By Jeffrey S. Leung, Senior Vice President, National Claims Manager, WFG National Title Insurance Company
“E-I-E-I OOOO.” A song that we all know well and that is fully engrained in the mysteries of our mind. So how is this relevant to the title industry? No, it does not have to do with farm land.
My focus here is that “E-I” is now a large part of our vernacular. Today’s functionality, whether at home or at work, relies heavily on the “E-”lectronics and the “I” world created by Apple®. Ah, the E-I world. This isn’t new to us. In the last 40+ years we have seen the introduction of the modern day fax machine, cellular telephones, and new inventions and breakthroughs with digital technology. Business transactions, which in our “little” world are real estate transactions, are conducted without the physical presence of the parties. Forms and documents, monetary transfers, property inspections, recordings, closings, etc., are transformed and transferred over the cloud at a touch or stroke of a keyboard, mouse, touch pad, smartphone, or other like devices.
The advent, or should I say, the acceptance of e-notarization is gaining popularity. The use of e-notarization will not change the course of a real estate transaction. It will require greater attention to detail. Today, we deposit checks by snapping a picture of the check and submitting them electronically; closings are conducted with buyers and sellers never setting foot in an escrow or title office; and electronic recordings are completed without the original wet signature document being submitted to the county recorder. The fact is, closings and recordings do not take place until the documents requiring notarized signatures are obtained.
There are currently 29 states which permit the use of some form of e-notarizations, but only a handful permit notarization where the notary and the party signing are not in the physical presence of one another (i.e. the latter allows for the notary and the signors to be connected via webcams). Standards and requirements are being implemented to ensure the very purpose of notarization – that the person signing is who they say they are, and to comply with state statutes where the document is being recorded are met. (As a side note, there has been a rise in the use of the “Hague Apostille.” This is utilized by individuals who sign documents internationally, and it is then accepted as being properly notarized. Each state has its own requirements. When confronted with an apostille, contact your local underwriter to confirm compliance.)
From a claims standpoint, the focus of this article is not the requirements for each state. It’s recognizing that the intricacies and details of a real estate transaction must work together so that all the pieces to the puzzle are accounted for. The claims department receives numerous claims involving notary issues, such as – incomplete or information missing (e.g., missing date) in notary acknowledgments, incorrect jurat forms, lack of all required parties with notarized signatures, illegible information, missing or expired notary stamps. These are just some of the examples that surface. WFG has paid hundreds of thousands in losses due to notary errors which have resulted in voided sales and finance transactions. The misconception is that a notary error will not be fatal. One reason for this misconception, is that in some states, a notary error is deemed valid and enforceable after the passage of a given period of time, while in others there is no such law. A common example is when a notary mistakenly acknowledges only one of the two borrowers who signed the security instrument. In this instance, the error may be discovered only during the borrower’s bankruptcy and eventually the secured loan is deemed void and unenforceable. All due to what may be one of the more simple tasks of the transaction.
Attention to every aspect of the real estate transaction is not only necessary, it’s critical to the very transactions we insure. That multi-million transaction will result in a multi-million dollar loss by the mere absence of information or mistake in the notary acknowledgement/jurat. Knowing the requirements for e-notarization will allow each of you to know the flags that can or will arise to a title insurance claim, or prevent a claim from ever arising in the first place.
For information on WFG’s notary policy see: WFG Internal External Public Signing Services Policy and Procedures.
By Jeffrey S. Leung, Senior Vice President, National Claims Manager, WFG National Title Insurance Company
