Welcome to Mortgage Industry Trailblazers, our ongoing interview series with innovative, forward-thinking professionals in the mortgage industry, hosted by Camelia Martin, Snapdocs’ Head of Industry and Regulatory Affairs. The series will take a look at the problems and solutions the industry is facing, through the eyes of some of its top leaders.
When we talk about digital transformation in mortgage closings, we tend to focus our attention on the parties that facilitate them – lenders, notaries, and settlement companies. State and local governments, however, play a massive role in driving both innovation and change for the industry, and – unfortunately – tend to only get attention when things they do (or don’t do) push things in the opposite direction.
The work public officials do to create the regulatory infrastructure that makes digital mortgage closings possible is invaluable. In order to highlight this work, we sat down with Ozie Stallworth, Electronic Notarization and Notary Enforcement Director at the North Carolina Department of the Secretary of State, where he leads the efforts to enable electronic notarization (eNotarization). Ozie is a national leader and innovator in this space, reinventing the framework for digital mortgage closings in the state. To date, 87 of North Carolina’s 100 counties accept recording of electronically signed and notarized closing documents (eRecording), representing more than 95% of the state’s population. Ozie was also named as the 2019 North Carolina Secretary of State Employee of the Year for his efforts to enable digital mortgage closings.
Digital innovation has been front and center for Ozie since the moment he walked into the job – his first official act was to participate in the inaugural meeting of the electronic reporting council in early 2005, back when digital mortgage closings were closer to science fiction than reality. He recognized the importance of building a comprehensive legal infrastructure to support fully digital mortgage closings, including laws, administrative rules, and standards that enable electronic signatures (eSignatures), eNotarization, and eRecording.
Below is a lightly-edited transcript of our discussion about his work, what he still hopes to accomplish, and his thoughts on the future of digital mortgage closings.
Camelia: Something that stands out to me is how many jurisdictions in North Carolina allow for eRecording. I’m sure that didn’t happen overnight. What did it take to get to that point, and what do you see being that next milestone towards expanding support for digital mortgage closings in North Carolina?
Ozie: Secretary (Elaine) Marshall likes to say, this is one of the longest overnight success stories you’ll ever hear. In 2005, there were three or four counties – Durham, Mecklenburg, New Hanover, and possibly one or two others – that started eRecording previously based on the passage of the Uniform Electronic Transactions Act, which essentially stated that documents in an electronic form or that have electronic signatures could not be denied or rejected simply because they were in electronic form.
Increasing the footprint of eRecording has truly been a collaborative effort between the Secretary of State’s office, the electronic recording council, and committed registers of deeds who are willing to be pioneers for change. There were a number of significant barriers we needed to overcome to get to where we are today. Each registrar is a duly elected official who has the discretion to accept eRecordings or not. Change is always daunting, and the fear of the unknown can actually be quite crippling.
This was extra challenging because North Carolina is one of the very few states that are referred to as a “race-to-record” state, and there was a great concern in the legal community that having the ability to eRecord would adversely impact the recording process. There was also no small amount of concern that outsiders would be able to swoop in and take business away from local attorneys.
The next milestone that we are going to face here is to have a major lender sign on to offer electronic closings in the state. Now, we have the legal infrastructure in place for traditional eClosings and remote online notarization (RON) closings can currently be done under our emergency video notarization order. There are several institutions offering eClosing to their customers currently, so we know that the process and the supporting infrastructure works – it’s just a matter of time before one of our larger lenders begins to offer eMortgages. We believe that when this happens, it’s going to have a much more significant impact in terms of the number of eMortgages that we see throughout the state.
Camelia: Digital mortgage closings provide benefits for every stakeholder involved, from the lender to the settlement agent, the investor, certainly borrowers. But I’m curious to hear as a policymaker, where have you seen the greatest benefits in enabling digital mortgage closings in North Carolina?
Ozie: Electronic mortgage closing is a win-win-win for all parties concerned. At the department, we have a keen interest on what is best for the consumer or the citizens of our state and we recognize that citizens are best served when the business community is able to provide quality goods and services that will best serve the citizens. The fact that government can also use these tools to provide more efficient and streamlined services to those who live and do business here, makes it a big win for everyone.
We believe that digital mortgage closings improves the quality of life for those who live and work in North Carolina, particularly in our current environment where the pandemic limits movement and direct interaction with others.
"Digital mortgage closings enable funds to be released faster, home buyers to have their keys delivered faster, loans to be sold on the secondary market faster, all while providing a higher level of security, assurance and efficiency in the closing process. Again, we see it as a win-win-win proposition."
Camelia: In your view, what role do technology providers like Snapdocs play as this regulatory landscape for digital mortgage closings continues to evolve?
Ozie: It’s vital that technology providers continue to be good partners with government policy makers to understand what the needs are and to provide sound technical advice and guidance where needed.
"I also believe that it’s an ethical imperative for technology providers to continue to pursue and develop better technologies based on common standards to keep the public and their business partners protected in this rapidly evolving space."
In an ideal world, we would have technology providers, business leaders, and policy makers work together to identify a basic set of standards that will ensure the safety, security, and efficiency of business processes and transactions, which would also provide uniformity across the industry.
It must also be said that the standards and the systems built on them should be flexible enough so that emerging technologies can be quickly and cost-effectively incorporated in updated standards, business processes, and in digital mortgage solutions. Essentially, there needs to be a paradigm shift where we move away from static programming to more advanced applications built on flexible interoperable platforms.
Camelia: We’re seeing a tremendous amount of interest in digital mortgage closings around the country. Clearly, COVID-19 was a catalyst for this, but as we start to see some light at the end of this tunnel, we’re not seeing lenders take their foot off the gas. It’s pretty clear that eClosings are no longer being viewed as a “nice to have.” What advice would you offer to lenders and settlement agents that do business in North Carolina and beyond, that are in the process of implementing digital mortgage closings?
Ozie: I would advise that they go ahead and continue to move forward with all haste. But, at the same time, I would advise them to make sure that they do their own due diligence and to ask questions and not settle for what might seem to be the easy answer. The fact of the matter is that the industry is evolving so quickly that it may be very easy to settle for outdated technology and processes that were the gold standard 12 months ago but has been downgraded to something that’s less than adequate today. It’s important to understand also that it’s difficult to have true experts in a field that’s still in its infancy. So, again, in doing your due diligence, it’s very important to make sure that you know what the questions are, you know the questions to ask, and then you ask them to a multiplicity of individuals so that you can kind of make sure that you have a true picture of what the realities of today are.
Demand to know all the options so you can make the best decisions for your organization about which path, processes, solutions, et cetera, will be best for you moving forward. I would also advise that they stay engaged with industry developments and select vendors who have the capability and willingness to educate them and to adjust to new standards, regulations, and technologies because again, things are evolving so quickly. Be prepared to cultivate the marketplace as well. There’s a great deal of consumer and industry level education that needs to be done before eClosings become commonplace. We’re certainly on the right track, but there’s a lot of education still left to be done.