Closing-Apart-Together: Best practices and procedures for remotely closing loan transactions
Last updated March 25, 2020
With remote working here for the foreseeable future, it’s more important than ever to ensure the continued implementation of best practices, policies and procedures for closing loan and financial transactions. Many practitioners have employed remote (or escrow) closings for some time - albeit never quite with this level of ‘social distancing’. But, for many in the field, including a large number of our banking and lending clientele, sit down in-person closings have remained the gold standard - until now.
Below are a few points banks, lenders and practitioners should consider when embarking on implementing remote closing procedures.
1. Trust, But Verify. Fraudsters and those with ill-intentions often look to take advantage of moments like these. Be vigilant with your due diligence. Thoroughly review organizational documents and title commitments. Ensure that any omitted material title exceptions have a true basis in fact (i.e. omitted old mortgages - try to obtain the basis for the omission and not just take the word of the title company or borrower on it).
2. Work Smarter, Not Harder. Discuss with your client and opposing parties the use of technology to attend virtual closings. Services like Facebook Messenger, FaceTime (for those with iOS devises) or a video conference platform (Google Hangouts, WEBEX Teams or ZOOM) provide high quality multiparty video streaming at little or no cost. Parties can interact in live time ensuring a constant level of communication to attend to any issues or problems in short order at a virtual table. By virtually attending a closing, one can further mitigate potential fraud by witnessing the execution of loan documents via live video feed. Many of these services (like ZOOM and Teams) also facilitate screen sharing functions that provide real-time collaboration through mutual simultaneous visualization of a shared agreement (i.e. the equivalent of passing a document around the table).
3. Implement the 5 Ps. Proper Planning Prevents Poor Performance - Coordination is essential. Make sure all parties know and understand what their responsibilities are. To this end, prepare and establish a comprehensive Closing Escrow Agreement among the parties that sets forth the logistics of closing from collection and delivery of documents, title closing requirements and conditions to release of funds. This agreement should also establish a very clear and unambiguous flow of fund statement. Likewise, given that the delivery of checks at closing is not likely, if you haven’t already, implement strong wire instruction verification procedures.
4. Enforceability of E-Signature Documents/E-Notary. Closing with original signatures may prove impractical and/or result in delays to the closing process. Discuss with your clients whether they will accept ‘electronic’ signatures. If so, consider implementing comprehensive E-Signature language into documents (or a separate instrument) executed at closing. To that end, consider the inclusion of language referencing the Electronic Signatures in Global and National Commerce Act (15 U.S.C Section 7001 et seq.), if applicable. To the extent any documents require notarization, in New York, Governor Cuomo via Executive Order recently implemented ‘remote notary procedures'. There is presently pending legislation in New Jersey to implement similar remote notary procedures. Given the rapidly shifting environment, please also consider the impact, if any, of remote notaries on recordable instruments and request further guidance and assurance from the title company insuring your transaction with respect to the recordability of such document as each county/municipality may have implemented different policies.
Please contact your CSG attorney for further guidance.
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