Historically, Indiana law required in-person notarization, where a party was required to physically meet with a notary public and provide identification. Then, the notary public would personally witness and attest to the party’s wet ink signing of the document.
Remote Online Notarization (“RON”) was approved by the Indiana legislature in 2018 at Ind. Code § 33-42-17, but its effective date was extended to July 1, 2020 as the state needed additional time to implement the required rules and technology associated with online notarization. However, in March 2020, the Covid-19 pandemic and concern over providing safe and reliable means of notarizing essential documents pushed government officials to expedite RON’s effective date and the adoption of 75 Ind. Admin. Code 7, regulations enabled by RON. As a result, RON went into effect March 31, 2020 instead.
This action cleared way for the Indiana Secretary of State to approve remote technology vendors that provide platforms to make the required real time audiovisual recording of the notarial act. These recordings must identify and authenticate the signer, as well as confirm that the signer is acting freely. To date, six (6) vendors have been approved by the Indiana Secretary of State.
Policies and Procedures
Under the rules, current notary publics in Indiana are not authorized to perform online notary functions without taking additional action, including registering as a remote notary with the secretary of state and maintaining a secure electronic journal detailing each notarial act. Additionally, a remote notary is still required to be physically present in the state of Indiana, even if the signer is outside the state, and the notarial act will be governed by Indiana law.
It is important for banks and servicers to be aware of RON’s availability and the state rules pertaining to it. Failure to originate loans in accordance with proper RON requirements may cause future challenges to enforcing default provisions, most typically in the context of foreclosure and bankruptcy proceedings.
A chief concern with RON relates to a holder’s right to enforce the note and mortgage and whether a holder can establish the correct chain of title. If there is no wet ink copy of the promissory note and mortgage proving it to be the original, questions may arise as to who actually holds the promissory note.
As in most states, Article 3 provisions of the Uniform Commercial Code (UCC) apply to determine that holders in possession of the original note are entitled to enforce it. Currently, it is an open question as to how RON may apply in the context of Indiana’s UCC provisions for holders. For the time being, however, Indiana judges will likely permit holders to enforce promissory notes if servicers can authenticate electronic originals.
As remote online notarization becomes more commonly available, so may the natural consequence of its limitations within the legal setting. In this respect, title insurers, along with skilled and knowledgeable default litigation and bankruptcy counsel, may ultimately be the defenders of RON’s virtues.
This publication is for informational purposes only and does not constitute an opinion of Manley Deas Kochalski LLC.
Do not rely on this publication without seeking legal counsel.