Digital Documents in the US E-Signature, E-Notarization, Remote Notarization Presentation for Advanced Training of Digital Legal Documents at the University of Houston November 14, 2018 Houston, TX Ozie H. Stallworth

Its All About the eMortgage eSignature eNotarization eRecording eMortgage

Consider the legal infrastructure needed for eMortgages

Electronic Signatures An electronic sound, symbol, or process, attached to or logically associated with a record (contract) and executed or adopted by a person with the intent to sign the record. Esignature Act and Uniform Electronic Transactions Act

Uniform Electronic Transactions Act Uniform Law Commission Uniform Act Adopted in 47 States (3 states have not - New York, Washington, Illinois) N.C. Department of the Secretary of State

Uniform Electronic Transactions Act Legal recognition of eRecords, eSignatures, and electronic contracts. A record or signature may not be denied legal effect A contract may not be denied legal effect or enforceability Satisfies the law requiring a record to be in writing satisfies the law requiring a signature N.C. Department of the Secretary of State

Common Electronic Signatures Digitized Signature Tiff Image Click Through Digital Certificate N.C. Department of the Secretary of State

Common Electronic Signatures (continued) Electronic “Check Box” “I agree to accept” buttons Holographic Signature / Signature Pad N.C. Department of the Secretary of State

Use Cases for eSignatures Retail Business to Business Government Federal – tax returns State – filings, applications Banking – Online services Mortgage – Loan origination N.C. Department of the Secretary of State

Electronic Notarization An official act by an electronic notary public that involves electronic documents. N.C.G.S. §10B-101(3).

Organizations Defining eNotary July 2016 December 2017 Summer 2018 January 2017 February 2018

Common Elements of All eNotarization Electronic Document Electronic Signature Electronic Notary Signature and Seal Electronic Notary Certificate N.C. Department of the Secretary of State

Disparate Elements of eNotarization Personal appearance Positive identification Jurisdiction N.C. Department of the Secretary of State

Electronic Notarization VS Remote Notarization

In-Person eNotarization Physical appearance before the eNotary Traditional methods if identification Bound by jurisdiction Total Electronic process Time honored and trusted process across all parties

Remote Notarization Knowledge based authentication Video or Webcam appearance Cross border jurisdiction Paper documents notarized Unconventional processes

“E” and “R” Regulation 30 Allow eNotarization DC RI 21 Regulates “e” notarization only 1 Regulates “r” notarization only 9 Regulates both “e” and “r” notarization 30 Allow eNotarization

“E” and “R” Bills (2017-2018) DC RI This provides insight into the appitite for electronic and remote notarization in the United States. In 2017/18 there were: 10 eOnly Bills introduced 11 Bills that included e & R 2 that introduced separate bills 10 “e” only bills “r” only bill 11 Bills with both “e” and “r” 2 Separate “e” and “r” bills

Electronic Recording It’s still recording, only the medium and delivery mechanism has changed.

N.C. Department of the Secretary of State Uniform Real Property Electronic Recording Act (URPERA) Recognized eDocuments as equivalent to an original eSignatures satisfies any signature requirement for recordable documents Recognized authenticity of an electronically notarized document Authorized the Secretary of State to develop Rules through an appointed Council (Electronic Recording Council) N.C. Department of the Secretary of State

eRecording Stats 1862 U.S. Counties eRecording 33 States enacted URPERA

electronic mortgage closings

Its All About the eMortgage eSignature eNotarization eRecording eMortgage

eMortgage Definition An eMortgage is a mortgage loan where the critical loan documentation, specifically the promissory note (eNote), is created electronically, executed electronically, transferred electronically and ultimately stored electronically. An “eClosing” produces an “eMortgage” only if the promissory note is signed electronically. - Fannie Mae eClosings and eMortgages (eNotes) FAQ, 11/2015

Components of eClosing eNote Mismo 3.3 smart doc eClosing Solution System that allows closing docs to be signed, notarized and delivered electronically eVault Secured mechanism to store the eNote

Why North Carolina is the Leader Legal Infrastructure Counties are prepared Statewide ecommerce initiative eClosing Mortgage Closings in NC 101 White Paper Benefits of eClosing (State, consumers, industry) How to transition to eClosing (Lenders, Attorneys, Realtors) Legal Framework Future issues and Contingency Plans

Electronic Mortgage Closings North State Bank paved the way in N.C. Quicken Loan pilot in N.C. Wells Fargo to purchase enotes U.S. Treasury Department Report Encouraged eNotarization & eMortgages N.C. Electronic Mortgage Closing 101 – A White Paper N.C. Department of the Secretary of State

Important “e” Terms Hybrid eClosing: The closing process where all the lender documents are electronically eSigned and notary and recordable documents are papered out and “wet” ink signed. eClosing: An industry term for the completely paperless process where all closing documents are electronically eSigned, eNotarized, eRegistered, eDelivered and eStored. Streamline eClosing: Ability to click sign all non-notary documents in advance of closing and then eSign and eNotarize all the rest day of closing. iClose is a web-based closing system offered by one settlement services provider. With this system, the borrower physically appears before a Notary to sign a limited power of attorney (LPOA) in paper form. The LPOA allows a representative of the title company or lender to sign the borrower’s mortgage documents. Typically, the borrower will then log onto the iClose system to review and approve the loan documents using an electronic signature. The title company or lender representative signs all paper documents in the closing package, including the Mortgage or Deed of Trust, and a title company or lender Notary notarizes the representative’s signature.

What are industry factors driving change/adoption CFPB Consumer Complaint DB – Consumer Good Where the consumers are Ensuring a legally compliant, replicable and verifiable process eVault date & time stamp audit trail CFPB Compliance Management System, (CMS) Electronic Evidence - proof of compliance

How is it a better process? Better validation & authentication of all parties in the transaction Maintain complete end to end control of the mortgage process Eliminates data and document integrity errors and omissions More efficient, transparent and auditable process Better consumer experience and education, (Empowered consumer) Cannot produce a non-compliant document No missing data, signatures, auto compliance check Maintain electronic record/evidence for life of loan (eVault) More efficient secondary market execution No more trailing documents Fund faster with fewer exceptions

What are barriers to adoption? Still not a lot of investors buying eNotes (no take-out) GinnieMae finally considering, (FHA/VA) Federal Home Loan Bank not participating Counties still need “e” education on legality/misconceptions regarding process Cost to implement no longer an issue, (SaaS version)

eSignature, eNotarization, eClosing Video

eClosing Video with eNotarization Video at: https://youtu.be/eVxCcnf3eNM

Remote Notarization Demo Video at: https://youtu.be/BG1u1k_1OtM

Questions? For additional questions on eNotarization contact: Ozie Stallworth Director of Electronic Notarization and Notary Enforcement N.C. Department of Secretary of State 919-807-2295 ostallworth@sosnc.com