Fannie Mae and Freddie Mac Ease RON Requirements

On March 31, Fannie Mae and Freddie Mac issued bulletins updating and clarifying their respective requirements for remote online notarizations as they seek to reduce in-person notarizations during the Covid-19 pandemic. Remote online notarization allows a notary to use electronic tools — typically video conferencing — to notarize documents while the signatory is physically located somewhere else. About half the states authorize the use of remote online notarizations, while several additional states have taken emergency actions to allow them in response to the pandemic.

Fannie and Freddie previously had electronic notarization guidance in their Selling Guide and Seller/Servicer Guide, respectively, that limited the use of RONs, as they are called.[1] The March 31 updates ease those requirements and clarify the conditions under which Fannie and Freddie will accept RONs of loans sold to them. Among other things, the bulletins establish:

• Minimum requirements for authentication of signatories
• Security and document integrity requirements
• Restrictions on the physical location of the notary performing the notarial act
• Requirements to comply with certain aspects of the Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA)
• Specific representations and warranties of the lender
• A list of states (below) in which lenders may sell loans to the GSEs with remote online notarization
• Clarification that they will accept remotely notarized documents meeting the new requirements in any state that, subsequent to the publication of the bulletins, adopts a law that permits the use of RONs or accepts out-of-state RONs

Notwithstanding the updates, lenders must otherwise comply with the guides’ provisions on using electronic records and signatures. So while the bulletins will help reduce friction with some transactions, care must still be taken to comply with the requirements of the guides, ESIGN, and the UETA.

The new guidelines do not override state requirements, nor do state law requirements override the GSE guidelines. For example, while Fannie Mae clarified that the system used for RON must provide for at least two-factor identity authentication — including using a government-issued photo ID that has a signature, credential analysis, and identity-proofing — each state has its own authentication requirements that often permit other forms of authentication.[2] That means a RON performed under a different authentication standard may satisfy state law but not GSE guidelines. The reverse is also true. Further, not all state notaries are permitted to perform RONs, and specific notarization means and recordkeeping requirements vary by state. For example, Nevada generally requires notaries to register as electronic notary publics in order to perform RONs.[3] Practically, this means that while the bulletins may clarify compliance with GSE requirements, state law may undermine the effectiveness of the GSEs’ attempts to promote contactless transactions during the pandemic.

 If you have any questions regarding the remote online notarizations or other related issues during the Covid-19 crisis, please contact an Orrick attorney with whom you have worked in the past.