05/28/2023
Read on to learn about the current status of "E-Closings" in North Carolina:
Our office is often asked if loan documents for a real estate purchase can be signed completely online for a borrower who can’t attend closing, usually because they are in another state. We explain that it’s not currently possible in North Carolina to do a loan closing this way, because some documents in the loan paperwork must be notarized, and North Carolina does not allow documents to be notarized remotely online.
Recently, I’ve learned that there is a lot of false/misleading information online and on social media about the ability to do closings remotely. The result being that many folks believe it is currently possible to do a loan closing entirely from your phone, wherever you are.
I believe the main cause of this misinformation is a loose use of the term “eclosing” by a few agents and law firms across the state. They use “eclosing” to refer to a couple different types of closings, but ironically, the one type of closing that they AREN’T referring to is the one that everyone wants - a fully remote online closing.
So let’s look at the different types of closings that are being referred to as “eclosings”:
1. CASH PURCHASES: The first is a closing without a mortgage loan, also known as a cash purchase. In this scenario, it IS possible to do everything remotely and online for the buyer’s side, because the buyer doesn’t need to sign anything that is notarized. Usually they only sign a HUD statement and a couple of disclosures or agreements. All of these can be electronically signed on any type of device (computer, tablet, phone), and from anywhere in the world. You can be flying over the Atlantic or sitting on the beach in California, and as long as you have an internet signal and can open the attachment, you’ll be good. This type of closing, signed in this manner, has been done by every real estate lawyer in North Carolina for years. Even before everyone had a smartphone in their pocket, buyers were electronically signing HUD statements on cash deals at their desktop. I’d estimate at least 70% of our cash buyers sign their final closing documents via docusign, and never come into our office. We do this multiple times a month, as does probably every other real estate lawyer in the state. But when clients ask about the ability to do an “eclosing,” they aren’t referring to cash closings. Yet apparently, there are law firms and agents referring to these cash closings as "eclosings." Personally, I think that doing so is dumb at best, and deceptive at worst.
2. HYBRID CLOSINGS: The second scenario involves a lender who has what are often referred to as “hybrid” loan packages. With these closings, the buyer will sign some, but not all, of the loan documents electronically in the lender’s online portal or app. But the buyer must still meet with the Attorney in-person to sign the documents that need to be notarized, again because North Carolina does not currently allow for the remote online notarization of documents. Referring to these “hybrid” closings as “eclosings” may be technically correct, because a portion of the documents are being signed electronically. But it doesn’t remove the need for the client to meet with the attorney in-person to complete the signing, and therefore is not an option for a buyer who is located out of the state and can’t come to the closing. From a practical perspective, the only difference between this type of closing and a traditional paper closing is that the buyer spends about 15 minutes less time with the attorney at the closing table.
3. IN-PERSON ELECTRONIC CLOSINGS: The final scenario is when the buyer’s loan is from one of the few lenders who utilize a fully-electronic loan package that is signed using “In-Person Electronic Notarization,” often called “IPEN.” In these closings, the buyer signs all documents electronically, and the documents are notarized electronically – no pen or paper is used. But the key thing to note here is that it is called “IN-PERSON Electronic Notarization” for a reason: because the buyer and Attorney are still present together in the same room when the signing and notarization are happening. They are even using the same device to sign everything – either a tablet or computer. They can’t be in different places. So while this is an “eclosing” because the documents are being signed electronically, it is not what most people are requesting when they ask if it is possible to "sign their loan documents electronically.” They aren’t worried about saving paper. They are asking for the ability to do it remotely, whenever and wherever they are. If I were to tell a client “yes, we can do your loan closing electronically,” only to then explain that I just meant we’d sign on an iPad in my conference room instead of with pen and paper, they would think I was a fool. (And they’d be right to do so).
Every single time I’ve been asked by a client or agent about the potential to “sign electronically,” or any derivation of that term, they’ve been asking if the buyer’s loan documents could be signed remotely online because the client wouldn’t be able to attend closing – usually because they are in another state. And the answer to that question is currently “NO.” (If you anyone tells you differently, they are either misinformed or just flat-out lying).
However, the answer won’t always be “No.” Remote Electronic Notarization (REN) will be available in North Carolina in the future. We just don't know exactly when that will be. A law was passed in 2022 that allows the North Carolina Secretary of State’s office to begin creating the framework for REN sometime after July 1, 2023. But it won’t be in place that soon - they recently said it will likely be “a year or more” before everything is ready to allow documents to be signed and notarized electronically and remotely online. But until that day comes, the only “eclosings” that can be done in North Carolina are of the variety mentioned above, none of which are of any use to a buyer who’s trying to close a mortgage loan from their phone while in another state.
