When you buy a house, especially with a mortgage, signing a mountain of documents is the well-known culmination of the process. It’s a crucial step to make sure everything is done properly, but now that stack of papers is increasingly available electronically. Pat Kinsel, founder and CEO of Notarize, an app that facilitates electronic notarization, spoke to Bankrate about why going to a notary is still so important and how the process is changing. The conversation has been edited for length and clarity.
What is notarization and why is it so important to a successful closing?
It’s the main event. It is what everything leads up to and it’s also the main impediment for a digital experience. In a real estate transaction, the closing is when everything has to come together, all of the documents, all of the money, all of the people. Those can only occur when people notarize and sign documents to transfer property and assign debt.
The documents are required to be notarized to prevent fraud. Notarizations are important for fraud because you have to identify yourself. You create a signed record and that creates confidence in the transfer of the property.
It’s the impediment to a digital closing process because historically notarizations have been required to be done on paper. That’s what’s required for you to meet, to go to a title office, and to ship original copies of documents. People need actual possession of the original copies of documents. Those are FedExed in the paper world. But electronic copies can be the same authoritative, virgin documents and they can be sent to people instantaneously.
How has getting documents notarized been affected by the pandemic? Are there more virtual options now?
In 2012 the CFPB did a study about why electronic mortgage and real estate closings hadn’t taken off. Everyone has wanted this forever. They said that there were two primary reasons. One was the lack of access to digital notarizations. There were not electronic notaries, and even when there were, they were not online. You had to go in person and sign on a tablet.
The second thing was lack of paper trails.
Prior to COVID we spent tons and tons of time and money getting legal clarity. Prior to COVID, 23 or 24 states had passed laws to accept electronic notarization. COVID helped clarify the legal questions. Prior to COVD, Fannie Mae allowed people to do online closings with us, but you had to get prior permission to do that.
Now that more people have tried it, they like it. Just imagine you’re a consumer and you’re trying to buy your home. Do you want to drive in to an office or do you want to do it online? It is a faster, more efficient business process. We’ve now seen companies really making investments in integrations.
How does Notarize fit into the shifting landscape?
The company was launched in February of 2016. I went down and met with the Virginia secretary of state at the time. They were the only state that had passed a law allowing online notarization.
We’re credited with passing the majority of the state laws that have passed. We’ve chaired the standards committees for our industry. The way that’s manifested itself is we’re the first company in the country to ever do an online real estate closing, in 2017.
There’s all these business processes that are stuck in paper because of notarization. We act as advocates and are able to move a bunch of things online for the first time ever.
What are people still hesitant about?
We serve consumers in all 50 states. The question is from where can notaries do this? Initially the pushback was, is this safe and effective, and then it was, can you do this across state lines? At this point, when we pass bills in states, they pass virtually unanimously. It’s the intersection of other issues, it’s data privacy and things like that.
It’s not a national solution, you still have to comply with state and county rules. Early opposition was your classic brick and mortar versus the internet. A lot of mortgage and title companies have physical offices. Now it’s more these other issues.
What else should people know?
I sometimes hate in my commentary that it gets associated as a COVID solution. It’s digital transformation, a business process change. What I’m really excited about these days is we’re starting to see organizations and industries go from experimentation to changing the way they work and they way they serve their clients.