Hillary S. Vauhn

Published October 2021

Real estate law is often the last bastion of resistance to technology.  Enter 2020—the year we could do virtually nothing but almost anything virtually—and the real estate industry finally heaved a heavy sigh and succumbed to the pressures of the digital age.

Anyone involved in transactional work is likely familiar with some form of electronic signings, whether exchanging copies of wet-signed documents by fax or e-mail or using cloud-based signing platforms to provide a digital signature.  In Idaho, most types of electronically signed or transmitted documents have been legally enforceable since the adoption of the Uniform Electronic Transactions Act (“UETA”) in 2000.[1]  

Many real estate transactions have included electronically executed documents for portions of the transaction.  However, documents affecting title, conveying an interest in property, and security instruments for real estate financing transactions have long been the holdouts since these documents required an original “wet” signature and notary certificate in order to be recorded in the county records.

Why does it matter if some documents require original signatures and notary acknowledgements?  The most obvious answer is time; it takes more time on the part of the person signing, the notary, and often for delivery of the document than electronically executed documents, and all that time needs to be built into a transaction.  The tricky dance with traveling signatories (especially when traveling internationally) has always been problematic.  But COVID-19 presented a new challenge:  the added risk of being in close physical proximity with people you don’t know, exchanging objects that everyone is touching in the middle of a raging, viral pandemic.  Virtual transactions became a real-life necessity.

How Did We Get Here?

Quite a few things changed in a relatively short time frame, and all prior to the pandemic.  In 2016, the Idaho Secretary of State sought to increase security measures for notary stamps and certificates and bring Idaho’s notary laws up to date with standardized notary laws being adopted across the nation.  The Secretary of State introduced, and the Idaho Legislature ultimately adopted, the Revised Uniform Law on Notarial Acts (“RULONA”), which took effect July 1, 2017.[2] 

The original version of RULONA adopted in Idaho included provision for electronic notarization, or “e-notary.”[3]  The process for electronic notarization is the same as traditional notarization in that the signer still executes the document in front of the notary as a witness; the only difference is that the signer signs and the notary completes the certificate and stamp by electronic means instead of manually with ink.  This process is slightly more streamlined, but still requires the signer to “sign” in the presence of the notary.  While e-notary certainly made some routine attestations more convenient, its impact on transactions was still limited because of the requirement of personal appearance.

“Any notary that would like to use RON must obtain approval from the Idaho Secretary of State for any platform (or platforms) that the notary will use for RON communications.”

Enter RON.[4]  While Idaho was in the process of vetting and passing RULONA, some states were getting truly scandalous and experimenting with technology that obviated the need for the signer to physically appear and sign in front of the notary.  The term “remote online notarization” (“RON”) refers to a notarial act where the signer and the notary are physically remote from each other and the parties use simultaneous audio-visual communications technology that allows the signer to “appear” in front of the notary when executing the document.  This process includes the use of e-notary because the parties execute and notarize the document using an electronic signature and stamp but goes one step further by modifying the requirement that the signatory be physically present before the notary when signing.

The first iterations of RON legislation were scattershot and only adopted in a few states with wildly different requirements and results.  In response, the Mortgage Bankers Association (“MBA”) and the American Land Title Association (“ALTA”) teamed up to develop the MBA-ALTA Model Legislation for Remote Online Notarization, promulgated in 2018, with the intent of standardizing the process and legal framework nationwide.[5]  Shortly thereafter, the Uniform Laws Commission issued an amendment to RULONA that included RON provisions that were substantively similar to the MBA-ALTA Model Legislation but worked within the existing RULONA terminology and framework that had already been adopted in a number of states, including Idaho.

Separate from these initiatives, but at the same time that many of these changes were being considered in Idaho, industry groups were pushing for widespread adoption of e-recording by county recorders throughout Idaho.[6] E-recording allows for use of an electronic platform to record documents directly with the county recorder from a remote location instead of physically delivering the original documents to the recorder’s or clerk’s office.  This technology drastically reduced transaction times by cutting out deliveries to the county.  However, because the party submitting the instrument for recording still had to have to have a wet-signed original in-hand under the existing notary requirements, the process still wasn’t as efficient as it could be.

It was somewhat serendipitous that the standardization and acceptance of the model RON bills intersected with the campaign to expand the availability of e-recording statewide.  These innovations are really two sides of the same coin—one allows for electronic creation of an instrument and the other allows the instrument be memorialized in the official records by electronic submission, but both are intended to modernize and streamline these processes for the convenience of the consumer.  

By the time Idaho adopted the 2018 RULONA amendment incorporating the RON provisions,[7] every county in Idaho accepted documents for recording through an electronic platform.  That makes Idaho one of only a handful of states where documents can be executed, notarized, and recorded electronically in every county in the state. 

How Does RON Work?

It’s a little more involved than your average Zoom happy hour, and for good reason.  First, any notary using RON communications will still need to satisfy all of the requirements of RULONA except for the physical presence of the signer, which means that the notary must still verify the identity of the signer, confirm the document being signed, witness the electronic signature, and add the notary’s electronic seal.  Second, since the notary process requires some exchange of non-public personal information and the parties are communicating via audio-video platform, a few additional precautions are necessary to safeguard information and prevent fraud.

There are now a number of different vendors providing platforms specifically for, or that have been expanded to facilitate, RON services.  Any notary that would like to use RON must obtain approval from the Idaho Secretary of State for any platform (or platforms) that the notary will use for RON communications.[8]

When using RON communication, a notary can validate the identity of the signer using any of four methods:  (1) the notary’s personal knowledge of and familiarity with the signer;[10] (2) analysis of a credential (e.g. driver’s license or other form of identification) that is verified for the notary by a third-party software process (a “credential analysis”);[11] (3) verification of the signer’s identity using multi-factor authentication (e.g. lots of questions) using information from a variety of private and public databases (“knowledge-based authentication” or “KBA”);[12] or (4) the oath of a witness identifying the signer, so long as the witness’s identity can be verified by one of the above methods.[13] 

RON Communication Platform Criteria

Each vendor’s user interface varies, but any communication technology used in Idaho must meet the following criteria[9]:

• The parties must be able to communicate simultaneously through sight and sound.
• The session must be recorded and the notary must communicate this fact to the signer before performing the notarial act.  The recording must be retained by the notary for ten years after it was made.
• The platform must include a process or service by which the notary can verify the identity of the signer (discussed more fully below).
• The signer executes the document electronically by drawing, typing a symbol or initials, or affixing a pre-selected signature to the document.  The notary must reasonably be able to determine that the document signed is the same instrument being notarized (e.g. by screen sharing an uploaded document).  Once that is confirmed, the notary affixes the notarial certificate with a note indicating that the act involved the use of communication technology, and seals with an electronic stamp. 
• The resulting document must be tamper-evident (meaning that it must be protected and identify whether anyone has tried to modify or alter the document after it was signed and notarized) and evidenced by a digital certificate.

In practice, a notarization conducted via RON communications generally proceeds as follows:  the notary uploads the document or document to be signed into the notary’s selected RON platform, the notary sends a link to the signer to join a recorded session through the communications platform, the signer then either completes the KBA verification or credential analysis (if the notary is not otherwise familiar with the signer), the notary session is then conducted as it would be in-person, the signer digitally executes the pre-loaded document, the notary completes and digitally stamps the notarial certificate, and the software produces a fully-executed and notarized electronic instrument with a tamper-evident certificate.  

The document produced can then either be submitted electronically through an e-recording platform or may be printed and physically submitted, so long as the notarial officer certifies that the tangible copy is an accurate copy of the electronic record[14] (the latter procedure is often called “papering out” of the electronic format). 

Where Are We Now?

Idaho found itself in the catbird seat with respect to RON when COVID-19 forced business closures and social distancing measures because it had already adopted RON standards and e-recording was available statewide.  However, many other states were scrambling to figure out how to keep transactions requiring notarized documents on track.  Fewer than ten states had previously adopted and implemented RON standards or were considering them, and it takes a significant amount of lead time to pass legislation and promulgate agency rules.  This chaos led, inevitably, to a patchwork quilt of measures including executive orders, use of emergency authorizations, and special legislative sessions, to create a short-term “fix” to satisfy the in-person presence requirement for notarizations. 

Thankfully, most of the states that relied on temporary orders or authorizations have now replaced them with more fulsome, permanent legislation that, for the most part, followed one of the two model acts.[15]  On the federal level, the bipartisan Securing and Enabling Commerce Using Remote and Electronic (“SECURE”) Notarization Act was introduced initially in 2020, went nowhere, and was reintroduced in 2021 in both the House and the Senate; both bills currently sit in committees.[16]  The SECURE Act would permit use of RON nationwide with minimum standards and expressly provide for interstate recognition of instruments notarized using RON. 

Some thorny issues remain.  The topic du jour is “remote ink notary” or “RIN”, where the signer and the notary both appear on an audio-visual platform and the notary identifies the signer as required by law, but the signer signs the paper document in pen and ink and then transmits the signed document by fax, e-mail, or mail to the notary to complete the notarial certificate and seal.  RIN became one of the COVID-19 workarounds in states that did not have an existing framework for the RULONA amendment providing for RON or the MBA-ALTA Model Legislation, or widespread availability of e-recording, because it produced an ink-signed original. 

Idaho does not currently allow this practice; RON requirements provide only for a fully electronic execution (even if papering out later).  One concern raised surrounds the lack of document control attendant with RIN, i.e. whether the notary can verify that the document the notary receives for stamping is the same instrument the notary witnessed being signed.

State RON laws still vary as to methodology, acceptable communication platforms, identity-proofing requirements, and where the signer may be located.[17]  Given these discrepancies, many title insurance underwriters and lenders also have varying policies with respect to acceptance of instruments notarized through RON technologies.  Fannie Mae and Freddie Mac issued new guidance in 2020 largely accepting but outlining the agencies’ requirements for documents notarized through RON.[18]  If history is any guide, it will likely take some time and increased certainty and uniformity in legal standards for these industries to fully embrace this new technology.

RON and similar technologies, often dubbed “FinTech” (financial technology) or “PropTech” (property technology), are trying to streamline traditional legal processes to make transactions more convenient and accessible to the consumer, while balancing security risks and providing robust protections against fraud.  The ultimate goal is a fast and seamless real estate transaction that takes place entirely in an electronic medium.  Technological innovations on this front have far outpaced changes to our staid legal processes, but COVID-19 certainly accelerated adoption of legal norms.  Due to the combination of good planning and forced necessity, Idaho has luckily found itself on the forefront of this digital revolution.

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Endnotes

[1] Idaho Code §§ 28-50-101 to -120.

[2] Idaho Code §§ 51-101 to -133; 2017 Idaho Sess. Laws 441. The RULONA model act was promulgated by the Uniform Laws Commission and has been adopted in twelve states including many of our neighbors (Washington, Oregon, Montana, and Colorado).

[3] Idaho Code § 51-118(2).  Note that UETA also included a similar provision under Idaho Code § 28-50-111, but UETA expressly did not apply to the execution of wills, codicils, or testamentary trusts and did not override any other substantive law applicable to transactions, such as recording requirements for documents affecting real property.  See Idaho Code § 28-50-103.

[4] Not Burgundy.

[5]  Model Legis. for Remote Online Notarization (Mortg. Bankers Ass’n & Am. Land & Title Ass’n 2018), available at https://www.mba.org/Documents/MBA%20and%20ALTA%20Model%20Act%20FINAL.pdf.

[6] E-recording was legally allowed under the Uniform Real Property Electronic Recording Act, Idaho Code §§ 31-2901 to -2907, which was passed in 2007, but counties were slow to provide platforms to record electronically.

[7] 2019 Idaho Sess. Laws 521.  The RON amendment went into effect in Idaho as of July 1, 2019, but deferred implementation until the Secretary of State promulgated rules for the use of RON technology.  RON technology was officially allowed as of January 1, 2020.  See Electronic Notary Public FAQ, Idaho Secretary of State’s Office, https://sos.idaho.gov/notaries-apostilles-authentications/notary-public-faq-electronic/ (last visited Aug. 28, 2021). 

[8] Idaho Code § 51-120.

[9] Idaho Code § 51-114A; IDAPA 34.07.01.

[10] IDAPA 34.07.01.014.

[11] IDAPA 34.07.01.013.01.

[12] IDAPA 34.07.01.013.02.

[13] IDAPA 34.07.01.014.

[14] Idaho Code § 51-120(3).

[15] MBA’s website includes a RON Resource Center where you can find helpful information on the status and type of RON legislation state-by-state.  See Remote Online Notarization, Mortg. Bankers Ass’n, https://www.mba.org/audience/state-legislative-and-regulatory-resource-center/remote-online-notarization (last visited Aug. 28, 2021).

[16] S. 1625, 117th Cong. (2021), available at https://www.congress.gov/bill/117th-congress/senate-bill/1625; H.R. 3962, 117th Cong. (2021), available at https://www.congress.gov/bill/117th-congress/house-bill/3962?s=1&r=19.

[17] Note that notary laws govern notaries, so the law of the state in which the notary is located will control the act and the form of notary certificate.

[18] What’s the difference between a hybrid and full eClosing?,Fannie Mae, https://www.fanniemae.com/deliveremortgage (last visited Aug. 28, 2021); Electronically Notarized (In-Person or Remote Online) Electronic Documents, Freddie Mac, https://guide.freddiemac.com/app/guide/section/1401.16 (last visited Aug. 28, 2021).