The coronavirus pandemic has exposed the fragility of the real estate ecosystem, but there is an opportunity to come out of this experience with newfound transparency and cohesiveness that will propel the market into a new way of doing business.
To accomplish this, participants in the mortgage transaction will first need to understand how to improve their processes and work together more closely. This is where the real estate ecosystem comes into play. It is not just about the title company. Getting this done is going to require that the lending, title, settlement services and brokerage communities all come together.
Paradoxically, the upheaval from the pandemic is actually moving the process along, with the real estate space responding with evolutionary adaptation rather than revolutionary change.
This increased evolution is most apparent in the remote notarization space, where it seems new concepts are being offered for consideration at a near-weekly rate.
Understanding remote notarization
For example, the market now has remote ink notarization (RIN) and remote online notarization (RON).
RIN eliminates the need for in-person signings and allows the notary and signer to be in different locations. Notaries witness wet signatures utilizing audio-visual technology, then use wet ink to sign their names later and finally affix their notary seal once the physical documents are received.
With RON, documents are notarized in an electronic form. Here the signer uses an electronic signature, appearing before the notary via online audio-video technology. This makes an all-digital RON the Holy Grail for the mortgage industry’s transition to fully paperless eClosings.
The COVID-19 pandemic has intensified the need to do more remote online notarizations. While we are in this state of affairs, we must keep pushing to see that these advances take hold. Notary legislation currently remains controlled on the state level.
However, national legislation to change that is currently being considered. In March, Senator Kevin Cramer, R-N.D., and Mark Warner, D-Va., introduced legislation that would allow immediate nationwide use of RON in response to the COVID-19 outbreak. Both bills sit in committee review.
As I write this, in the 23 states that have adopted RON statutes, documents that have been executed and notarized remotely and electronically are valid and binding. That is, provided that the notary is located in the state of execution for the applicable party.
These states include Arizona, Florida, Idaho, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wisconsin. On March 5, 2020, Wisconsin enacted the Revised Uniform Law on Notarial Acts, becoming the 23rd state to authorize notaries to perform remote online notarizations.
Though only 23 states have passed a statute, nearly every state legislature has submitted a RON bill for consideration. Even if Federal legislation enabling RON in all 50 states passed tomorrow, people, including many county recorders, are not prepared for it. Many notaries lack training in how to use it and many states would suddenly need to get up to speed utilizing remote notarization technology. The local communities that govern these things will also need to be cooperative.
The good news is that the pandemic is pushing these issues to come to the forefront, with start-up companies developing the capability to do RON transactions through e-notarizations.
Getting the lending community on board
Inside the lending community, however, and particularly in large banks, differing customer needs and complex implementation requirements make this kind of change comparatively difficult. It’s the larger non-bank players, companies like Quicken and loanDepot, that have a better chance of leading the way on these important innovations. Once they get the ball over the goal line, others will be forced to follow.
Quicken is currently the largest non-bank mortgage lender in the world, and it will likely remain there. The institution is capitalizing on several dislocations in the mortgage market, such as questions concerning the direction of Federal rescue plans, irregular liquidity in the wholesale market and the inability of others to evolve during disruptions caused by the pandemic.
Creating a virtual transaction room
This pandemic is also forcing the hand of consumers to become more adept at using online conferencing technology to communicate. We, across the board, are becoming more comfortable using tools like Zoom, Skype and Microsoft Teams, and this is the time for these efficient resources to become permanent.
These tools will make a difference in how effective and efficient our businesses are in communicating with consumers. By making this a part of our lives, it will be easier for our industry to empower people who want transparency without having to be touching a lot of doorknobs, shaking a lot of hands and hugging.
Williston Financial Group has a product called MyHome that allows parties integral to a home sale to come into this digital bubble. It functions like a virtual data room in which the lender, real estate agent, the broker and the consumer can gather, share information and collaborate to move the transaction forward.
MyHome can be leveraged to review the transaction status, sign documents, and load appraisals and inspections, making transactions more efficient and less stressful. By doing so, we take away the anxiety consumers can experience when a lack of communication drags down the entire process.
Maintaining social distancing
What we know is that social distancing is paramount in people’s minds. Even as we transition back to normal, progress in this area will depend on the volume of buyers in a market. The bottom line is that social distancing has become an important focus in our lives, and agents, brokers and lenders are going to have to figure out how to make it work.
Technology will play a huge role going forward. This ranges from the home search process, to opening and managing the escrow process digitally in a secure and efficient manner. In addition, individual privacy and security protocols must be locked down for these changes to succeed, because, the more we use technology, the bigger the risk becomes for cyber fraud and wire transfer fraud.
It is essential that real estate agents become educated in the increasing threat of cybersecurity risks, from phishing scams to identity theft and ransomware attacks. To help, WFG is now expanding the use of WESTprotect, a fraud detection service originally created to help title agents, to the real estate agent community.
The only way RON will be accepted is by proving the validity of the digital verification process. COVID-19 is proving we are all connected from a market risk perspective. Now we must prove we can rise to the challenge together. Even if we are standing six feet apart.
Steve Ozonian is the President and Chief Executive Officer of the Williston Financial Group, a portfolio company of Golden Gate Capital.
