LenderClose has created a comprehensive, four-part guide to Remote Online Notarization (RON) – an important piece of the digital lending toolkit – covering topics including what RON is, how it works, implementing RON, and an overview of RON technology itself. This is the first in the series and provides an overview of RON.
The call for digitization of lending services was happening long before the world was rocked by the COVID-19 pandemic. The pace and scale of digital adoption varied widely among financial institutions – that is, until stay-at-home guidelines and social distancing became a universal reality almost overnight.
Accelerated digitization is now a must for every credit union and community bank for financial institutions that want to maintain responsive and seamless lending services during a global pandemic and well beyond.
About Remote Online Notarization
What is Remote Online Notarization (RON)?
Remote online notarization (RON), or remote notarization, is a process that notarizes a document electronically using audio-video technology. Documents are shared electronically, and both the signing and notary process occur face-to-face in a virtual environment.
Is remote online notarization the same as eNotary?
RON is not the same as eNotary, and it’s important to understand and use the terminology appropriately to properly distinguish the two solutions. There are two main differences. First, states that have approved eNotary may not have approved RON. Therefore, the process by which a transaction is conducted matters in terms of compliance for each type of notarization. Second, each type of transaction has a different signer ID validation process.
Parties are not in the same room, as a RON session occurs via a recorded audio-video conference.
The audio-video conference includes the notary, the borrower and a witness and/or another party the transaction may require.
Rules around ID validation vary by state and include specific measures that ensure validation is done properly.
In most cases, the borrowers’ ID is validated through a knowledge-based authentication (KBA) method in addition to presenting a valid state driver’s license or state identification card to the notary public through the technology.
A notary public and the borrower are in the same room (signing in-person), so the borrower’s ID can be validated in person and per state’s guidelines.
The signature is realized electronically, and the notary stamp is done digitally, rather than with a physical stamp on a hard-copy of the document.
What types of legal documents can be remotely notarized?
This depends on the state in which the document is executed. Generally, most lending-related documents can be executed via RON.
How many participants can be in each closing session?
Up to eight participants, including the notary public, are allowed per closing session.
Can mortgage or home equity loan transactions be executed via RON?
In states where RON is legal, mortgage and home equity loan transactions can be executed utilizing RON.
However, loans conforming to guidelines established by government-sponsored enterprises (GSE) may fall under separate guidelines that require additional workarounds. These include transactions such as hybrid closings and/or in-person closings.
A financial institution could make internal policy changes allowing RON for portfolio (non-confirming/non-GSE) mortgage and home equity loans.
Is there a special process for a notary public to be RON or eNotary-certified?
In some states where RON and/or eNotary is legal, a notary public must go through an application and validation process with the state to ensure compliance. Each state establishes its own rules for this process. For state-specific information, check with the secretary of state’s office.