The Situation:  A notary signing agent has been called for his first home loan closing. He is excited and nervous and does not want to make any mistakes.

The Notary’s Dilemma:  Our signing agent knows that he needs to make a good first impression on the borrower. He knows he must present a professional appearance, but he is not completely sure what that entails.

The Solution:  As a Notary Signing Agent, it’s imperative that you immediately put the borrower at ease by presenting a professional appearance. To the borrower, you are a complete stranger that he is inviting into his home to conduct a sensitive business transaction. When he opens the door to his home to allow you to enter, his first impression of you will come from the way you are dressed to conduct this important transaction.

Moreover, to the borrower, you represent each company that had a hand in preparing the loan he will be executing with you. It’s quite possible that your signing appointment will be the only personal encounter the borrower has in the entire loan process. As far as clothing is concerned, a crisp, neat, business casual outfit is an absolute must.

Seeing that you are wearing a professional-looking name badge, and being able to immediately see your name, professional affiliation and title, can help reassure your client. The best style is a hard plastic badge about the size of a business card, with the information engraved/inscribed on it in contrasting type. A magnetic fastener is the kindest to your clothes.

Presenting a professional-looking business card to the borrower upon entering his home is another sure way to indicate that you are serious about the business of being a signing agent. Have your card ready, and offer it promptly upon greeting the borrower.

The U.S. Department of Housing and Urban Development (HUD) has been considering an administrative rule titled, “Proposed Rule to Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs as a reform measure to the Real Estate Settlement Procedures Act (RESPA).”

As written at press time, the rule would create a “closing script” addendum to the HUD 1-1/1A form that is intended to help borrowers better understand their settlement costs. The “settlement agent or other person conducting the settlement” would be required to read the closing script to the borrowers, and “explain” any terms if questions arise.

This would effectively prevent notary signing agents from presiding at the large number of settlement appointments that they facilitate every day. The notary would be in violation of state law if he or she explained anything about the settlement costs that would be detailed in the closing script.

In excerpts from her comments submitted to HUD, ASN Executive Director Kathleen Butler explained why this is an important consumer issue:

“Notary Signing Agents are hired by lenders or closing agents specifically because of their specialized training and to provide the utmost of service and convenience to borrowers. The Notary Signing Agent’s mobility means that geographic location is not a barrier to a consumer’s ability to obtain the best possible loan. These notaries serve as a nearly irreplaceable human and professional resource for those who contract their services.

“Consumers appreciate that Notary Signing Agents provide them the option to have signings conducted at the time and place most convenient to them. The notary’s ability to bring a signing into the borrower’s home admirably accommodates borrowers who might suffer from immobility or ill health.

“If the Notary Signing Agent’s responsibility at closing would be to only read the closing script, that would be within the boundaries of their authorized activities. Preparation of the closing script, and all questions that might arise while it is being read to borrowers, should be the responsibility of others such as the lender or closing agent, who have authoritative knowledge of the details of the transaction.”

ASN’s comments were among the approximately 4,300 public comments submitted on the rule. It will take some time for HUD to review all comments and consider revisions to the rule. A proposed final rule will be submitted to the Office of Management and Budget for Administration review later this summer. HUD has announced its intention to have a final RESPA rule published by November 1, 2008, with a one-year implementation period during which settlement service providers may comply with either the current requirements or the revised requirements of the amended provisions.

CNA Surety, a leader in writing surety bonds and errors and omissions policies for notaries public, has announced it now provides errors and omissions coverage specifically tailored to the unique needs of notary signing agents.

CNA’s Signing Agent E&O insurance fills the gaps left by a traditional notary E&O policy, when the notary is providing signing agent services in a real estate loan closing. (It does not, however, replace traditional E&O insurance—notaries still need to maintain a “regular” E&O policy for their notarial acts that are not related to signing agent work.)

While this new E&O product is not currently sold in all states, availability is growing. ASN does not and CANNOT sell this product—we do not sell any notary surety bonds or insurance products. It is instead our policy to refer members to any notary bond/E&O agency with whom we have a working relationship through their sales of ASN memberships and products. Of those bond agencies, the only one that is also authorized to sell CNA Surety’s Signing Agent E&O insurance is Notary Public Underwriters, Inc.

(Please note: Insurance laws prohibit us from earning any income or commissions whatsoever from referring your business to a bond agency that can sell this product. Our referral is strictly to provide members a reliable and trusted resource to obtain this product.)

To learn more about Signing Agent Errors & Omissions Insurance, please visit Notary Public Underwriters at www.signingagentinsurance.com; or CNA Surety at http://signingagent.cnasurety.com.
  

Background checks are a hot topic for notary signing agents. Affected notaries are strongly questioning whether "mandated" background checks are as black-and-white an issue as they are being told, or whether the facts present a more nuanced picture.

We believe it's the latter. While it's true that some financial institutions and their service providers may be requiring background checks now, others aren't because they have opted for different information security procedures. Here's what we've gleaned about "mandated" background checks notary signing agents, and why this measure may be more an option than a requirement for financial institutions and their service providers.

BACKGROUND
Gramm-Leach-Bliley/Financial Modernization Act of 1999
In 1999, the United States Congress passed sweeping legislation to modernize federal regulations affecting banks, securities firms, and insurance companies. This legislation was the Gramm-Leach-Bliley Act, or the Financial Services Modernization Act of 1999 ("the Act").

The Act included privacy provisions created to make financial institutions responsible for protecting their customers' sensitive financial information. Background checks for notary signing agents are not mentioned in these provisions... that level of detail would later materialize in implementing rules created by various federal agencies.

This is standard procedure following passage of an act by Congress. The true "rules" (regulations) that carry out the objectives of an act are created by the federal agencies that have regulatory oversight over those who are governed by the act. Federal rules are truly the enforceable laws behind an act.

Information Security Standards Specifically, the Gramm-Leach-Bliley Act required certain federal agencies¹ to establish, through rulemaking, standards for financial institutions to follow relative to the safety and privacy of customer information.

Under this mandate, four federal agencies² published the "Interagency Guidelines Establishing Information Security Standards" in 2001. In 2005, these agencies completed work on a Small-Entity Compliance Guide, written to help financial institutions comply with the Security Guidelines. The Compliance Guide explains that under the Security Guidelines, each financial institution must:

► Develop and maintain an effective information security program tailored to the complexity of its operations.

In developing an information security program, financial institutions are required by the Security Guidelines to consider, and adopt if appropriate, a variety of information security measures. Background checks (for employees with responsibilities for or access to customer information) appear on this list of security measures.

The Security Guidelines also require each financial institution to:

► Require, by contract, its affiliated and non-affiliated third-party service providers that have access to its customer information to take appropriate steps to protect the security and confidentiality of this information.

The Security Guidelines define "service provider" as any party that is permitted access to a financial institution's customer information through the provision of services directly to the institution. This includes third parties such as the title companies and mortgage document preparation companies that utilize notaries to perform signing agent services.

The Compliance Guide further elaborates on bank/service provider contracts as follows:

The contract provisions in the Security Guidelines apply to all of a financial institution's service providers. After exercising due diligence in selecting a company, the [financial] institution must enter into and enforce a contract with the company that requires it to implement appropriate measures designed to implement the objectives of the Security Guidelines.

Certainly, "appropriate" information security measures required in bank contracts with third-party service providers might include background checks for employees, or for non-employees such as notary signing agents. But the Security Guidelines clearly indicate that background checks are recommended but optional, not flatly mandated. Broad claims that the Gramm-Leach-Bliley Act "mandates" background checks for notary signing agents are at odds with this fact.

More accurately, the decision to require background checks will depend on each bank's assessment of its own information security needs. It will depend on the unique circumstances of each bank's contractual arrangement with its service providers. Some bank/service provider contracts might specifically require background checks, some might simply require "appropriate security measures" that meet the Security Guidelines' objectives. Some service providers won't require background checks because they aren't deemed as "appropriate" as some other security measures.

CONCLUSION
For now, ASN recommends that notary signing agents do the following:

1. Communicate directly with the title companies and signing companies that hire you-don't let a third party tell you what the entity that hires you will require of you.

2. Ask the companies that hire you to explain their specific policy on background checks. We've found that some companies don't require them. We've also found that some require them for certain types of loan closings and not for others. If a company is requiring background checks, it should be able to tell you what type of background check is being run, what criteria is being checked, which vendor is providing the service, how much it's going to cost, and whether the notary or the company will pay for it.

3. Ask if the title or signing company requiring a background check whether it will accept any previously performed check that satisfies the company's background check criteria. That is, if your background check satisfies the title or signing company's criteria, we hope it doesn't matter which reputable vendor performed the service.

4. Ask whether your cost for obtaining a background check will be reflected in higher fees paid to you.

5. Ask what internal security measures are going to protect your private information, once it's been turned over for purposes of a background check. For example, notaries are reporting multiple hits on their credit histories, occurring after their information has already been used to obtain a background check. In more extreme cases, these repeated hits lower the subject's credit score. (ASN hopes to address this alarming issue on behalf of its members... stay tuned for further information.)

The American Society of Notaries realizes that resolving questions related to background checks is important to our notary signing agent members. We continue to obtain guidance from the appropriate federal agencies and private trade associations, and will keep our members apprised of any new developments as they arise.