Patchwork of state laws hurts U.S. effort to modernize mortgages

Fri Sep 9, 2016 8:01am EDT
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By Suzanne Barlyn

NEW YORK (Reuters) - As Chuck DeBonis was wrapping up his stint as a civilian paramedic at a military base in Kuwait earlier this year, he found a home he wanted to buy in the Virginia town of Bristow for his return.

The problem? His mortgage lender wanted him to sign paperwork, in person, in front of a notary public. So the 30-year-old flew 6,500 miles to sign on the dotted line.

"It was ridiculous and unnecessary," DeBonis said in recounting his 14-hour trip.

His problem may be unusual in its scope, but it is one that millions of U.S. homeowners and buyers face every day – and one some U.S. lenders and state lawmakers are now trying to solve.

    As it stands, nothing is official in mortgage documents until there's a face-to-face meeting with a notary public, a person who verifies borrowers' identities.

Lenders have long recognized notarization as a critical anti-fraud measure. But the practice – which dates back at least to Ancient Rome – is becoming passé in an era of FaceTime, Skype and live-streamed social media.

The financial industry is pressing for change in the form of "remote notarization." The service, available through companies like Notarize Inc and NotaryCam Inc, uses secure webcams to link borrowers and notary publics. Before their virtual meeting, borrowers must answer random questions from their credit histories to prove who they are.

But adoption has been limited because a patchwork of laws in most states does not allow for the practice, and city and county governments are slow to change. Investors who buy the loans also impose restrictions, such as requiring original signatures to avoid fraud.   Continued...

A "For Sale" sign is seen outside a home in Cardiff, California February 22, 2016.  REUTERS/Mike Blake