Real-estate closings can now take place remotely in most states, a shift that accelerated as much of life moved online during the pandemic. Mortgage lenders are pushing the remaining states to come on board, too, though lawmakers have reservations.
Today, 43 states have laws permanently allowing remote online notarization, which underpins virtual closings, up from 22 at the outset of the pandemic, according to the National Notary Association. Seven remaining states—including California, Connecticut, Georgia, Mississippi and South Carolina—haven’t passed such legislation, although bills are close to becoming law in Delaware, Massachusetts and Washington D.C.
During a remote closing, homebuyers videoconference with lenders, lawyers and notaries who verify identities. Documents are signed electronically.
In a slowing housing market, mortgage lenders say they are prioritizing new tech-enabled processes, including virtual closings.
“It’s really not a technology limitation; we’ve got all the tech now where you can do a fully digital close. It’s really the legal innovation that needs to happen,” said
Brian Woodring,
chief information officer of Detroit-based Rocket Mortgage LLC.
Brian Woodring, CIO of Detroit-based Rocket Mortgage.
Photo:
ISABELLE BOUSQUETTE / THE WALL STREET JOURNAL
California lawmakers have been working to hammer out legislation that would allow remote online notarization. A bill was passed by the state Assembly this year but sticking points remain that are stalling its progress in the state Senate.
Assemblymember Frank Bigelow, a Republican who opposed the bill earlier this year, said stakeholders, including some notary and real-estate organizations, had voiced concerns about several provisions, including one that would subject out-of-state notaries to strict California regulations when performing notarizations for residents of the state.
“While remote online notarizations of documents could benefit California consumers, unfortunately there were several unresolved issues with the measure,” Mr. Bigelow said.
The California Association of Realtors and the California Land Title Association wrote in a letter to members of the California State Assembly that the provision about out-of-state notaries ran “afoul of the long-standing doctrine of interstate recognition” as defined in the U.S. Constitution. Additionally, other groups opposed a provision in the bill they believed made it too easy for anyone to sue an online notarization platform.
“There have been several attempts to come up with some compromise in language that would appease both sides, but right now we’re in a holding pattern until we can come up with something,” said Assemblymember Reggie Jones-Sawyer, a Democrat who introduced the bill.
In Georgia, state Rep. Joseph Gullett, a Republican, has sponsored two bills that would legalize remote online notarization. Both stalled.
Georgia requires a closing attorney to be present for real-estate closings. Mr. Gullett said that has created challenges for legalizing remote online notarization.
Local lawyers fear that big real-estate companies could end up dominating the closing process, from start to finish, without involving any Georgians, he said.
When the bill was on the floor of the state Senate in 2021, Sen. Blake Tillery spoke out against it. Mr. Tillery, a Republican, acknowledged during questioning that he is himself a closing attorney, adding that he didn’t believe that presented a conflict of interest. Mr. Tillery didn’t respond to a request for comment.
Another lawmaker who voted to table the bill, Democratic state Sen. Elena Parent, said, “I felt that there was more to learn about the issue and tabling gave the proponents and opponents time to work on a potential compromise.”
Fraud can be a risk in any real-estate transaction, including those conducted remotely. There has been at least one high-profile instance where fraud occurred in a remote electronic closing.
In 2021, homeowner Mohan Fang sued multiple defendants in Washington state, saying another person posed as her and fraudulently attempted to sell her Seattle-area property for $900,000, according to court documents. The case accused the notary of negligence, stating that during the remote-notarization process, the notary didn’t take proper steps to verify the seller’s identity.
At the federal level, the House in late July passed the Secure Notarization Act, which would allow notaries nationwide to perform remote online notarizations. The bill now moves on to the Senate.
Write to Isabelle Bousquette at Isabelle.Bousquette@wsj.com
Corrections & Amplifications
The surname of Georgia state Rep. Joseph Gullett was misspelled as Gullet in one instance in an earlier version of this article. (Corrected on Aug. 8)
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