Expert speaks on status of RON, eClosing, eNote adoption
The title insurance industry has witnessed significant advancements in digital technology, particularly with the integration of remote online notarization (RON), eClosings and eNotes with an aim to offer greater efficiency, security and convenience.
However, as with any major technological shift, adoption of these tools has been gradual and marked by a range of challenges.
Jay Hollis, Executive Vice President and General Manager for Pavaso, has been at the forefront of this transformation and recently shared insight while speaking at the 2024 Illinois Land Title Association conference.
The adoption process: “Crawl, Walk, RON”
Hollis emphasized that adoption of these digital tools is not an overnight process.
“One of the things we came up with was crawl, walk, RON,” he told attendees. “You don’t have to go to RON right away. You can crawl, you can walk, and then you can RON.”
Some industry members are more eager than others to embrace digital tools, Hollis said, but said many remain cautious due to concerns over regulatory compliance, security and the need for retraining staff.
“There’s a lot of lenders that have the technology set up to do eNotes and eVaulting, but they’re not doing it yet,” he said. “This is due to both perceived risks and the costs of restructuring organizations to support digital tools. It’s risky after the fact if something goes wrong with that note. Lenders would need to spend money to get documents re-signed and transferred securely, which can be costly.”
The state of RON
RON has allowed for documents to be notarized digitally without requiring physical presence, but adoption of RON varies greatly across states.
“There are still states that haven’t fully adopted RON,” Hollis said. “Some states had temporary emergency rules during the pandemic allowing for remote signing of physical documents, called remote ink-signed notarization, but they’ve since rolled back those rules.”
The uneven adoption of RON legislation has created complications for vendors and consumers alike. For instance, states like Connecticut have implemented specific stipulations on RON.
“Connecticut passed RON legislation, but it’s specifically called out that it’s not for real estate transactions,” Hollis said. “In contrast, other states, such as Illinois, have taken a more collaborative approach to drafting their RON laws, engaging industry stakeholders to ensure practical implementation.”
eClosings: Broad acceptance, but room to grow
Adoption of eClosings continues to grow steadily, but there’s still progress to be made, Hollis said.
“eSign is generally accepted on most documents anywhere in the U.S.,” Hollis pointed out. “However, the move toward fully digital closings has been slower in rural areas where eRecording remains unavailable. There are about 2,600 counties and counting that offer eRecording, covering 95 percent of the nation’s population.”
One area where Hollis sees significant potential for growth is in use of smart documents — digital documents embedded with metadata that tracks information such as who signed the document and when.
“The industry is trying to move towards what’s called smart docs,” Hollis said. “They offer a more secure, transparent way of handling transactions, particularly when compared to traditional paper documents. Having an eNote means you’ve got a lot more data in those documents than in traditional paper versions.”
eNotes: A game-changer, but slow to catch on
While benefits of eNote use are clear – improved compliance, security, and efficiency – adoption has been slow.
According to Hollis, this is due in part to the complexities involved in generating and transferring eNotes.
“The reason why is since it’s its own unique document, there were only a few vendors out there that would generate an eNote and then hand it back to the lender,” he said. “The cost of generating eNotes was initially a major barrier.”
Despite these challenges, progress is being made.
“We’re seeing about 20,000 [eNotes] a month,” Hollis said. “This past month was another good sign, with 36,000 eNotes registered with MERS (Mortgage Electronic Registration Systems). These numbers indicate growing momentum, but they’re still a far cry from full-scale adoption. Most of those were coming from the big industry players.”
Hollis also highlighted the role of interoperability in facilitating the adoption of eNotes.
“If the loan is sold, let’s say from a major lender to Fannie Mae, the major lender has their own vault, and Fannie Mae has their own vault,” he said. “They have to transfer that note securely. The secure transfer of eNotes between vaults is a critical factor in ensuring smooth transactions, but it’s also a point of potential failure that lenders are wary of.”
Overcoming adoption barriers
Even with more widespread awareness of benefits associated with RON, eClosings and eNotes, Hollis said the path to widespread adoption is still fraught with challenges.
“The biggest thing I’ve heard from most lenders is they know they need to do it, they know they need to move towards smart documents, but it’s just the money it would cost to change the organization to get ready for that,” he said.
However, the cost of inaction may be even higher, as consumers increasingly expect digital options for their real estate transactions, he said.
Hollis emphasized the importance of ongoing collaboration between technology providers, lenders, and regulators to ensure a smooth transition.
“These industry trade groups have been much more collaborative recently than ever before,” he said, referring to entities including MISMO, the American Land Title Association (ALTA), and the Electronic Signatures and Records Association. “ALTA now has a group designed to give feedback to the lenders, making sure they understand the impacts on the title and escrow side.”
As more states enact RON legislation and technology continues to evolve, the future of real estate transactions is clearly digital. However, Hollis emphasized the industry’s success will depend on continued innovation and attention to consumer needs.
“We want to hear feedback on every single closing,” he said. “We send surveys, ask how it went, and inquire if there were incidents or support tickets. What could we have done better? Florida has recently started asking for feedback from vendors on allowing biometrics. While these methods could improve security, they also introduce significant new risks as fraudsters become more sophisticated.
“From an industry standpoint, it’s a cat-and-mouse game right now. We are all on the lookout for whether someone can break the digital process and if they can, we have to innovate as fast as possible. We are all always asking, ‘How can we make this better?’“
Pavaso is part of the Old Republic Title Tech family of companies. This article has been reposted with permission from The Title Report. You can read the original article here.