In November 2019, ALTA released survey results which indicated that only 14% of title companies offered some form of digital closing. The survey found that 42% of respondents had no planned timeline to offer digital closings.
Just 5 months later, in response to social distancing measures mandated during COVID-19, timelines toward digital closings have rapidly accelerated. According to survey data from Qualia taken shortly after COVID-19 shelter-at-home orders took place, 24% of title & escrow businesses are currently using remote online notarization (RON) eClosings. Meanwhile, 63% of title & escrow businesses are considering the use of RON. This is a big leap considering RON eClosings require the most lender and underwriter coordination compared to other digital eClosings such as hybrid eClosings and in-person digital eClosings.
The obstacles title & escrow businesses face to enable fully-remote eClosings are slowly dissolving however as lenders, underwriters, and county recorder offices accelerate their timelines to enable their portion of the RON puzzle. Lenders are more rapidly adopting eNotes, county recorder offices are implementing technology for e-recordings, and underwriters are updating their policies with temporary guidance for RON transactions.
More lenders taking steps toward RON eClosings
Historically, mortgage lenders have been slow to adopt eNotes (electronic promissory notes) due to the challenges associated with selling RON transactions to aggregators, government sponsored enterprises (GSEs), and elsewhere in the secondary market. Additionally, eNote implementation required process changes and technological investment which further deterred mortgage lenders from adoption.
The lack of eNote movement started to shift in early 2019, as evidenced by an explosion in eNote registration. MERS data shows that eNote registration during the first quarter of 2019 exceeded the total number of eNotes registered for all of 2018. This shift may have been influenced by decisions from major aggregators such as Wells Fargo, which announced in late 2018 that it would begin buying eNotes.
Although eNote adoption trended upward in 2019, overall eNote registration was still relatively low, due to a lack of uniform acceptance criteria from secondary market participants. While both Fannie Mae and Freddie Mac accept eNotes, Ginnie Mae and the Federal Home Loan Banks (FHLBs) are still behind. However, both Ginnie Mae and the FHLBs are taking strides toward eNote acceptance. Ginnie Mae announced in December 2019 that it is running a pilot program for eNotes and the Federal Home Loan Banks began developing a solution to accept eNotes in January of this year.
Recent data from the Mortgage Electronic Registry Systems (MERS) shows a sharp acceleration of eNote registration in March 2020. This is likely due to a shift that made eNotes a necessity overnight as COVID-19 shut down or greatly limited all person-to-person contact near the end of the month.
Today, in light of COVID-19 and the need for social distancing, the GSEs are becoming more receptive to RON transactions. Recently GSEs Fannie Mae and Freddie Mac announced modifications to single family selling guides which include relaxed requirements for RON. Fannie provided a list of more than 40 states where lenders may sell loans closed with RON.
Most recently, Fannie Mae and Freddie Mac also issued guidance allowing temporary flexibility for closings involving RIN. (A remote closing in which a signer wet ink signs documents with a notary over FaceTime, Zoom, Skype, or other similar services and then mails the physical documents for notarization.) In states which have recognized RIN as a viable closing option during COVID-19, Fannie Mae and Freddie Mac will accept these transactions.
Underwriters adapting policies to insure RON and RIN transactions
In the past, underwriter acceptance of RON transactions varied depending on state legislation and other variables such as the ability to record RON transactions on a county level. Today, as COVID-19 and the need for social distancing brings a level of urgency to fully-remote closings, many underwriters are issuing temporary guidance for RON.
The new policies expand coverage of RON transactions to states where RON is utilized. This includes states that have issued RON legislation or temporary legislation in light of COVID-19. For example, during a recent Remote Qualia Live event, a representative from American Title Guarantee Fund (ATGF) noted that in the event that a RON transaction can be completed, ATGF will insure those transactions in all states in which it underwrites.
During a separate Remote Qualia Live event, a representative from AmTrust noted that in instances where RON is temporarily permissible or pending adoption, Amtrust is issuing guidance on a case-by-case basis.
While most of the underwriter response has been to issue temporary acceptance, the events surrounding COVID-19 may leave a lasting impact on title insurers who may begin to adjust their stance on RON transactions—especially as RON legislation accelerates across the nation.
County recorder offices implementing e-recording technology
One of the major pieces of the RON puzzle is the ability of a county recorder office to e-record documents. The availability of e-recording varies dramatically across US counties; however, the tally of county offices turning on e-recording ticks upward weekly.
As temporary legislation and permanent RON legislation take hold across more states, more and more county recorder offices are realizing the need to update their systems for e-recording. The Property Records Industry Association’s (PRIA) latest data (March 31, 2020) indicates that 2,114 counties now e-record — that’s up from PRIA’s count in summer 2019 which was just under 2,000 counties.
The increasing availability of e-recording combined with lender and underwriter acceptance of RON is driving many title & escrow businesses to start e-recording. Simplifile reported that more than 2,400 submitters were added in March 2020 alone.
The future looks bright for RON
Across all parts of the real estate and home purchase ecosystem, businesses have adopted new processes and technology at unprecedented levels to deliver touchless closings and move toward RON eClosings where possible.
COVID-19 has accelerated the need for technology and RON solutions like never before, and while the outbreak and need for social distancing will eventually pass, the innovative strides the industry has taken will remain. As one of Qualia’s title users (who adopted digital closing processes during COVID-19) noted, when the need for social distancing passes, her team plans to continue to leverage digital closing technology and low-touch processes well into the future.