e-Closings

At the risk of creating some anxiety, I am tackling a subject this month that is less relevant today than it will be in the near future.  e-Closings are a source of anxiety, fear and consternation for us real estate practitioners.  It represents a significant change in how we have always conducted business.  Some of you have already begun recording documents electronically.  In the future, I dare say, virtually everything will be recorded in this manner.  Like it or not, our society has become more and more dependent on the internet.   We consume our music on the internet.  We read books electronically.  People are using on-line retailers to order clothes, electronics, foods, cars and even to find dates.  We are in the digital age.  e-Closings and digital signing services are in our future.  Our first true e-Closing was conducted in Hickory last Fall.  Click HERE to read more about e-Closings in a publication produced by our friends at NATIC.

The related topic that I want to hyperfocus on is the notarization of electronic documents.  This one aspect of e-Closings is arguably the most important, as it has the potential to truly disrupt our businesses.  This issue has been discussed extensively by the members of RELANC, including, but not limited to, at our Annual Meeting in February.  (Shameless plug for RELANC.  JOIN RELANC! www.relanc.com).  North Carolina has an e-Notary Act and permits e-notarizations.  However, what has not changed in North Carolina is the requirement for presence.  The law requires that all acknowledgments, whether electronic or traditional, must occur after the signer of the document executes it in the presence of the notary.  The rationale behind that requirement is that it puts some limitations on potential fraud so that we can rely on the documents filed in our recording systems.  That rationale is no less true today.  I have personally discussed this issue with a current legislator and a high ranking official at the Secretary of State’s Office and both officials did not see this requirement changing anytime soon.  Having said that, there is currently one state, Virginia, where a Notary can affix an e-acknowledgment to a document even though the e-notary is not in the same room as the signer of the document.  (There is also a western state, Montana or one of the Dakotas, I forget which, that permits the same, however there has to be a nexus to the State.)  So, in Virginia, the e-notary can acknowledge a document where the e-notary is physically located in Virginia, while the borrower is in, let’s say, the Bahamas.  There is some serious questions about whether that acknowledgment passes legal muster in North Carolina where physical presence of the notary is a requirement for a valid acknowledgment.  There are movements afoot in other States, Texas is one of them, that will, if passed into law, adopt the more liberal standards of Virginia.  The outfall of this is, that in those States, e-acknowledgments can be made out of a central office no matter where the borrowers are located within the State.  This has the potential to be very disruptive to the way closings are currently conducted.

I hope that I have not depressed you too much.  My goal with these articles is to be informative.  We can all make a choice to stick our heads in the sand and pretend that it’s not happening, or we can move forward with our eyes wide open and start embracing the changes and challenges that are surely coming.  If you have any questions, please feel free to reach out to me.

sb