In this coronavirus crisis, we desperately need to give financial relief to as many people as possible as quickly as possible. Many people are losing their jobs, and many more are at risk of reduced earnings.
We have excellent examples of how to do this. During the Great Recession, the federal government stabilized the housing market with programs such as the Home Affordable Refinance Program (HARP), which enabled borrowers to take advantage of very low interest rates to immediately reduce their monthly payments. Without a doubt, HARP was the single most effective government program for borrowers in the financial crisis. It enabled many families to hang on to their biggest investment, their homes.
In recent weeks, the Federal Reserve has similarly taken a bold step to significantly reduce interest rates. But to make the Fed’s monetary policy effective, we need to solve a problem that didn’t exist in the Great Recession — borrowers and others are afraid, and in many places prohibited, to meet in person at a closing table to sign a mortgage loan. We urgently need the Congress to enact the bipartisan SECURE Notarization Act to enable borrowers to refinance their mortgages digitally and reduce their monthly payments quickly.
To close a mortgage loan, a notary must validate the identities of the parties executing the documents. In some states, this can be done virtually today.
In fact, Virginia passed a bill allowing for remote online notarization in 2011, which has since enabled homeowners to close their real estate transactions live on a webcam by showing their face along with identification to a notary over the internet. Since that time, some other states have passed legislation authorizing remote online notarization, but much of the country still requires a notary at an in-person closing. Because there is no consistent practice across various jurisdictions, title insurance companies have shied away from insuring transactions done with virtual notaries.
The SECURE Notarization Act would provide a consistent set of basic requirements to make remote notarization universally accepted. The Act requires multi-factor authentication to ensure the security of transactions, as well as the use of tamper-evident technology. The Act also mandates the use of video recording and storage technology for auditability and traceability. Importantly, the Act also allows states to issue additional requirements for transactions within their jurisdictions.
In this crisis, with economic fallout all around us, borrowers are desperate to reduce their mortgage payments. It’s one of the few things that might allow them to keep their homes and provide for their families. We should also want to keep the purchase market alive and enable buyers and sellers to complete home purchases.
If we want to have a functioning housing finance system, we need to use modern, digital technology to close loans, whether it is a refinance or a purchase mortgage loan. Unlike many other policy questions under consideration, this would cost taxpayers nothing. Lenders and borrowers alike should be calling on Congress to pass the SECURE Notarization Act immediately.