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Analysis: Remote online notarizations will reduce real estate fraud

Remote notarization real estate fraud prevention analysis article

The widespread availability of remote online notarization (RON) may become the strongest deterrent to real estate fraud because the technology used by RON makes it much harder to impersonate a Notary or a signer.

Deed fraud has been on the rise for years because land records such as property deeds and mortgages are now available on the internet. Fraudsters find properties online whose owners are often absent, may be older, or even deceased while the property has not yet changed hands.

With some research, they obtain enough personal information to forge documents and file transfers of ownership so they can then fraudulently sell the property, usually quickly and for less than market value. Because the property was obtained illegally and without an actual cost, even selling below the property value is profitable for criminals.

With traditional paper notarizations during which the Notary and signer are in each other’s physical presence, the only record kept is the Notary’s journal entry — and only in states where journals are required. It is often difficult to prove a signer was an imposter  because there is little or no evidence outside a Notary’s written journal entry. However, RON technology adds layers of evidence to the process which is much harder to dispute.

Easy access to information leaves real estate documents vulnerable to fraud

A Wall Street Journal (WSJ) article titled “Latest Cyberthreat: Stealing Your Home” described how criminals obtain real estate information by accessing public records intended to provide transparency in the real estate market. In Illinois, the Cook County Recorder of Deeds had 62 open real estate-related investigations at the time of the WSJ article’s publication. The Wayne County Prosecutor’s office in Detroit, Michigan reported more complaints of deed fraud than any year since they began tracking this information.

According to the WSJ article, New York City alone investigated 120 cases of such fraud in 2014. In 2018, the Manhattan District Attorney released a grand jury report that reported New York City had investigated 2,000 such cases in the four previous years.

In 2016, the Department of Justice Southern District of California reported having prosecuted a single individual for selling or attempting to sell 15 properties with a combined worth of $3.6 million, earning proceeds of nearly $2.2 million.

Common Types Of Fraud

The classic form of notarization fraud is a signer presenting themselves to be someone else and presenting false ID to prove their identity. Another common type of Notary fraud involves coercing an elderly, unwilling person to sign a document against their wishes. While the classic type fraud  can work if a Notary doesn’t follow due diligence in examining ID documents, quite often the fraudster can even trick or mislead a careful Notary if their fake ID is convincing enough.

In standard paper notarizations, many states require a journal record of the transaction that includes information such as the signer’s name, place of residence, type of document being notarized, and the documents to prove the identity of the signer. California requires the signer’s thumbprint for the journal entry when notarizing specific types of documents involved in real estate fraud as well. But in some cases, even these precautions aren’t always enough to block individuals’ intent on committing fraud because the identity linkage to the thumbprint cannot be substantiated.

The National Notary Association has supported in-person, computer-assisted notarization for well over a decade, but the real push for Remote Online Notarizations (RON) came in 2020 with the COVID pandemic. As of the release of this article, over 40 states and the District of Columbia provide for remote notarizations with several other states coming on board soon.

Remote online notarization is the most aggressive means available to combat this real estate fraud, especially forgery of real property instruments and identity fraud of all kinds in the online environment.

Impersonating a Notary

While the majority of real estate fraud is by the “signer,” fraud can also take the form of impersonating a Notary through the theft or co-opting of a Notary’s seal and forgery of a Notary’s signature. A standard requirement of every notarial act connected to real estate transfers is the signer’s personal appearance before a Notary Public. In the paper environment, a Notary Public’s signature and official seal have often been counterfeited by criminals who copied the seal using publicly filed documents.

The Process of Completing a Remote Online Notarization

To understand how RON can combat real estate fraud, it’s important to understand how this process is completed. While details can vary from state to state, we offer a general description of how a remote online notarization would be completed.

Much of the RON process parallels a standard, “paper” notarization. Because fraud, spamming, etc. is already known to be highly prevalent online, how can RON make the important process of notarization safer and less susceptible to fraud?

Remote Online Notarization as a means to combat forgery

In the paper world, the Notary and signer are face-to-face but once the signing is complete the entirety of the record relies on the Notary’s journal and memory. What did the signer look like? Can the Notary remember enough details to effectively identify the signer if a legal proceeding were to result from the signing? And equally, would a signer who has been harmed in the transaction necessarily be able to remember the identity of the Notary?

That insecurity is erased with remote online notarizations because with each RON, an audiovisual recording of the notarization is retained showing both the Notary and the signer. While documents can be forged, it’s far more difficult to disguise a face, and the digital recordings of these transactions would stand as solid evidence of those who participated.

With all notarial acts, the Notary reviews and verifies ID documents to assure to the best of their ability the person before them is who they say they are. With remote online notarization, the signer is required to upload copies of their ID prior to the signing. This allows the authenticity of the ID documents to be verified by a third-party identity services provider within the RON technology platform being used by the Notary before the notarization takes place. This drastically reduces the potential for identification fraud.

Remote Online Notarization can prevent someone impersonating a Notary

The extra levels of protection provided with RON begins with the Notary. RON has safeguards in place to help prevent someone stealing and using another Notary’s identity.

Nearly all states authorizing RON require a process to verify the authenticity of the Notary’s electronic signature and/or official seal, usually in the form of a “digital certificate” — computer code that identifies and is issued to the Notary and is installed on the Notary’s computer. The Notary then uses the digital certificate to create the Notary’s electronic signature when notarizing electronic records. The digital certificate not only adds an additional layer of assurance that the Notary is who they say they are, it also adds security to the electronic documents by exposing any changes made to or tampering with the document after the electronic record is signed. For example, if a crook decided to change the name of the person in the certificate of acknowledgment for the notarial act, the change would be evident. Further information about digital certificates can be found in the National Notary Bulletin titled “Understanding Notary Technology: eSeals, eSignatures, and Digital Certificates” published in March 2020.

Proposed federal laws risk making remote notarization less secure

A bill has been brought forward in Congress to establish and legislate a federal mandate around the requirements to complete a remote online notarization. This legislation is the SECURE Act of 2021. Members of the American Bar Association’s Science and Technology Section have raised concerns that the bill would remove the requirement to use a digital certificate during a RON, which would weaken the protections remote notarization currently provides. Privacy advocacy groups, including the Electronic Frontier Foundation and the Center for Democracy and Technology, are opposed to the bill, in part, because of these diminished consumer protections as well as unaddressed personal data access and sharing controls.

In an effort to streamline and automate the process of online notarization, the bill mandates interstate recognition for remote online notarizations based on “technology neutrality.” However, this could prevent states from requiring Notaries to use a digital certificate (which is not technology neutral but the application of a specific technology) to verify a Notary’s identity and create the Notary’s electronic signature when performing remote online notarizations. Banks, land title companies, and technology providers would dictate the technological tools Notaries use to perform remote online notarizations – and without a means to securely attribute the Notary’s electronic signature to a particular Notary.  This contradicts current practices.

Since 1999, one of the clear standards in the field of electronic notarization is that an electronic notarial act must qualify as a “security procedure” with the capabilities of establishing who signed and notarized an electronic record and rendering a notarized electronic record tamper-evident. Currently, 36 states, either by statute or administrative rule, have such a “security procedure” requirement, which today can be met only by the use of a digital certificate or blockchain technology.

With remote online notarization, legislators and state regulators should heed the warning of noted lawyer and legal scholar John Henry Wigmore given back in 1928 – “The notary’s certificate of acknowledgment of a deed is the pillar of our property rights. And these pillars of property become a treacherous support when they are permitted with forgery. A practice which permits forgery is as dangerous in policy as it is unsound in principle.”

Members of the American Bar Association’s Science and Technology are urging Congress to revise the SECURE Act to remove a provision that would pre-empt any state's in-person electronic or remote online notarization law that does not maintain technology neutrality, thereby preserving the ability of states to require Notaries to use attribution methods such as a digital certificate.

In 2022, the Notary community has technology accessible to them to suppress and decrease real estate and identity fraud like no other point in history. Now is not the time to bypass or eliminate it. Now is the time to embrace it to our advantage to create secure, reliable, and in-person electronic and remote online notarizations that protect not only the parties signing electronic real estate documents, but parties relying on these documents and Notaries as well from fraud and crime.

Timothy Reiniger bio

Timothy Reiniger was the recipient of the 2022 March Fong Eu Achievement Award for his work on the nation’s first remote notarization statute in Virginia.

Editor’s Note: The analysis and opinions expressed in this article are those of the author and do not necessarily reflect those of the NNA.

1 Comment

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Suzanne Jenkins

22 Jul 2023

How do we get California on board?

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