The NNA’s Vice Chair Deborah Thaw provided an update on the “State of the American Notariat” in October during a speech at the 2014 Conference of the Australian and New Zealand College of Notaries in Honolulu, Hawaii. Here is a transcript of her remarks.
It is quite an honor to have been asked to address this distinguished group, especially since the relationship between the National Notary Association and the international Notary community has been so robust and longstanding.
It is also a pleasure to see so many familiar faces – perhaps a bit more distinguished – but recognizable none the less.
During the formative period of this relationship and throughout the succeeding years, we provided important forums for sharing information and trends about the Notary office -- in the United States, in civil law jurisdictions and in common law countries.
The importance of this was evident: this communications provided each group with an understanding and respect for the others. Procedures, rules, requirements and obligations though categorically different shared many of the same fundamental characteristics. This remains true today but now, the U.S. Notary is being asked, often required, to assume greater responsibilities in executing the Notary act and managing more of the document transaction.
Today, the increasing technological enhancements, such as e-notarization, would suggest that the American Notary office is being endangered or dramatically altered. In fact, what I will share with you this morning is our opinion that there is a strengthening and reinforcement of the Notary office and the reliability of the notarial act.
Today, based on numbers collected regularly by the NNA, there are 4.4 million Notaries in the United States. That equates to one Notary Public for every 78 U.S. citizens. And, they outnumber the populations of 88 nations including Norway, Costa Rica, Uruguay, Latvia and Estonia –combined and….New Zealand.
It’s satisfying that Notaries have such a large U.S. presence among the population, but what the numbers truly represents is something more.
These numbers show that there are 4.4 million citizens who are willing to take on the responsibility of a public office, to uphold the rules and regulations as required of the position and to conduct themselves honorably and skillfully.
And, it is not an easy process.
There are 56 jurisdictions in the United States, including American Samoa, Guam, Northern Mariana, Puerto Rico and U.S. Virgin Islands. Each state establishes and regulates its own notarial qualifications, statutes and regulatory procedures. For instance, California Notaries are required to be tested and fingerprinted to obtain a commission. They are also required to take continuing education during the course of their four-year term. In Ohio, applicants apply to become a Notary with the local court of common pleas. The judge of the court may require a Notary to take a test and have an oral interview before the judge to qualify. In Maryland, a senatorial endorsement is required and in Washington, a Notary applying for their first commission, must obtain endorsements from three people 18 years or older who are not relatives.
Notary terms vary among states as well. South Carolina has a term of 10 years. Indiana’s is eight. Ohio has a 5-year term and California, as in most states, has the standard four.
Of course, each Notary is only obligated to follow the statutes within their own state but the notarial act is accepted across state borders regardless of the differences in state laws. One can only imagine the confusion when a New York Notary who is not required to affix a seal to a document sends it to a state that does.
In addition, it makes for a wild system because states determine their own rules regarding each aspect of notarization from seal requirements, to acknowledgment wording to disciplinary procedures to strategic processes for eNotarization and eSignatures.
Yet, in spite of this distinctive characteristic of the American Notary office, there are exciting trends and developments that herald a dynamic future ahead for U.S. Notaries and which I will address today.
The first is a growing determination among the states to bring conformity to their Notary laws.
Though each state strives to uphold qualities unique to their own constituencies, the enactment of uniform laws across a large spectrum of statutes from adoptions to rules of evidence, has now begun to gain greater currency in Notary regulatory offices.
The second is the participation of Notary-related industries such as mortgage bankers, lenders and land title insurers who, working with the NNA, are establishing formal standards for Notaries by which they are qualified and certified to execute notarizations in the real estate and financial industries.
And lastly, is the growing threat of identification theft and fraud to which the Notary is appearing as a critical component to preventing such risks. The concept of personal appearance in identifying the signer continues to be a resolute principle of the notarial act.
Generally speaking, there is one motivating force behind each of these trends: consumer protection and government concentration -- both at the state and federal level --on laws that will improve the customer confidence and trust damaged as a result of the economic events of the past eight years.
Like many countries throughout the world, the United States is continuing its recovery from the 2007 housing market collapse and the subsequent subprime mortgage crisis.
Having been sliced and diced over these seven years, the causes and conditions of this “crash” are still being debated but the general opinion is that there was significant growth in investment savings between 2000 and 2007. The “temptation” on Wall Street to capitalize on this “savings” eroded financial policy and regulatory control mechanisms which led to an era of low lending standards, skyrocketing levels of household debt, breakdowns in corporate governance and systemic breaches in accountability and ethics at all levels.
Put simply, there was a breakdown in common business practices. Millions of flawed transactions flooded a financial system that also endured a breakdown of accountability and ethics in the U.S notarial system.
In some cases, Notaries were forced by superiors to ignore legal and professional practices for speed and efficiency. Countless notarizations were improperly performed by non-Notaries inside law and other mortgage servicing offices as the pressure and demand to process more transactions grew.
The discovery of these “flawed” notarizations was among the causes of the second U.S. economic catastrophe: the foreclosure “robo-signing” crisis which forced the major U.S. banks to halt their foreclosure proceedings.
The Associated Press defined robo-signing as “a variety of practices in which representatives of the mortgage industry signed documents and swore to their accuracy without verifying any of the information they contained.”
This meant a variety of scenarios: Qualified executives signed mortgage affidavit documents without verifying the information; employees forged an executive's signatures; lower-level employees signed his or her own name with a fake title. In the event, there was failure to comply with proper, legal Notary procedures.
How it happened could have been easy to predict, mortgage servicers and law firms were flooded with an unprecedented wave of foreclosures in 2007 and 2008 and eclipsed what their staffs could handle. As the workload built up, they began to use robo-signing practices as a way to keep the workflow going.
Instead, what they created were hundreds of thousands of foreclosure documents that were potentially fraudulent, which could not be trusted by anyone, including the courts. As a result, in the fall of 2010, major U.S. lenders including JP Morgan Chase, Ally Financial, and Bank of America suspended judicial and non-judicial foreclosures across the United States over the potentially fraudulent practice of robo-signing.
Granted, most of the flawed notarizations involved in the crisis were performed by non-Notaries. There are stories in which law firms had “stamping parties” in which they took every Notary seal they could find, threw them in the middle of a table, and told everyone in the office to stamp foreclosure documents. But, many were actual Notaries who told stories of being forced by their superiors to do this under the threat of losing their jobs.
In the aftermath of these systemic breakdowns, new laws, practices, regulation and oversight were implemented at all levels of government and business to ensure more confidence in commercial agreements and the financial industry.
This situation thus motivated many states to review their own statutes and notarial procedures, which were in some cases critically antiquated, and in others, too weak to provide consumer confidence.
Since 2010, there has been an average of 48 new Notary laws passed annually on a variety of issues ranging from identification requirements of the signer to more stringent or better defined disciplinary proceedings. Through September of this year, we are reporting 41 new laws enacted.
During the last several years, six states, took, passed or implemented the Revised Uniform Law on Notarial Acts – the RULONA: Oregon, Pennsylvania, Nevada, North Dakota, West Virginia and Iowa.
The RULONA is a model law created by the National Conference of Commissioners on Uniform State Laws to serve as the basis for states to modernize and strengthen their Notary statutes. This particular revision updates sections on notarial responsibilities, electronic recording and reiterates interstate recognition of notarial acts, among others.
Specific provisions, for example, require a notarial officer to refuse to notarize a document if satisfactory identification is not provided and allows a notarial officer to refuse to perform a notarial act if they are not satisfied that the person executing a record is competent. In another, a notarial officer is prohibited from performing a notarial act in which they or their spouse is a party or has a direct beneficial interest in the underlying transactions.
It also stipulates in one provision that personal appearance applies to notarization of tangible and electronic records.
While the specific changes adopted can vary by state, the law does seek to encourage states to adopt selected standardized provisions that will ultimately deliver similar guidelines for Notaries across the U.S.
Other current uniform laws of interest in the notarial space include a Uniform Power of Attorney Act in which a power of attorney acknowledged before a notarial officer is given a presumption of genuineness in court.
And a Uniform Foreign Unsworn Declarations Act which allows a person who needs to swear an oath on a document outside the U.S. to make the statement under penalty of perjury. The Act exempts certain documents such as wills and documents that require recording with a public custodian.
And, a few states – California, Utah, Oregon and Nevada – have passed laws to deal with so-called sovereign citizens. These bills allow the Secretary of State to refuse to attach an apostille to a document the Secretary suspects is to be used for an illegal purpose.
eNotarization, of course, is of particular interest to both industry and government as a means to streamline business processes and evolve notarization into a reliable procedural protection. So in addition to new legislative activity to govern its use, we are seeing some practical implementation.
Florida Attorneys are using it for court documents, lobbyists in North Carolina are using it to notarize their annual reports, and some mortgage and escrow companies are using it on documents that can be filed electronically with certain recorders of deeds.
Forty-nine states have enacted legislation allowing Notaries to use eSignature and 20 states have implemented legislation or rules specifically governing eNotarization. Widespread use though has not been embraced in the notarial execution of real estate and mortgage documents.
Its adoption, though, has been incorporated into other legal and commercial environments.
The Minnesota Bureau of Criminal Apprehension (BCA) has adopted a system of eNotarization for electronically processing documents used to formally charge suspected criminals. Previously, state law enforcement officers would spend hours couriering paper copies of criminal complaints from prosecutor to judge to Notary and back to the police station. The BCA’s eCharging system handles the entire process electronically, including the notarization. One rural jurisdiction estimates that the eCharging system is saving it $100,000 a year in staff time as well as the cost of paper, gasoline and other supplies.
General businesses also are benefiting from eNotarization. One East Coast entertainment business is using an eNotarization system to process 3,000 to 5,000 notarization required invoices each month. Previously, company employees would spend nearly a week printing, stapling, notarizing and shipping invoices, some of which contained hundreds of pages at a cost of at least $350,000 a month in shipping, supplies and staff time. By incorporating electronic notarization, they can send most invoices by email and cut their costs in half.
With all of this activity on the eNotarization front, the National Notary Association has been working with a national panel of 28 experts to draft a new legislative model focused entirely on electronic transactions: the Model eNotarization Act (MeNA).
The MeNa offers state legislators electronic notarization provisions that more easily update their existing Notary laws and is the latest in a series of model statues published by the NNA that have helped lawmakers revise and modernize their Notary laws.
Following the Model Acts of 1973, 1984, of 2002 and 2010, more than 40 U.S. states and territories have enacted some or all of the provisions of the four model acts.
The Model Act of 2002 was the first to incorporate rules for electronic notarization. At that time, the electronic notarization provisions built on the fundamental definitions and procedures of paper-based sections. It required lawmakers to integrate and cross-reference the two codes – one paper based and the other electronic – if they wanted to retain their current paper-based Notary laws while still adopting eNotarization provisions. It was a cumbersome and painstaking task.
In contrast, the MeNa is being drafted as a “standalone,” model statute allowing legislators to incorporate all or part of its provisions without having to rewrite existing laws.
The MeNA Review Committee that is drafting the model act includes Nevada Attorney General Catherine Cortez Masto, North Carolina Secretary of State Elaine Marshall, and Delaware Deputy Secretary Rick Geisenberger. It also includes nationally recognized authorities on electronic documents and signatures.
Even with uniform law imprimaturs, state legislators and the Notary regulating offices are reticent to act quickly to address Notary matters when issues such as budget, voting laws and corporate regulation can overwhelm limited office staff and resources.
While we can identify this trend of statutory activity as contributing to the overall improvement of the Notary office, there is also a development that has come from an unexpected source: private industry. Long recognizing that state government is limited in its ability to alter its Notary laws, the NNA believed that if change were to come, industry-related organizations would have to be the drivers. Until recently, they too were disinclined to alter a system that seemed to work comfortably for them.
This changed in 2010 when an interest in the Notary office and its management was illuminated in the precedent-setting Illinois Supreme Court ruling in Vancura v. Katris.
In this case, the state Supreme Court of the State ruled that an employer can be held liable for the misconduct of its Notary employees who are not properly trained or supervised.
The case centered around a real estate transaction in which a Notary at a retail copy and office supply store performed acknowledgments on two documents containing the forged signature of plaintiff Richard P. Vancura. Vancura, the victim, sued the Notary and the retail outlet. During the trial, the Notary testified that he only required signers to present an ID with a signature — and not a photo — so he could match it to the signature on the document.
Not only was the Notary held liable but the Supreme Court also ruled that the employer was liable for damages because it had a broad, legal responsibility to make sure its Notaries followed notarial best practices above and beyond what state law required.
Moreoever, the court referenced the NNA’s Model Notary Act’s higher level of notarial requirements when it wrote that employers have a “common law” duty to protect the public from a Notary who fails to meet the higher standards of care -- even if state law does not mandate that higher level of performance.
Suddenly, the pressure was on employers to ensure that their Notaries were appropriately trained and supervised. And businesses and corporations at all levels began to focus on creating internal programs, training and oversight of their Notaries Public.
But if government is slow to act, business can be equally sluggish.
However, this ruling coincided with the passage of the nation’s comprehensive Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 which mandated greater consumer protections and regulation of financial markets. Now, businesses began to listen.
One of the Act’s mandates was the creation of a new federal agency — the Consumer Financial Protection Bureau (CFPB) — which was given sweeping powers to regulate all types of financial companies.
From its inception in July 2011 to June of this year, the CFPB received more than 85,000 complaints from borrowers through its consumer complaint system. Spurred by this flood of consumer reaction, the agency issued thousands of pages of new regulations, recommendations and guidance. It also brought numerous enforcement actions against lenders and other financial companies that resulted in more than $750 million in refunds and penalties. And it implemented an active audit program for the companies it regulates. All of this work is focusing on protecting the consumer and pressing the financial industry to provide a much better and more consistent customer experience.
Because these institutions are obligated to ensure consumers are protected throughout the transactions process --- suddenly Notaries, as the final arbiters in the real estate transaction, were being noticed.
Many companies covered by the Act have launched their own corporate programs requiring their Notaries go through an annual training program and exam, even if it is not required by law in their state. They are also requiring Notaries to pledge to follow the Notary Public Code of Professional Responsibility … a procedural and ethical guide developed and published by the National Notary Association.
As a result of our preeminence in the education of Notaries, we have 360 banks and credit unions that are participating in our Trusted Notary Program including JP Morgan Chase, Wells Fargo, US Bank and Citibank.
In addition, there are another 600 clients including title companies, retail stores, and non –banking financial institutions such as check cashing stores, insurance agencies, and tax preparation companies that rely on our organization to deliver compliance metrics that conform to regulatory obligations.
Additionally, managers that oversee staff Notaries are being trained in notarial oversight, ethical practices and law. This is especially important in firms that perform cross-border transactions between U.S. states, where Notary laws and regulations often differ.
Because compliance requires auditing, the National Notary Association, in collaboration with these clients, developed a centralized portal that provides banks and other institutions with the detailed reporting about who their Notary employees are, when their seals were manufactured and when their commissions expire. Our clients utilize these reporting metrics for their own compliance efforts and regulatory reporting.
As an example I’d like to share with you the effort of JP Morgan chase who was awarded our March Fong Eu Achievement Award this year for its groundbreaking One Chase Notary Program.
Since 1979, the NNA has bestowed this annual award upon key state officials and influencers in recognition of their significant achievements to improve the standards, image and effectiveness of the office of Notary Public in the United States.
But this year we came across a national effort so unique and compelling that — for the first time ever — we chose to honor an organization: JPMorgan Chase & Co.
Challenged with a need to generate and track mortgage lending paperwork and providing a better customer experience, Chase reviewed its procedures involving sworn documents and recognized the importance of notarial best practices, launching the One Chase Notary Program.
Their stated goal was to provide an outstanding customer experience, offer the highest level of consumer protection and create consistent, best-in-class notarial practices that comply with legal and regulatory requirements.
The program began as a partnership between the JP Morgan Chase & Company legal team, operations experts and branch leaders. With a final group of seven employees, the team drafted a firm-wide policy for its Notaries including requirements that Notaries must pass the training course on notarial best practices, must maintain a journal of their activities including specific minimum data about the document even if there is no state requirement to do so and must require the signer’s personal appearance for all notarizations.
To understand the scope of the program, consider that Chase has 24,000 Notaries in 36 states working at thousands of branches.
The developments I have just discussed generally apply to Notaries Public who are employed by a business or corporation to perform job-related notarial acts. But many U.S. Notaries are self-employed or independent Notaries who perform notarizations within and apart from the mortgage finance industry. If they are performing notarial acts for real estate related documents, they are identified as Notary Signing Agents – acting as third party service providers to lenders and title companies to facilitate loan closings.
These Notaries, too, are facing increasing requirements as the federal government expands its regulation of the mortgage finance industry. Just as financial services companies have implemented internal controls for their staff Notaries, they are also under pressure to improve the quality and oversight of the 3rd party Notaries they hire to facilitate loan closings.
The publication in April 2012 of a CFPB Bulletin under the heading, “Service Providers,” prompted executives at several of the major lenders and title underwriters to start addressing what happens at the signing table.
The two-and-a-half-page Bulletin noted that financial institutions cannot shift the burden of complying with federal law to the service providers they hire, but are ultimately responsible for ensuring that their service providers follow the law. A service provider that fails to uphold the law or has “weak internal controls” can harm consumers and create potential liabilities for themselves and their contracting firms.
In short, lenders are now being held accountable for the actions of their outside service providers, including Notary Signing Agents. As a result, these expectations have been incorporated in the contracts between banks and title companies, which in turn can affect signing services and Notary Signing Agents. Failing to abide by the terms of the contacts can have serious consequences for title companies and lenders.
Amid this reality, 40 organizations including mortgage lenders, title companies and attorney closing firms gathered to create the Signing Professionals Workgroup (SPW) that among other interests is creating, maintaining and promoting professional standards for Notaries Public who provide signing services in connection with a closing of a mortgage finance or real property transaction.
To date, the SPW has created a certification framework for Notaries that handle loan closings which encompasses five standards:
- Specifications for an annual background screening
- A Certified Signing Specialist Code of Conduct
- A standardized written signing script
- Specifications for an annual competency examination
- Notary errors and omissions insurance with a defined limit of liability
These Standards are designed to help signing agents and the companies who use and rely on their services to meet their regulatory compliance obligations and improve the customer experience at a mortgage finance or real property settlement conference.
It is clear from these examples and the rapid and resolute shift in industry, government and the public’s perceptions of the notarial process, that the role of the U.S. Notary is being reaffirmed.
Speaking for the Association, I am gratified that our years of supporting the importance of education, of best practices and of high standards are being recognized.
Government and private industry have clearly propelled many of the new enhancements of the U.S. Notary office but there is a third component driving this progress.
And that is the constant standard on which notarization relies: trust.
Each of these developments in law and commerce has only served to underscore that integrity and reliability had been appallingly discounted. The value of a signature, the significance of an oath, the acknowledgment of volition had been sorely compromised.
When it didn’t seem to matter, it mattered more than anyone could predict.
Thankfully this inclination to disregard standards is being reversed. Moreover, it validates our conviction that the Notary Public office ensures immeasurable protection to document transactions.
In the end, the significance of the notarial act continues to resonate with the signer, the document’s recipient and the officials who rely on its integrity.
Technology will continue to allow us to work more efficiently and communicate more quickly but it challenges us with its threats. Identification fraud, data breaches and social media abuses are also part of technology – threats Notaries must act to inhibit and counteract.
Technology represents a tool which we use in the notarial process, not a replacement for the process itself.
Having worked over the past several years with large institutions, state and local agencies and regulatory authorities, it is evident that the overwhelming sentiment is to restructure systems where possible and retain them when indispensable.
What we are witnessing is not only the strengthening of notary procedures and practices whereby consumer confidence can be restored but a reestablishment of the American Notary as a key participant in the security of document transactions.
The essential principles of notarization that were eroded during these most turbulent economic and worrisome years have been restored. These principles continue to be the substantiated identity of the signer, their personal appearance before the Notary, and the veracity of the act of acknowledgment.
This emerging focus on the notarial act confirms what our Association has long advocated – there is a vital role for Notaries in protecting the nation’s transactions and there is a contingent obligation that they be trained to do it properly.
American Notaries, put simply, are being held to much higher standards than ever before and American governments and industries now are viewing notarization as an essential safeguard in building trust in our complex system of law and commerce.
We invite you to recognize this achievement as well and continue to accept our notarizations with the confidence and assurance with which you accept those of your other international counterparts. Thank you.