Want to use eClosing to grow your company but worried about the legal implications of becoming paperless? Do you have questions about this topic? If so, this piece should address them.
The present epidemic has only hastened the digital transition in the title and closure business. Electronic signatures, remote online notarizations, and eVaults are the functional components of an eClosing process, and new laws and regulations are coming up to control and verify these elements.
Many in the title sector would welcome a paperless closure, but they are still determining the legal implications of this change. Which behaviors does the law sanction, and which are not? Is there a set of rules they can follow to design a dependable process that will need minimum maintenance down the line?
There are three main aspects of eClosing, each with its legal ramifications and the ability to affect how title firms go about their business. This article discusses the current legal standing of eNotarization and the governing legislation for electronic signatures (ESIGN and UETA). It will also explore the role of eVaults in the overall eClosing legal framework. As far as the law is concerned, eClosing has three distinct phases. These are:
- eSigning
- Remote Online Notarization (RON)
- eVaults
Electronic signatures are recognized by law thanks to two separate pieces of legislation. The first step is eSigning, which enables the listing agent and title firm to accept digitally signed pdf versions of papers like the closing disclosure and ALTA. What you see before you is the ESIGN and the UETA. They argue that an electronic signature may be legally binding if you meet certain conditions.
Electronic signatures’ legality
According to ESIGN and UETA, an electronic signature is legally binding when:
- Parties communicate an agreement to sign the papers
This electronic signature captures the signer’s agreement through a “accept” or “reject” button. To apply the signature, the signer must agree to sign the document indicated by request.
- Permission to transact electronically
Both the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act (ESIGN) need mutual permission before conducting commerce electronically. Permission to do transactions online is similarly embedded in the process as is consent to sign. Customers do not have to opt out or withdraw approval for a transaction to be legitimate and accepted, even though the statute specifies that they should supply an opt-out option.
- Access to an “opt-out” choice
If you’re a title business and want your clients to sign online, you have to give them a way to back out. It would help if you made that option obvious for purchasers or settlement agents who want to use wet ink signatures. The desire to revoke your approval is also possible. Notifying the borrower of the withdrawal in such a circumstance is necessary.
- Receiving signed copies
According to the law, all parties involved (borrower, lender, seller) must get a copy of the finalized contract.
- Permission to record
The acts require signatures to be recorded and reproduced precisely in the future by those with authority. Most eSignature software developers also provide their eVaults for storing signed documents and electronic signatures. These records are kept indefinitely.
Electronic signatures (eSignatures) are often employed throughout the house closing procedure, although they have certain restrictions. The electronic signature is only valid for the specified papers. Documents such as the ALTA and Closing Disclosure may be verified electronically, while others must be notarized. Online document notarization is feasible, but a distinct set of rules governs it.
Online notarization
During the epidemic, many people have turned to use online notaries. Although some states do permit entirely digital notarization, many others do not. It is why, to this day, eClosing still consists of a mix of digital and non-digital steps. However, that is rapidly changing. Currently, 16 states have fully implemented RON, and another 13–14 have enacted legislation.
Online notarization from a distance is a straightforward technique. Buying and selling parties and the settlement agent, lender, and legal counsel all sign in simultaneously. The parties arrange a video conference as an alternative to a physical meeting at the title insurance company.
The lender has confirmed that both the buyer and the seller have electronically signed all necessary paperwork. Finally, the lawyer considers the parties’ agreement. After that, the title company’s electronic seal is added to the deed by the attorney. The monies are transferred to the seller’s account, and the buyer becomes the legal owner of the property after affixing the seal and producing the record.
eVaults
In eClosing, eVaults is the last piece of the puzzle. Several vendors provide eVault services. Whenever necessary, an eVault should provide a legally binding copy of the documents, complete with signatures. Additionally, they must protect the information from being seen or altered by anybody without proper authorization. Third-party services handle record keeping and ensure it follows all applicable laws, so you don’t have to worry about it.
Real estate transactions will increasingly take place through eClosing in the future. We may be close to a completely functional eClosing experience throughout the US since most states have begun explicitly defining legal foundations for eClosing.
