Frequently Asked Questions
- Are both Owner's and Lender's Title Insurance policies required?
- Are there jurisdictional differences within the US that affect title and escrow?
- Can homeowners shop around for Title and Escrow services?
- Can the property owner get rid of a lien?
- How are title defects 'cured' (resolved) traditionally?
- How is traditional title insurance different from other types of insurance, such as car insurance?
- How large is the Title and Escrow Industry?
- If title is not paper what is the paper you get?
- Is Title and Escrow really always required?
- What are electronic recordings (eRecordings)?
- What are electronic signatures (eSignatures)?
- What are government-sponsored enterprises (GSE)?
- What are the different components of the escrow process?
- What are the steps of the Title and Escrow process?
- What happens during foreclosure?
- What is 'vesting' as it relates to property ownership and how does it affect your title ownership?
- What is a Closing Protection Letter (CPL)?
- What is a commitment?
- What is a digital closing?
- What is a drive-thru closing?
- What is a home appraisal?
- What is a hybrid closing?
- What is a limited power of attorney (LPOA)?
- What is a notarial act?
- What is a notary block?
- What is a notary public?
- What is a paperless transaction?
- What is a property's ‘legal description' and how can it cloud title?
- What is a title lien?
- What is a title plant?
- What is a title search?
- What is a wet signature?
- What is an audit trail?
- What is an easement and how can it cloud title?
- What is an electronic closing (eClosing)?
- What is biometric technology?
- What is communication technology?
- What is COVID-19?
- What is credential analysis?
- What is electronic notarization (eNotarization)?
- What is end-to-end encryption?
- What is Fannie Mae?
- What is Freddie Mac?
- What is gap insurance?
- What is Home Owner's Title Insurance?
- What is in-person electronic notarization (IPEN)?
- What is knowledge-based authentication (KBA)?
- What is Lender's Title Insurance?
- What is nonpublic personal information (NPI)?
- What is papering out?
- What is remote online notarization (RON)?
- What is RULONA Section 14A?
- What is tamper-evident technology?
- What is the American Land Title Association (ALTA)?
- What is the Electronic Signatures in Global and National Commerce Act (ESIGN)?
- What is the Escrow and Post-Closing Process?
- What is the Mortgage Bankers Association (MBA)?
- What is the Mortgage Industry Standards Maintenance Organization (MISMO)?
- What is the National Conference of Commissioners on Uniform State Laws (NCCUSL)?
- What is the Property Records Industry Association (PRIA)?
- What is the Revised Uniform Law on Notarial Acts (RULONA)?
- What is the Securing and Enabling Commerce Using Remote and Electronic (SECURE) Notarization Act of 2020?
- What is the system of record for deeds and title issues?
- What is the Uniform Electronic Transactions Act (UETA)?
- What is the Uniform Law Commission (ULC)?
- What is the Uniform Real Property Electronic Recording Act (URPERA)?
- What is Title and Escrow?
- What is Title?
- What is traditional closing?
- What power does a lien serve?
- What's a title agency?
- What's a title company?
- What's a title underwriter?
- Who pays for Title and Escrow?
- Why is Title and Escrow required?
Are both Owner's and Lender's Title Insurance policies required?
A lender's policy is almost always required when there is a mortgage. Adding an owner's policy to a lender's policy usually winds up costing the borrower only $50-$200 in addition to what a standalone Lender's policy would have cost (though the breakdown gets complicated). As a result, most resale transactions result in two policies being issued: a lender's policy and an owner's policy. This is not necessary; the buyer can decide not to get the owner's policy and save $50-$200, but this rarely happens.
For refinance transactions, only a Lender's policy is issued, at about half the cost of a resale transaction.
Are there jurisdictional differences within the US that affect title and escrow?
Yes, title insurance is largely a function of state real property law which varies across the U.S. While there are some industry stakeholders that dictate national standards (i.e. Fannie Mae, CFPB, ALTA, etc.) those standards often allow for regional differences. For instance, in certain states, it is the unauthorized practice of law to conduct escrow or a title search without a law license, whereas in other states, attorneys are generally not involved in the transfer of residential real estate. Other practices like how prices are agreed upon, split between the parties vary greatly across the nation. (see state-by-state laws and customs) Given this wide array of practices, this document attempts to capture the most common behavior; for any particular transaction, the specifics may differ.Back to Top ↑
Can homeowners shop around for Title and Escrow services?
Yes, home buyers do have the right to select their title and escrow provider. Despite the requirement that title and escrow be explained to buyers and the fact that they sign a piece of paper acknowledging they have a right to use the provider of their choice, more than 90% of the time, the buyer just goes with who their advisor (real estate agent or loan officer or attorney) tells them to use, and accepts the pricing without question.
Some complexity around this area happens during the resale process, where the buyer and seller usually have different real estate agents. Depending on geography, either the buyer's agent or the seller's agent (typically the latter) gets to select the title and escrow provider, and sometimes there is sparring between the two of them as to which one to use.
Can the property owner get rid of a lien?
If the property owner (or someone on the owner's behalf) pays the lien, then the owner can ask for the lien to be removed. Oftentimes liens are not removed because either the property owner or the lien holder (or both) neglect to file a release. As a result, the lien often lies dormant until it's uncovered during the next transaction.Back to Top ↑
How are title defects 'cured' (resolved) traditionally?
The traditional process of curing title involves resolving the issues listed on the commitment through research and/or payment. In the case of a lien, once it's been certified as a false positive or paid, a release is submitted to the county (this frequently fails to take place, however).Back to Top ↑
How is traditional title insurance different from other types of insurance, such as car insurance?
Title insurance protects against the past, whereas car insurance and the likes of it protect against the future. A car insurance company has no control over whether the insured actually gets into an accident; they can only screen the probability upfront, not the actual event. Title insurance, in contrast, is perceived to work to research all past actual events, delineate/resolve them, and the insurance guarantees the accuracy of that research.
Therefore, title is traditionally more akin to E&O self-insurance (work done by the company is certified against its own demonstrable error), rather than P&C insurance (protection against events that can't be precisely predicted).
How large is the Title and Escrow Industry?
Title and Escrow is a $25 billion industry in the US. Each year consumers are charged $15 billion in title fees and $10 billion in escrow fees through the processing of roughly 10 million mortgages.Back to Top ↑
If title is not paper what is the paper you get?
The document that usually shows ownership is called a 'grant deed'. A grant deed is simply a statement on the transfer of ownership between parties. It's admissible in court, and can be forged (which is a potential source of title fraud).Back to Top ↑
Is Title and Escrow really always required?
Title and escrow are not required if the buyer is paying for the property without the assistance of a loan (which is really only the case in about 10% of all transactions). If the buyer and seller choose to go without title and escrow, it's up to them to make sure all legal documents are filed properly, and they bear the risk of any legal issues. For this reason, most individuals still choose to purchase title and escrow, even when there is no loan.
For loans less than 20% of the property value, such as home equity loans, lenders often forgo the title process or request certain non-title insurance products (so-called 'lien checks').
Lenders could choose to go without title and escrow for 'balance sheet loans' (loans they do not sell to the secondary market). However, most lenders still require title and escrow services for these loans due to the risks involved.
What are electronic recordings (eRecordings)?
The recording of real property instruments in county records offices in an electronic manner. Across the country, the ability of a local recording office to eRecord depends on the level of funding available for trained personnel, equipment, and other resources; the resolve of the leaders of these offices (sometimes political in nature); and the economic, business, and social priorities of the locality.Back to Top ↑
What are electronic signatures (eSignatures)?
Broadly defined as any electronic sound, symbol, or process attached to or associated with a document that an individual uses to express their intent to sign a document. In real estate, eSignatures are commonly used to sign mortgage forms, closing disclosures, seller's affidavits and other closing documents.Back to Top ↑
What are government-sponsored enterprises (GSE)?
A type of financial services corporation created by the U.S. Congress, intended to enhance the flow of credit to targeted sectors of the economy – making them more efficient and transparent – and to reduce the risk to investors and other suppliers of capital.Back to Top ↑
What are the different components of the escrow process?
The escrow process includes the following:
Scheduling a close date
Once a transaction is clear to close, the agency works with the lender and borrower to pick a convenient close date. The agency (or 'settlement agent') works with an in-house or external notary service to schedule a meeting with the borrower at the desired location. Escrow officers may or may not be present. At States Title, we use a third party notary service for scheduling and do not include escrow officers.
The notary meets with the borrower(s) in an escrow office or another convenient location. The borrower signs all necessary documents in the 'closing package.'' This package can reach 100-150 pages for a refi.
Post-closing: funding, disbursement, recording
Once the closing package is signed, it is returned to the agency and lender for review. For refis (except investment properties), the borrower has three days to change or cancel the transaction. This is known as a 'right to rescission').
Funding and disbursement
Once any rights to rescission have expired, the lender wires funds to the escrow account. Funds are then disbursed to the relevant stakeholders and any payoffs, borrower proceeds, fees, or outstanding taxes are paid.
A portion of the closing package is sent to the county recording office, where the documents are ''made official'' by being placed on county record. Recording can occur before or after fund disbursement, depending on the state. Many counties accept eRecording, while some still require ink-signed originals.
What are the steps of the Title and Escrow process?
The exact flow of the Title and Escrow process depends on the type of transaction. In a resale transaction the buyer purchases property from a seller, usually with a mortgage loan. In a refinance transaction, the current owner obtains a new loan for the property. There are also other specialized transactions such as builder (new home) and commecial (non-residential) transactions. The following steps illustrate the traditional flow of the Title and Escrow process:
1. The order is placed and categorized. An open order indicates the process has begun. A closed order indicates the transaction was closed. A cancelled order indicates the process was actively cancelled or never progressed. Cancellation occurs about 25-30% of the time. For traditional resale in many states, the seller's real estate agent (or an attorney) issues the order ahead before the property goes on the market.
2. The Title and Escrow provider is selected, usually by whomever issues the order.
3. An offer is made, and the title process begins.
4. The lender approves the buyer's application and the buyer deposits funds (downpayment and fees) into open escrow.
5. The property is appraised.
6. The title process begins and a title commitment (or preliminary title report) is produced which consists of a preliminary insurance policy and any title issues that need to be addressed.
7. If the title process results in a clear to close status and the appraisal comes through as expected, escrow work can conclude.This includes the creation of a schedule of fees, the signing and notarization of relevant documents, the disbursement of funds, and the recording of relevant documents in the various county offices.
8. Finally, the title insurance policy itself is issued, consisting of the final commitment plus any changes that have taken place in the interim.
A traditional refinance transaction follows similar steps, except that there is no seller and the bank starts off the title search which makes it the controlling entity in choosing the title provider.
What happens during foreclosure?
Banks can foreclose on a property because they have a lien on it. In many states this can happen as fast as 90 days after the last mortgage payment they receive.
The federal and local government, construction contractors, and other parties can also foreclose on a property if the owner defaults on a payment. There is usually a statutory period for these types of foreclosures.
Once the foreclosure process starts, all lien holders are notified by the foreclosing entity. The earliest (most 'senior') lien holder gets paid first, even if they did not initiate the foreclosure process. A properly executed foreclosure process will clear title. However, if all lien holders are not notified (or if other mistakes are made), it's possible to have title issues on recently foreclosed homes.
What is 'vesting' as it relates to property ownership and how does it affect your title ownership?
Vesting,' a description of the current legal owners of the property, is the most serious type of cloud on title. By default, the vesting on a property is the same as that on the latest grant deed. However, if there's been a marriage, divorce, or death since the last deed, then depending on the state, the vesting of the property can become a cloud on title.
For example, when a married couple purchases a property, they are both named as the buyers on the grant deed. Should they later divorce, the spouse who is awarded the property still needs permission from the ex-spouse to sell or refinance the home, often through a quit claim deed. If the owner does not obtain a quit claim deed, then when the property is sold to a new owner, the ex-spouse can come out of the woodwork at any time and lay claim to the property. As a result, there would be a total failure of title and the new owner would suddenly have no right to the property whatsoever. In instances like these, the title insurance provider loses a significant fraction of the value of the home.
Finally, we use vesting when we record the documents of lien and property ownership during the closing of a transaction. Proper vesting is crucial to the customer in cases when property ownership changes hands, either in resale or refinance scenarios.
What is a Closing Protection Letter (CPL)?
A Closing Protection Letter 'CPL' is a type of non-title coverage provided to the lender by a title underwriter once an order is received. The CPL guarantees that the lender's disbursement instructions are followed precisely. It also covers the theft of the money in escrow by any of the title employees (even though these employees usually belong to a different agency than the underwriter). For this reason, underwriters need to thoroughly vet the title companies they work with.Back to Top ↑
What is a commitment?
A commitment (known as a 'prelim' in California) is the underwriter's promise to issue an insurance policy. It contains all the information that will be included in the actual insurance policy, plus any items uncovered during the title search that need to be cured ('curative items'). The commitment can be updated throughout the curative process to reflect changes (e.g. loan amounts, updates in vesting, etc.) and are binding (except in California).Back to Top ↑
What is a digital closing?
Sometimes referred to as an eClosing, a digital closing is a real estate closing comprised of four main elements that correspond to core events in the closing process: Electronic documents, or eDocuments; electronic signatures, or eSignatures; electronic recordings, or eRecordings; and electronic notarization, or eNotarization. Although closings commonly seen in the market today involve various combinations of these elements, all four elements must be present to comprise a truly digital closing.Back to Top ↑
What is a drive-thru closing?
An emergency type of real estate closing, developed during the COVID-19 crisis to comply with self-isolation measures, in which homebuyers sign closing documents from inside their cars while the title agent maintains a safe distance, wearing appropriate personal protective equipment, such as gloves and a face mask.Back to Top ↑
What is a home appraisal?
An appraisal verifies that the house is actually worth the amount it is being purchased for, protecting both the buyer and the mortgage lender. It traditionally involves an in-person visit to the property and an inspection of the house. A real estate transaction may not close if the appraisal is different from the listed price of the property. Appraisals are not part of Title and Escrow process.Back to Top ↑
What is a hybrid closing?
One step up from a traditional closing, a hybrid transaction is conducted at a table with the notary and signers in the same room, but some of the documents are signed on paper with ink, and some documents are signed electronically.
What is a limited power of attorney (LPOA)?
The designation of another individual to manage, acquire, mortgage, refinance, convey, or sell property on behalf of the principal. During the COVID-19 crisis, the GSEs provided guidance allowing for a closing agent or other affiliated party to sign loan documents on the borrower's behalf using a properly executed LPOA.Back to Top ↑
What is a notarial act?
Any written narration of facts drawn up by a notary public, authenticated by the notary's signature and official seal, and detailing a procedure that has been transacted by or before the notary in their official capacity. A notarial act is the only lawful means of proving those facts of which it is the recognized record.Back to Top ↑
What is a notary block?
Also called a notary acknowledgment, a sworn statement made by a notary public that claims a specific person signed a form. In accordance with state law, the notary public is required to view government-issued photo identification in order to prove the signer is the authorized party.Back to Top ↑
What is a notary public?
A public officer constituted by law to serve the public in non-contentious matters, usually concerned with estates, deeds, powers of attorney, and foreign and international business. A notary's main functions are to administer oaths and affirmations, take affidavits and statutory declarations, witness and authenticate the execution of certain classes of documents, take acknowledgments of deeds and other conveyances, protest notes and bills of exchange, provide notice of foreign drafts, provide exemplifications and notarial copies, and perform certain other official acts, depending on the jurisdiction.Back to Top ↑
What is a paperless transaction?
A real estate transaction that involves no paper documents. Paperless real estate transactions offer several benefits: Convenience for buyers and sellers, reduced printing and storage costs, improved efficiency and turnaround time, and easier record retention.Back to Top ↑
What is a property's ‘legal description' and how can it cloud title?
A property's 'legal description' is the geographic boundary of the property. If a legal description is stated incorrectly, it must be fixed through a property survey or else it could become a cloud on title.Back to Top ↑
What is a title lien?
A 'lien' is a claim to a piece of property for a specific dollar amount. It is filed in the county system of records and can be one of the causes of a clouded title.
A 'voluntary lien'is a lien that someone agreed to at some point in time. For example, if a seller once obtained a home equity loan on their property, they voluntarily agreed to give the lender a claim to a piece of their property to use as collateral. Likewise, any buyer/borrower who obtains a mortgage voluntarily agrees that the mortage serves as a lien on the property.
If an owner of a piece of property fails to pay their bills (such as a tax bill, garbage bill, contractor bill, etc.), the party who is owed money can file a lien on the property. This is an 'involuntary lien.' Once it is filed, the lien holders have a right to a piece of that property, up to the amount of the lien. Liens are generally first-come, first-served; the first person to have a lien on the property is paid back first.
What is a title plant?
A 'title plant' is a database of property records, organized by location rather than by property owner. A title plant allows title searches to be completed quickly and efficiently by title companies so that a title can be cleared and title insurance issued. These title plants may be owned by the title company or may be a separate company with a formal information-sharing agreement with title companies-- allowing title companies to access, update, and track a shared pool of property information.Back to Top ↑
What is a title search?
A title search is an investigation to uncover any possible issues that may 'cloud' (or cause problems) in the transfer of property ownership. The search is conducted through the 'title plant' (official title records) and includes the current vesting and legal description of the property and any liens along with court records.
If clouds are discovered, the next step is to locate 'curatives' (ways to 'cure' or fix the title defects). This may include actions needed to remove liens, change vesting, and/or otherwise modify the title so that the transfer of ownership can take place.
What is a wet signature?
The act of physically signing a piece of paper, called a 'wet' signature because an individual signs with a pen that uses liquid ink. Some state laws, local recording jurisdictions, and individual companies require wet signatures on closing documents, but in 2000, the Electronic Signatures in Global and National Commerce Act (ESIGN) established that wet signatures and electronic signatures hold the same legal weight.Back to Top ↑
What is an audit trail?
Records of a transaction or agreement, including initial contact with a customer and all subsequent actions, such as payment, signatures, and the delivery of products and services. For notaries, an audit trail is useful for recovering lost transactions, maintaining security, responding to customer complaints and inquiries, and addressing tax or legal issues.Back to Top ↑
What is an easement and how can it cloud title?
An easement is an agreement which gives the an agreed entity the right to access a certain part of the property, for example to a utility company, to maintain a sewer or natural gas line; title insurance guarantees that there are no unstated easements on its policies.Back to Top ↑
What is an electronic closing (eClosing)?
Sometimes referred to as a digital closing, an eClosing is a real estate closing comprised of four main elements that correspond to core events in the closing process: Electronic documents, or eDocuments; electronic signatures, or eSignatures; electronic recordings, or eRecordings; and electronic notarization, or eNotarization. Although closings commonly seen in the market today involve various combinations of these elements, all four elements must be present to comprise a truly digital closing.Back to Top ↑
What is biometric technology?
The use of technology to identify a person based on some aspect of their biology, such as fingerprints, palm prints, vein patterns, DNA profile, and facial, iris, gait, or vocal recognition.Back to Top ↑
What is communication technology?
Defined by Section 14A of the Revised Uniform Law on Notarial Acts (RULONA) in 2018 as: 'Any means or process that allows a notary public and a remotely located individual to communicate with each other simultaneously.'Back to Top ↑
What is COVID-19?
Colloquially known as coronavirus, an infectious disease that causes respiratory illness with symptoms such as cough, fever, and in more severe cases, difficulty breathing. The World Health Organization (WHO) classified coronavirus as a pandemic on March 11, 2020, resulting in sweeping public and business closures, shelter-in-place orders designed to reduce the virus' spread, and supply shortages across the world.Back to Top ↑
What is credential analysis?
A process by which a principal's government-issued identification card is validated. The process requires a third party to use technology to review the security features on an ID and confirm it is not fraudulent. As part of the remote online notarization process, the third party provides the result of the authenticity test to the notary, enabling the notary to visually compare the credentials used with the principal, who personally appears before the notary via audio/visual technology.Back to Top ↑
What is electronic notarization (eNotarization)?
A notarized transaction in which documents are notarized electronically. Primarily seen in two forms: An in-person eNotary transaction, where the notary and signer are present in the same location, the notary identifies the signer face-to-face, and the signer executes documents with an eSignature; or a remote online notarization (RON), where the notary and signer are located in different places, but communicate via real-time, audio/visual (A/V) communication technology, and the signer effects an eSignature.Back to Top ↑
What is end-to-end encryption?
A system of communication where only the communicating users can read the messages, to prevent data being read or secretly modified, other than by the true sender and recipient. Messages are encrypted by the sender of a given message, but third parties do not have a means to decrypt them. The recipient retrieves the encrypted data and decrypts it themselves.
What is Fannie Mae?
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a government-sponsored enterprise (GSE) founded during the Great Depression to expand the secondary mortgage market by securitizing mortgage loans in the form of mortgage-backed securities, allowing lenders to reinvest their assets into additional lending.Back to Top ↑
What is Freddie Mac?
The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a government-sponsored enterprise (GSE) created in 1970 to expand the secondary mortgage market in the United States. Along with Fannie Mae, Freddie Mac buys mortgages on the secondary market, pools them, and sells them as a mortgage-backed security to investors on the open market. This increases the supply of money available for mortgage lending, as well as the liquidity available for new home purchases.Back to Top ↑
What is gap insurance?
A title insurance policy that provides insurance coverage to the policyholder for title defects that may arise during a 'gap period,' the time between closing a real estate transaction and the actual recording of the real property instrument. If county recording offices are unable to record documents in a timely manner (e.g., during office closures due to the COVID-19 crisis), the title insurer covers the gap and potential exposure to title claims.Back to Top ↑
What is Home Owner's Title Insurance?
Owner's Title Insurance is an insurance policy guaranteeing clear title to the owners of a piece of property at time of purchase. If a lien or other title issue is discovered after closing, the policy issuer will cover the costs (as long as the lien or title issue occurred before the closing date).Back to Top ↑
What is in-person electronic notarization (IPEN)?
A type of real estate closing where electronic documents are signed on an electronic device, but the closing still takes place at a table with the notary and signers in the same room.Back to Top ↑
What is knowledge-based authentication (KBA)?
A method of proving the identity of someone accessing a service such as a financial institution or website, requiring the knowledge of private information of the individual to prove that the person providing the identity information is the actual owner of the identity. KBA is found in two forms: Static and dynamic. Static KBA is commonly used by banks, financial service companies, and email providers to prove a customer's identity before allowing account access, for example, a 'shared question' where the user stores an answer to a question such as, 'What was the make and model of your first car' to be asked if he or she forgets their password. Dynamic KBA is a high level of authentication that uses knowledge questions to verify someone's identity, without requiring the individual to have provided questions and answers beforehand. For example, questions may be compiled from public and private data like credit reports or transaction histories.Back to Top ↑
What is Lender's Title Insurance?
Lender Title Insurance is an insurance policy guaranteeing to make the lender 'whole' if a title defect is later found that causes financial loss. This means that should the borrower fail to make payments on the loan for which the property is collateral, the lender will be first in line to collect if there is a foreclosure. Even though the insurance policy covers the lender, it's the buyer/borrower that pays for it!Back to Top ↑
What is nonpublic personal information (NPI)?
As defined by the Gramm-Leach-Bliley Act Privacy Rule, any personally identifiable financial information that a financial institution collects about an individual in connection with providing a financial product or service, unless that information is otherwise publicly available. NPI includes: Any information an individual provides to get a financial product or service (e.g., name, address, income, Social Security Number, or other information on an application); any information a financial institution collects about an individual from a transaction involving financial product(s) or service(s) (e.g., the fact that an individual is a consumer or customer, account numbers, payment history, loan or deposit balances, and credit or debit card purchases); or any information obtained about an individual in connection with providing a financial product or service (e.g., information from court records or from a consumer report). The Privacy Rule restricts a business' use and disclosure of NPI, and requires them to give consumers written notice describing their privacy policies and practices.Back to Top ↑
What is papering out?
A provision under state law that allows an electronically notarized document to be recordable if printed out and certified by a notary to be a true and complete copy of an electronic original. This provision is intended to allow recordation of electronic documents in jurisdictions that do not currently support eRecordings.Back to Top ↑
What is remote online notarization (RON)?
The use of audio/visual technology to complete a notarial act when the principal is not in the same physical location as the notary public. Each state enacts laws governing the manner in which RON transactions are conducted, and these laws are usually based on standards set forth by the Mortgage Industry Standards Maintenance Organization (MISMO) and the Revised Uniform Law on Notarial Acts (RULONA). Only about half of the states in the country had adopted RON laws and regulations by early 2020, but the COVID-19 crisis motivated states to take action to enable real estate closings to continue with minimal human contact.Back to Top ↑
What is RULONA Section 14A?
Revisions made in 2018 to the Revised Uniform Law on Notarial Acts (RULONA) to suggest how remote online notarization (RON) should be conducted. These provisions enabled RON without geographic limits on the signer's location, if the notary uses 'communication technology' to notarize documents, defined as 'an electronic device or process that allows a notary public and a remotely located individual to communicate simultaneously by sight and sound.' It requires the notary public signature block to state, 'This notarial act involved the use of communication technology.' Notaries must identify signers using a combination of identity-proofing methods, including knowledge-based authentication (KBA) questions, credential analysis, and biometric technology. Finally, Section 14A requires an audio/visual recording of the transaction to be maintained for at least 10 years. These provisions helped propel industry adoption of RON, the last eClosing component to see widespread implementation.Back to Top ↑
What is tamper-evident technology?
A layer of security in electronically notarized documents that provides evidence of any changes made to an electronic document after it was notarized. Notaries public may use one or more tamper-evident technologies to perform notarial acts with respect to electronic records. For example, Public Key Infrastructure (PKI) technology can be used to create a numeric digest or 'thumbprint' of an electronic document that can reveal any subsequent tampering or corruption of the document.Back to Top ↑
What is the American Land Title Association (ALTA)?
Founded in 1907, ALTA is a national trade association representing more than 6,400 title insurers, title and settlement agents, independent abstracters, title searchers, and real estate attorneys. Headquartered in Washington, D.C., ALTA has more than 40 committees and creates standardized title insurance policy forms, works to educate the public on property-related matters, and is involved with local, state, and federal regulatory efforts.Back to Top ↑
What is the Electronic Signatures in Global and National Commerce Act (ESIGN)?
A United States federal law passed by the U.S. Congress in June 2000 to facilitate the use of electronic records and electronic signatures in interstate and foreign commerce by ensuring their validity and legal effect. Its general intent is that a contract or signature 'may not be denied legal effect, validity or enforceability solely because it is in electronic form.' It also allows for state preemption of the federal law, as long as states provide at least the same level of security for eDocuments and eSignatures. Together with the Uniform Electronic Transactions Act (UETA), ESIGN provided a national standard of recognition for eSignatures and eRecords.Back to Top ↑
What is the Escrow and Post-Closing Process?
The escrow process is often used interchangeably with the term 'closing.' Technically, closing is only part of the escrow process. The true definition of closing is the part of the escrow process in which all the necessary legal documents are signed by the buyer in the presence of a notary.
The entire escrow process includes everything from scheduling a closing date to filing the closing documents with the county recorder.
The escrow process is handled by the agency. The underwriter is only involved with the issuance of the title insurance policy.
What is the Mortgage Bankers Association (MBA)?
A national trade association representing all facets of the real estate finance industry. Headquartered in Washington, D.C., the MBA represents more than 2,200 member companies from all sectors of the real estate finance industry, including originators, servicers, underwriters, compliance personnel, and information technology professionals. The MBA provides training and continuing education to mortgage professionals, educates consumers on mortgage-related matters, and has a political action committee to raise money to help elect candidates to Congress who have an understanding of the real estate finance and housing industries, and who are supportive of the mortgage profession.Back to Top ↑
What is the Mortgage Industry Standards Maintenance Organization (MISMO)?
A nonprofit subsidiary of the Mortgage Bankers Association (MBA) and the leading technology standards development body for residential and commercial real estate financing. MISMO promotes data consistency throughout the broader industry, reduces processing costs, increases transparency, and boosts investor confidence in mortgages as an asset class. MISMO developed minimum standards for how remote online notarization (RON) transactions should be conducted, and MISMO's RON standards are accepted by the GSEs and have been widely adopted by state legislatures.Back to Top ↑
What is the National Conference of Commissioners on Uniform State Laws (NCCUSL)?
Also known as the Uniform Law Commission (ULC), a nonprofit, unincorporated association consisting of commissioners appointed by each state, the District of Columbia, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands. Its purpose is to discuss and debate which areas of the law require uniformity among the states and territories. The results of these discussions are proposed to the various jurisdictions as either model acts or uniform acts. NCCUSL/ULC promulgated the Uniform Electronic Transactions Act (UETA) and the Uniform Real Property Electronic Recording Act (URPERA).Back to Top ↑
What is the Property Records Industry Association (PRIA)?
A national consortium that identifies opportunities for collaboration among industry stakeholders, develops recommendations for standards and best practices, and promotes the adoption of standards and practices. PRIA also acts as a clearinghouse for property record-related information, and educates the public and industry stakeholders about the property records industry.Back to Top ↑
What is the Revised Uniform Law on Notarial Acts (RULONA)?
An act promulgated by the Uniform Law Commission (ULC) in 2010 to provide a consistent framework for notarial acts, including taking an acknowledgement, administering an oath or affirmation, witnessing or attesting a signature and certifying a copy of a document. RULONA allowed for the performance of notarial acts with respect to eRecords and eSignatures, but did not address remote/online transactions until revisions of the act were made in 2018. At the beginning of 2020, 23 states had enacted laws based on RULONA.Back to Top ↑
What is the Securing and Enabling Commerce Using Remote and Electronic (SECURE) Notarization Act of 2020?
Proposed federal legislation that aims to permit immediate nationwide use of remote online notarization (RON), with minimum standards, and provide certainty for the interstate recognition of RON. The bill is supported by the American Land Title Association (ALTA), the Mortgage Bankers Association (MBA) and the National Association of Realtors (NAR). The bipartisan measure is pending in the U.S. Senate as Senate Bill 3533 and in the House of Representatives as H.R. 6364.Back to Top ↑
What is the system of record for deeds and title issues?
County offices are the official systems of record for deeds and any issues which could cloud title.This county-level focus has led to many problems because there are over 3000 counties, each with a different physical medium for their data (paper, legacy electronic, modern electronic) and different regulations. The complex interplay of state, federal, and county rules makes researching and defending title issues a complex operation. This complexity is part of what led to the inception of the title insurance industry.Back to Top ↑
What is the Uniform Electronic Transactions Act (UETA)?
The first national effort to provide uniform rules to govern electronic commerce transactions by validating eDocuments and eSignatures and ensuring they are legally enforceable, the same as paper documents with wet signatures. Promulgated by the Uniform Law Commission (ULC) in 1999 and adopted on a state-by-state basis.Back to Top ↑
What is the Uniform Law Commission (ULC)?
Founded as a nonprofit, unincorporated association, the ULC is a consortium350 practicing lawyers, judges, legislators, and law professors. The ULC drafts uniform laws to address areas in state law where uniformity is needed. Also known as the National Conference of Commissioners on Uniform State Laws (NCCUSL).Back to Top ↑
What is the Uniform Real Property Electronic Recording Act (URPERA)?
An act promulgated by the Uniform Law Commission (ULC) in 2004 to give county clerks and recorders the legal authority to prepare for eRecording of real property instruments. URPERA established that any requirement for a paper document's originality is satisfied by an eDocument and eSignature, provided the standards a recording office must follow and what it must do to make eRecording effective, and created a board that sets statewide standards that must be implemented in every office.Back to Top ↑
What is Title and Escrow?
Title and Escrow is a suite of insurance products, documents, and services required by lenders to close a real estate transaction.
The term 'escrow' is used to describe a couple of different aspects of a real estate transaction. Escrow is the money held to secure the transaction, including the downpayment and third-party fees. It is also the term used to refer to the entire closing process– beginning when all parties agree on the terms of the deal and ending when funds are disbursed and legal documents are signed.
Title is the process in which ownership of a property transfers from one person (or business) to another.
What is Title?
Unlike other forms of title, like an auto title, a property title is not a paper or electronic document. Property title is a legal concept. When property title is marked 'clear,' all parties who claim to own a piece of property are able to successfully defend their full right to that property in a court of law. If a property title is marked 'cloud on title' somebody not involved in the transaction may be able to claim a piece of the property for themselves in a court of law.
In the USA, crazy as it sounds, you own whatever you say you do, and if someone disagrees, they need to sue you and prove otherwise.
What is traditional closing?
A paper-and-ink signing ceremony, conducted at a table with a notary and signers in the same room; the type of closing most commonly seen in the American homebuying process for decades.Back to Top ↑
What power does a lien serve?
If a lien holder is able to prove that the property owner is in violation of the law or a legally binding financial contract, they can foreclose on the property after the statutory holding period. In a foreclosure, the property is put up for sale and auctioned even without the owner's consent to pay or allow title transfer to the lien holder.Back to Top ↑
What's a title agency?
A title agency is a company that typically provides comprehensive title and escrow services, except that it can't function as an underwriter. In Southern California, a title agency usually provides only title services.
As an example, North American Title Company (NATC) is a title agency that provides title search, title clearing, and escrow services, while North American Title Insurance Company (NATIC) is an underwriter for many NATC policies. They are both owned by States Title Holding.
It is rare for a title agency and title underwriter to be directly affiliated with each other the way NATC and NATIC are. More commonly, title agencies are only partially owned by, or indirectly affiliated with, certain underwriters.
Truly independent title agencies, which don't have a preferred underwriter, will usually declare themselves as being 'independent.'
What's a title company?
The term 'Title Company' is a bit ambiguous. It could refer to a title underwriter, a title and escrow agency, or a title-only agency. There are also separate escrow-only companies, but they are rare outside of Southern California.
By far the most common way of obtaining Title and Escrow is to solicit the full set of services from a single title and escrow provider.
In Southern California only (from roughly Fresno to San Diego), different title agencies and escrow companies are usually separately engaged for each service.
What's a title underwriter?
A title underwriter is the person or company that bears the risk on a title insurance policy. They confirm that a title is clear and able to be insured. Then, if a valid claim is filed because a title defect is found after closing, the underwriter must pay the claim. An underwriter can issue policies in one of two ways:
1. They act as the directly issuing underwriter-- providing a complete title service to the customer by also doing all the title research and work. In this arrangement, the underwriter retains 100% of the title premium.
2. They work with a title and escrow (or title-only) agency who completes all the title research and title work. The partner agency keeps about 85% of the title premium, while the remaining 15% goes to the title underwriter, who is responsible for paying future claims. This is the most common way policies are issued.
Who pays for Title and Escrow?
Every step of the Title and Escrow process incurs fees. The buyer/borrower typically pays most fees, but in some states, the seller will assume some of the costs.
Escrow fees are typically fixed between $400-$500, but they can be much higher (e.g., in Illinois they reach $1000). Title fees are calculated at 0.5% of the property value for resale and about half this amount for refinances. Centralized rates (half that of the full rate), may be offered to high-volume lenders for refinances.
Why is Title and Escrow required?
The Title and Escrow process was established to help protect consumers from fraud. First, it ensures the seller actually has the right to sell the home and makes sure the property is free and clear of any legal issues which might cloud ownership of the property by the bank. Secondly, it ensures all parties are correctly paid and all the proper documents are signed, notarized and filed with the correct authorities.Back to Top ↑