Industry Impact: How remote online notarization is changing the real estate game in the Golden State

In 2011, Virginia became the first state to authorize online notarization. The movement caught steam in 2020 due to the COVID-19 pandemic and today 44 states have permanent laws legalizing remote online notarization, with California being the latest on September 30, 2023 with the passage of CA Senate Bill 696. 

In addition to making it possible for people to conveniently get their documents signed and notarized in minutes online from any location in the US, legalizing online notarization has fundamentally and for the better disrupted the way the Real Estate industry transacts. A real estate transaction can now be completed securely and legally with the entire closing package signed and notarized online. A recent study conducted by MarketWise found that digital closings:

• Eliminate approximately $97 per transaction for title agents
• Save lenders $444 per loan 
• Reduce errors by up to 31%
• Condense the full loan closing cycle by more than 7 days

CA Senate Bill 696 is a big deal because the language provides uniform standards and removes all ambiguity around acceptance, thereby unlocking remote online notarization for real estate closings in California, one of the cornerstones of the national real estate market with 40 million residents and a massive 12% of the United States population. The economic and social impact of this is very significant.

The major real estate industry stakeholders make it clear they are ready to digitally close in California.  

Three major real estate industry stakeholders must be on the same page for fully digital closings to work: Title Insurance Underwriters, Mortgage Investors, and County Recorders. Consensus on the acceptability of remote online notarization in real estate had remained elusive and lacked the necessary uniform standards across all three stakeholder groups — until CA Senate Bill 696. We now have consensus from all stakeholders that online notarization will be accepted and therefore available for California property transactions. 

1. Title Insurance Underwriters

In any real estate transaction, the Title Insurance Underwriter is deeply vested in ensuring the enforceability of crucial documents, such as Deeds, Mortgages, and Powers of Attorney. Even the smallest of legal discrepancies could lead to a title insurance policy claim — making title insurance underwriters particularly diligent and sensitive to the nuances of notarial law, including the use of online notarization.

Although for years many underwriters have been insuring California real estate transactions closed via remote online notarization, 70% of the real estate market was hesitant due to ambiguity in California’s previous notarial law regarding a technical term “interstate recognition”.

The passage of CA Senate Bill 696 provides the clarity that interstate recognition does explicitly include remote online notarizations completed by an out-of-state notary public, and therefore Title insurance underwriters are insuring CA real estate transactions as of January 1, 2024.

2. Mortgage Investors

When a real estate transaction involves financing, it’ll also likely involve a Mortgage Investor who will purchase the mortgage itself. There are two dominant Government Sponsored Entities (GSE) mortgage investors in the national real estate market: Fannie Mae and Freddie Mac which supports around 70% of the mortgage market.

Both Fannie Mae and Freddie Mac publish their own “Seller guide” that details the specific requirements, representations, and warranties of the loans that they’re willing to purchase. The Seller Guide defines the acceptance criteria for digital mortgages, including those closed through remote online notarization. Before the new law, California was not included as an approved State for online notarization in Fannie or Freddie’s Seller Guide and so lenders have largely avoided closing California mortgages via remote online notarization.

Since the law’s passage, both Fannie and Freddie have issued bulletins updating their Guides to include California on their list of approved states for remote online notarizations effective January 1, 2024:

• Fannie Mae:  Selling Guide Announcement SEL-2023-11‍
• Freddie Mac:Bulletin 2023-24 - Selling

3. County Recorders

Towards the end of a real estate transaction, the title agency or escrow company will submit specific documents to the county recorder, otherwise known as the county clerk or registrar of deeds. They play a crucial role in maintaining, preserving, and protecting the integrity of all property records within a given county.In order for a county to accept a document completed through remote online notarization, they must also support eRecording. 98% of the California population live in one of the 43 counties that support eRecording.

To Get Started:

You need to partner with a remote online notary provider to take advantage of CA Senate Bill 696. Proof (formerly Notarize) provides best-in-class remote online notarization software and notaries, having supported over 2,500,000 remote online notarization transactions. The major real estate underwriters, title agents, and lenders have already transformed their businesses with Proof. For more information:

• Title Agents: Click here.
• Lenders and Credit Unions: Click here.
• Realtors: Reach out to your title agent to inquire about digital closings so you can advise your client on the possible ways to close.
• Looking to get in touch with our team? Click here to Contact Sales.