notarization legislation is not a direct challenge to the specific short-
term future of independent land title agents, but it suggests a template for future market disruptive
technologies that could challenge us for survival. Blockchain technology is fast approaching our
marketplace. Like e-notarization and webcam notarization it promises to change the methods of
our providers. It also threatens the very existence of title insurance. Following the lead of
enhanced notary legislation, blockchain could unemploy a number or even an entire business
sector in the insurance industry, even while it provides certain benefits and efficiencies to our
product.

About NAILTA:

The National Association of Independent Land Title Agents (NAILTA) is a non-profit trade
association that represents the interests of independent title insurance agents and independent real
estate settlement professionals from across the United States. It was created by independent real
estate settlement professionals to further the agenda of small business owners from within the title
insurance, abstracting, surveying, and real estate community who lack representation at local, state
and national levels.

To contact NAILTA, please visit our website at www.nailta.org.