When the pandemic hit in March, Michigan already had a law on the books that allowed remote online notarization (RON) closings. But the state took it a step further when Gov. Gretchen Whitmer (D) declared a state of emergency and issued a series of executive orders, including one allowing the use of remote ink-signed notarization (RIN), a lower-tech alternative to RON.Now a recent Michigan Supreme Court ruling has put a question mark on the RIN mortgage closings that were conducted after April 30, when the governor extended her emergency executive orders without legislative backing.
"We conclude that the Governor lacked the authority to declare a 'state of emergency' or a 'state of disaster' … after April 30, 2020, on the basis of the COVID-19 pandemic," Justice Stephen J. Markman wrote.
The Oct. 2 ruling, plus a related ruling on Oct. 12, nullifies hundreds of Whitmer’s emergency orders, including the one that authorized RIN, which allows notaries and borrowers to use audiovisual technology to remotely notarize and ink-sign paper documents.
“Hundreds, if not thousands, of mortgages have been recorded in Michigan since the start of the pandemic, many employing notarization processes approved by the nullified Executive Orders, and have been thereafter accepted for filing by county recorders,” noted an analysis by law firm Manatt, Phelps & Phillips, LLP. “Many [mortgages] may have been recorded using RIN or other procedures that were approved by order but not part of the statute itself.”
While the analysis found that RIN was likely legal up until Oct. 12, “borrowers and their lawyers will doubtless argue that mortgages submitted for recording in reliance on the emergency orders are somehow void, and lenders will doubtless be considering various potential fixes to avoid this otherwise likely line of collateral attack.”
To clear up any confusion, the authors urged the Michigan legislature “to move quickly to ensure the validity of mortgages recorded under the expanded procedures.”
While RIN closings have become more popular in recent months due to COVID-inspired social distancing guidelines, the mortgage industry's response has been mixed. Fannie Mae’s RIN guidance encouraged lenders to consider RIN only if RON wasn’t available, due to the RIN emergency orders being temporary.
“I see RIN as essentially using new technology to hold onto an old way of conducting notarizations. That seems oxymoronic,” said Gavin Ales, DocMagic’s Chief Compliance Officer. “It’s adding in extra steps when you don’t need to because you can conduct actual remote online notarizations using available software.”
Nonetheless, some states are still supporting RIN use during the pandemic. Minnesota, which also has a permanent RON law, recently passed legislation to temporarily allow RIN, while last week the governor of Tennessee—another state with a RON law—extended his executive order allowing RIN to the end of the year.