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Special Reports
Electronic Documents, Paperless
Loans
DC Becomes Latest to Permit Electronic Recording
By Jennifer Harmon
WASHINGTON -- Mayor Anthony Williams here recently signed the Uniform Real Property
Electronic Act of 2005, which allows the recorder of deeds to validate and accept electronic and digitized documents.
Legislation has also been passed to store records in electronic form in Arizona, Delaware, Texas, New Mexico, Connecticut,
California and North Carolina.
Experts say the goal of any proposed state Electronic Recording Act is to create
legislation authorizing land records officials to begin accepting records in electronic form, storing electronic
records and setting up systems for searching for and receiving them. The intent is only to authorize such activities,
not to mandate them. The act also establishes a state electronic recording commission. Under the act, a state agency
is charged with adopting standards for the receipt, recordation and retrieval of electronic documents. While the
steps in the law may be simple, lawmakers say the process will be complex from state to state.
According to one Washington attorney, the Electronic Recording Act makes life
easier for lenders who do business nationwide. "Different state laws make it difficult and burdensome for
lenders to comply," said Philip Bohi, an associate with Lotstein Buckman LLP. "To be able to do everything
electronically will be very helpful to the mortgage industry."
The new District of Columbia law is scheduled to take effect on Jan. 17, 2006,
following a 30-day Congressional review.
"The act takes the lead that was started by the Uniform Electronic Transaction
Act and stretches it. The Transaction Act pulled everyone in the direction of electronic recording. It's really
just getting started," added Mr. Bohi.
"It empowers local officers and state mortgage officials to implement an
electronic recording system in a uniformed way in their work. States who adopt it will be able to start with a
baseline approach to what they should do. If it is implemented on the local level, the city or county or whoever
records land records will be doing so electronically."
According to the National Conference of Commissioners on Uniform State Laws, which
originally approved the law, many local real estate recorders have developed a strong interest in converting their
traditional paper-based land recording systems to electronic form. Acts such as the Uniform Electronic Transactions
Act and the federal Electronic Signatures in Global and National Commerce Act contain certain provisions that cleared
the way for digital recording of real estate documents by local recorders' offices.
It is possible to have sale contracts, mortgage instruments, whatever form a jurisdiction
uses, and promissory notes memorialized in electronic form with electronic signatures that will now be treated
the equal of the same paper documents with manual signatures.
Real estate transactions, however, require another step not addressed by either
UETA or E-Sign. Real estate documents, which establish the chain of title relating to the transactions for a specific
piece of property, must be recorded on public records to be effective.
The NCCUSL says there must be an orderly conversion of every recording office
in the U.S. for electronic recording to become accepted universally. "That will be a complex process, but
it needs a starting point in the law. The Uniform Real Property Electronic Recording Act is that essential start,"
said the commission.
State and local municipalities will need to get comfortable with documents being
recorded electronically as well as long-term stability of data storage. When it comes to homeownership, Mr. Bohi
said many are still reluctant to rely on computerized records. "Some people are much more comfortable with
paper, which is much more fragile in its own way. States and localities are going to have to come up with a way
to create and maintain the systems. The act doesn't address who will pay for the systems and how they will be funded
and maintained."
States that decide to enact this legislation will be obligated to keep an eye
out for what other states are doing. "Most of the states are taking other laws and creating theirs almost
at verbatim. Uniformity is the real meat of the original document. This is just to get started with the foundation
and to get people thinking about electronic recording that will be consistent nationwide," Mr. Bohi said.
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