5 Reasons Why Loan Signings Need a Notary Public Present

Living in the digital era, where technology has entered most aspects of our everyday lives and has, for the most part, made all day-to-day processes easier and more efficient, one must stop and wonder how helpful and safe technology is when we become addicted to it all across the board. That is, when does too much of a good thing become bad for us?

Much has been said within the last couple of months about the idea of e-notarization. This basically means closing notarizations remotely, without having the notary public and the client face-to-face at the notarization table. The process implies using remote communication systems in order to put the notary public and the interested parties (the clients) in contact, namely email and other document sharing tools (Dropbox, Google Drive etc), as well as video conference tools (Skype, FaceTime etc). The notarization is concluded by way of expressing consent and applying an electronic signature, thus making the transaction final. While this extremely technologized process might seem highly efficient and easier at first glance, we wonder what actually lies behind this modern era bubble?

Well, a lot of legal trouble if you really think about it. This becomes apparent especially in complex and long-term transactions, such as loan signings and real estate closings. These notary services are especially important given their effects upon the financial stability of the client and the long-term consequences that such closings produce. Just think of loans taken for a 30-year period, with the amounts of money involved, the interest rates and the potentially life-changing effects thereof (foreclosure on a family home used as collateral on a mortgage loan, for example). Given the complexities of such notarization, does travelling to a notary public or having said notary public travel to you in order to finalize a loan signing, even seem like such a struggle anymore?

Looking at this objectively, let’s analyze the peculiarities of a notarization. Simply put, having a document notarized means that a person (a notary public) must be present upon signing the document and attest to the identity and free will of the parties involved. One might ask why you need this process or this outside person. The answer is simple. Given the importance and effects of the documents concluded and signed, the notarization has the following three purposes:

1. to attest that the parties to the document are properly identified, namely that they are who they say they are;

2. to observe and guarantee the free will of the parties involved, namely that no one is forced or pressured into signing legally binding documents or that no one is incapable of understanding the consequences of their actions;

3. to give the concluded document a proper means to be subsequently verified in an independent manner, by way of the notary public’s journal.

Let us not forget that a notary public is a person invested by state government with the authority to act as witness to the signing of certain documents. Therefore, given this capacity as a witness, the notarization process is provided for the deterring of fraud during the concluding of documents. Namely, the notary public attests the borrower’s identity, apparent understanding and will to conclude a loan signing.

That being said, one might wonder whether the actual purpose of a notarization is being met by way of e-notarization. The peculiarities of a notarization process have made it a de facto face-to-face operation. Digitizing the closing process is not only unrealistic at this point, but also opens the notarization to a plethora of questions regarding its legitimacy, making it easier to contest later. Here are the 5 main reasons why loan signings, as well as real estate notarizations need a notary public present:

1. The notary public must verify the identity of the signers. The notary requests an identification document containing a photograph, the physical description and a signature of the signer (borrower). Identification documents issued by state or federal government are normally used, such as US passport, driver’s license, permanent resident card, US military ID card etc. It is essential that the signer and the notary public are present at the notarization place at the same time, since this allows the notary public to physically verify the validity of the identification document, by touching and examining it. Remote e-notarization does not allow such verification, thus opening the door for potential fraud or identity theft.

Simply affirming a certain identity via video conference does not offer all security guarantee measures necessary for a proper legal verification during a loan signing process, defying the very purpose of a notary public.

2. The notary public must make sure, as much as humanly possible, that the signer (borrower) is not acting under duress and is willing to enter a loan signing agreement. Performing the notarization with the signer and the notary in the same room offers an assurance on willingness more so than a remote e-notarization.

It is virtually impossible to ensure that the person sitting behind a screen, hundreds or thousands of miles away, is acting under free will and not, for example, being threatened with violence or in any other way coerced. That’s not to say that face-to-face notarization is 100% secure and any coercion impossible to occur, but at least having a notary public present prevents any type of immediate threat. The fact that the notary is able to pick up on verbal or nonverbal cues and is allowed to refuse to conclude a signing should any signs of lack of free will present themselves, makes a face-to-face notarization that much more reliable.

3. The notary public must ensure that the signer is under full mental capacity to conclude a signing. While the notary public is not qualified to assess mental ability and cognitive skills, having the notary and the signer in the same room, able to carry on a comprehensive conversation and observe any cognitive red flags through speech, body language and reactions, allows for a more secure notarization process.

4. The lobbyists for e-notarization push forward this so-called modernized and easier way of performing notarizations, arguing that it represents a less expensive way of conducting notary services. While strictly looking at the cost of travel either for the client to reach a notary public or for the mobile notary public to travel to a client, this argument seems to have a lot of force, it is imperative we look at the bigger picture. In the case of loan signings or real estate notarizations, the risks and long-term problematic consequences that a remote e-notarization causes are far greater and more expensive than the immediate cost reduction, thus making the e-notarization potentially much more expensive.

5. A face-to-face notarization offers the signer full visibility into the process. The signer is able to personally examine and freely browse through the documents that need signing (for example, the loan documents), to ask all unresolved questions and to double check that everything that s/he is signing is entirely as initially agreed upon. This is not the case for remote e-notarization, where documents are electronically sent back and forth and the video communication with the notary public is not as direct and transparent as a face-to-face discussion.

It is one thing to have your documents digitized and to only sign them electronically (for example, using a pen on an iPad), while still having a notary public present for any other issues, and it is completely different to transform the entire notarization process into a digitized remote experience. While not being opposed to the “paperless” concept, the notarization should be done face-to-face and not via video call.

Having considered all the arguments above, it doesn’t feel like a remote e-notarization, at least when it comes to complex transactions such as loan signings and real estate notarizations, is as secure and transparent as a face-to-face notarization. The risk of errors and fraud is much higher, therefore, taking this risk into consideration, the e-notarization becomes more expensive and unsafe.

Furthermore, the issue of e-notarization also raises the question of legislation regulating the notary public profession. The legislation currently in force only supports and is concluded in light of a face-to-face notarization. In addition, remote e-

notarization raises a question regarding the notary jurisdiction and whether an out of state notarization can be considered valid. The current rule on this matter is that a notary public is only allowed to perform notary services within the geographical limitations of his or her state of commission. One should automatically ask him/herself if or how this limitation is being infringed in the case of remote e-notarizations and whether electronic notarizations should be affected by the same geographical limitations as face-to-face notarizations. Therefore, until the legislation itself changes or at least partially supports the new and question-raising practical issues of e-notarization, it should not be used for complex and important notarial acts.

In light of all these aspects, all the signs point to the fact that, at least for now, remote e-notarization is failing the main goal of a notarization, which is to have a third party witness the signing of a document, to attest the identity and willingness of the signers to become bound by it, in order to prevent fraud. It is very dangerous for the signer to seek comfort over reason and to place more emphasis on an easy and swift process rather than on certainty and security. E-notarizations only offer solutions to superficial problems and still present too many risks to become the norm for concluding loan signings or real estate notarizations.

Teodora Bantas, is Content Strategist, for Signio at usesign.io