In recent years, more and more of the home-buying procedure has shifted online. Buyers now have more options, from virtual property tours to online mortgage loan applications. Not all eClosings are the same, but you could have the choice to test one on closure day. Several states issued executive orders during the coronavirus outbreak that allowed for limited eClosings. Even now, the precise nature of an eClosing is often misunderstood.
Not familiar with eClosing? Here’s what you should know.
E-closing: what is it?
Regarding mortgages, eClosing is signing paperwork digitally rather than on paper. An electronic closing may range from a completely digital procedure in which the notary interacts with you remotely to a hybrid process in which certain documents are still physical; we’ll get into the specifics in a moment.
Types of Electronic Closings
Many electronic closings, or e-closings, have been developed to streamline the buying and selling of real estate. E-closings allow for the completion of the closing process entirely online, without the need for in-person meetings or the handling of physical documents. Here are some of the different types of e-closings and how they work.
1. eSigning
Virtually all eClosings now need electronic signatures. An eSignature is any “electronic sound, symbol, or procedure connected or conceptually related with a contract” that you use. When applied to closing papers, this electronic signature has the same legal weight as a manually signed version of your signature.
Loan signing appointments are often planned with a title firm, real estate attorney, or loan signing agent to finalize a real estate transaction. An eSigning appointment may be made in place of a notarization, depending on your function (buyer, seller, or other), the nature of the transaction, and the state laws.
Cash-only purchase papers are a frequent example. High-volume investors who prefer not to go to a title company’s office to sign documents use this method.
2. In-person Electronic Notarization (IPEN)
With IPEN, both the signer and the notary must be physically present at the same time and place to use a tablet or computer to sign all necessary papers digitally. No actual signatures written in ink are required.
In certain regions, eNotarization is another name for IPEN. On the other hand, “electronic notarization” and “remote online notarization” are not interchangeable terms. Real estate transactions, including electronic signatures and notarizations, are generally accepted and utilized in most states; however, not all notaries are authorized to use RON. That’s why it’s possible to have a transaction that works with IPEN but not RON.
However, as the underlying promissory note must be designated and tracked, eSignatures and IPEN may be restricted for some lender documents. Unfortunately, not all financial institutions have the infrastructure to generate, store, and transmit electronic promissory notes.
3. Remote Online Notarization (RON)
Your RON closing notary will be in virtual contact via video conference. Digital signatures are used for all papers once again. The main benefit is the freedom to go anywhere you want.
To the extent allowed by law, RON may now be used in refinancing transactions. Possible alternatives to RON for eClosing exist. According to research conducted by Notarize, RON will enable businesses to increase the rate at which they conclude agreements while decreasing the number of employees needed to do it.
4. Remote Ink Notarization (RIN)
Don’t get RON and RIN mixed up (Remote-Ink Notarization). Notaries, title agents, and lawyers could use RIN during the pandemic to execute wet-ink signings using video conferencing tools like Zoom and GoToMeeting. Without enduring RON legislation, many states permitted RIN use by temporary executive decrees from governors.
South Dakota, Montana, Wyoming, and Alabama are the only states with RIN-specific regulations set in stone.
In contrast to those who support RON, many in the mortgage and real estate industries doubt RIN’s long-term sustainability as an eClosing solution. Nonetheless, this choice is used in a sizable enough volume for Freddie Mac and Fannie Mae to provide recommendations to safeguard borrowers against fraud.
5. Hybrid eClosing
Some papers may be signed online, while others must be signed at the closing table to comply with local legislation and mortgage investor regulations. A “wet signature” refers to signing a paper document with an actual wet pen. The procedure is carried out in the presence of a notary.
To reduce stress and make things go more quickly and easily on closing day, it is often possible to sign the necessary paperwork electronically in advance. You will be informed before closure if this is a possibility.
E-closings offer many benefits over traditional in-person closings. They can greatly speed up the closing process, are more convenient for all parties involved, and provide improved security and accuracy. As technology advances, we will likely see more e-closings being developed.
