Electronic Real Estate Recording Task Force

Legal Subject / Fee Subcommittee

Present: (Members) Chuck Hoyum, Chuck Parsons, Eileen Roberts, Mike Cunniff, (via conference call) John Jones, John Richards, (Guests) Luci Botzek

Chuck Hoyum began the meeting with a discussion of pilot processes. One option is to run dummy data as long as they are run parallel to current process. County commissioners may need to authorize this; counties may need to get local approval. By not using real documents piloting could be made easier.

Mike Cunniff suggested that pilots should include satisfactions, releases or assignments. Pilots could be done with these documents and you would get high volume and it would be simpler.

Chuck Parsons asked about the concept of a parallel process. How do you execute both paper and electronic? This seems difficult to do, having both.

John Jones: There are several versions of a pilot – parallel system

1. Create same document – electronically and paper process

2. Electronically and then make a paper copy

3. Paper – scanned, use that for electronic

John Richards described how Broward County began by running dummy data – to see if the system was reliable. Once proven reliable it went straight to electronic. They selected documents to begin with; when comfort levels rose they moved to other documents.

Mike Cunniff asked if there any pilots out there doing parallel processes.

John Richards was not aware of any. When you get into performing two transactions you then struggle with which is valid of the two, this can get confusing.

Mike Cunniff suggested that dual processing would double the work load. He argued that it should be real the first time – no one wants added work that is duplicate effort on the same document. He also asked if we could waive the statute in place – he suggested the use of the State Board of Innovation.

John Richards asked if we know what legislation needs to be changed.

Chuck Parsons responded that a real process means more to someone involving their time – it gets people excited.

John Richards suggested that we assure folks the legal frame work exists and technology is tested.

Chuck Hoyum suggested the comparison of dummy data vs. tangible real data that is more valuable. It is a chicken and egg scenario. The private sector is not at a point to create these documents right now.

John Richards stated that people are using and signing end to end in some cases. We have received documents that show this process is in use and recorder’s stanp is on it – (where?) Broward County. The lender originated the document. Do run throughs on test basis then do production, parallel is not being done.

Chuck Parsons commented that Bank of America asked if they could send electronic satisfactions to the counties, but were told no. Looks like we would do trial testing then go straight to electronic recording in non-parallel scenario, once all the bugs are worked out.

Mike Cunniff suggested the State Board of Innovation and asked Luci if there is statutory authority here?

Luci Botzek responded that yes, there was a county exemption for collecting delinquent taxes. This was allowed. Only the auditor could collect them but this allowed counties to use the treasurer if they wanted to for collecting.

Chuck Parsons stated that we want to make sure we have documents that are valid. For e-signature we need to verify the signer’s identity before we use it in Minnesota.

John Richards added that the borrower in Broward was asked to validate identity when they were in the office – digitally signed documents are stored on a server – a digital key validates documents have not changed till it reached the county office. The process from end to end in Broward they are:

• Executing documents using a digitized signature

• Notary signed the document holographically

• Closing agent then assigned an encryption key to ensure no changes were made to the documents – sealed with a public key

The public key resides on a server – the server can be owned by the technology provider – but could be owned by the closing agent

Mike Cunniff asked how closing agents will encrypt this document. How do they stay in the game? They partner with technology providers.

Chuck Parsons asked how a county recorder knows the document is untouched.

John Richards explained that the county gets a public key from the technology provider. They give the key that opens and examines the document.

John Jones inquired about digital signatures with notaries. He asked if the county now needed to validate the signatures as valid and suggested that this may be an added layer of responsibility. He commented that UETA allows for typing a signature if that was the intent.

Luci mentioned that HR block must file everything electronically – it may be worth taking a look at the processes.

Beth commented that there will be demos on 12-13 at the ERERTF meeting from technology vendors. This could help level set everyone’s understands of e-recording.

John Richards asked if this is legislatively do-able? Are there statues that make this impossible – like mandatory use of purple paper?

Mike Cunniff suggested that we have document standards that may be a problem – payment shouldn’t be a problem.

The Reviser of Statutes had produced a run of searches for Chuck Parsons that were presented to the attendees. These documents represent legislation on recording, filing, etc… 90% is probably ok but each one needs to be reviewed. It is sorted by chapter and section and should be easy to divide out between the groups for review.

John Jones mentioned that UETA exempted any recordable real estate transaction.

Chuck Parsons added that we also need to look at the MN version of UEAT and see if it is in conformity with E-Sign.

Chuck Hoyum suggested that with E-Sign it is very difficult to have confidence that there is compliance in MN. It was intended to make sure states could conduct e-commerce. Could we request an opinion from the Attny General? Does the MN UETA adoption conform with E-Sign?

Chuck Parsons stated that we think it does conform, but we need to make sure.

Is there a process in place to accept e-transactions? Do recorders have to accept e-created documents before they think they are ready to, technologically?

We need to go back to the Task Force with a recommendation. The Attorney General can address this. A county will need to ask the Attorney General for an opinion on this issue. This should be our recommendation to the task force.

Mike Cunniff mentioned that Hennepin has been counseled by its own counsel not to accept these documents.

Chuck Hoyum added that local governments are not technologically set up. UETA does not compel counties to accept documents electronically.

John Richards mentioned that UETA – 17 and 18 – state that you are not forced to accept documents. This didn’t really need to be carved out.

Chuck Parsons: A deed between two parties can happen electronically right now but cannot be recorded with the county.

John Richards suggests that the carve-out of legislation makes pilot recordings valid and enforceable.

Luci Botzek added that even if you got a waiver for counties the private sector may need to be protected. It may be best to get a pilot waiver amendment.

Chuck Parsons stated that this should be a statute. It will be easier to research later, years from now when someone is trying to figure out why these documents were done this way.

Eileen Roberts suggested that Carmen should be asked about UETA and E-Sign and the carve-out. And the Attorney General should still be asked for an opinion.

On another topic, Chuck Parsons referred to work done by the legal committee a year ago which identified issues. He presented the document from the Public Records Industry Joint Task Force which listed the issues. (as they are discussed they will be listed as item A, B, C, as they are listed down the document).

Eileen Roberts asked when will national standards be recommended? PRIJTF. When can we look at them?

John Richards responded saying that PRIJTF.org/TaskForce will show some status. A draft of standards will be ready by mid-January, the final by the end of February. MISMO (Mortgage Industry Standards Maintenance Organization) draft is complete.

Item B: Uniform conveyance blanks.

Chuck Parsons stated, as part of the original discussion – but we need a short list of documents for the beginning of pilots. Satisfaction, assignments, releases, and others.

Item C:

John Jones commented that recorded documents, once accepted and stamped by the recorder are electronically archived. Original is sent back to the custodian with copies of anything else. The note goes on to Fannie Mae.

Eileen Roberts added that the electronic signature storage is the concern.

John Richards stated that MISMO is looking into this.

John Jones commented that TIFF or ASCII file formats are currently accepted for storage.

Item D: Race and Notice

Chuck Parsons asked what is the time of e-recording vs. paper recording?

John Jones: also asked if there is a master clock or master Q for these recording.

Mike Cunniff asked if it is financially advantageous to use e-recording for sender. The computer may be the first to receive something. The documents hit the clock of the PC the same way a person at the desk meets the clock.

John Jones stated that incentives are a bit of a necessity for a new technology like this.

Mike Cunniff asked, if I am at the counter, how do I prioritize between people, mail and the computer? People come first before mail today.

John Jones remarked that the county can receive and log a time and date of receipt but does not record the document until the recorder processes it. They still have a right to reject when sent electronically.

Chuck Parsons stated that a process will need to dictate what gets recorded by each office.

Luci Botzek asked if there is a preference built into electronic recording that may be an issue. Not every county will be able to take part initially and that will be an issue.

John Richards suggested that business rules can be built in to recording time lines and priorities.

Item E: No one remembered it.

Item F:

Chuck Parsons stated that the recording process isn’t just in the recorders’ office. Review and approval may need to be done by auditors and treasurers. Documents that need an approval of examiner of title should be in the pilot.

Item G: county issue

Item H: State wide.

Chuck Parsons mentioned that we would like documents to be accepted by any county. Uniformity should be the goal.

Item I:

Chuck Parsons stated that we discussed some already. Today the CREV cannot be created electronically.

Item J:

Mike Cunniff stated that this could kill some counties if it becomes mandatory.

Chuck Parsons asked if the state has standards and some counties use it, can some counties not accept documents electronically where others do? Does E-Sign make all counties mandatory if only some actually can?

Do we need statutes to authorize joint county use of technology? Where groups of counties share the technology and costs between them?

Mike Cunniff stated that it is already being done by AMC. Legislation should not be needed for counties to team up.

Item K: Permissive system

Item L:

Mike Cunniff mentioned that the Grantor / Grantee index provides little information, but it is the official index.

Eileen Roberts mentioned that this is because in the puritan communities they wanted to know who was moving in. They needed to know names to keep people out.

Chuck Hoyum suggested that we need some sort of G/G index because that is the only information we have in some cases.

Chuck Parsons noted that most counties already have tract indexes. Should we propose it?

Eileen Roberts added that everyone has it. It’s just not on all the historical documents. If it was a go-forward plan this really would not be a huge economic impact.

Item M:

Chuck Parsons stated that county recorders need to tell us what issues need to be looked into.

Item N:

Mike Cunniff mentioned that Congress is examining the use of SS#s on documents, on public records. It could be costly to remove those items from all documents. This is a hot issue

Eileen Roberts stated that in the English system you need a reason and approval to look at documents.

Chuck Parsons commented that we are a free market society. It would be hard to close documents off. Title examiners for one need access.

John Jones stated that there is talk not to close off access but to change access. When you walk in to the office they see you. They verify you and some offices have you sign in.

Prove who you are on the internet??? How do you do that? It may not be easy but you could put up some obstacles.

Eileen Roberts recommended that we should look at the statutes.

Chuck Parsons stated that liability should not change with electronic documents.

What do we do with this document now?

Eileen Roberts commented that all of these items are in the workplan. We don’t need to take this back to the Task Force, the intent was to have this covered already.

End of Meeting

1. Legal Sub-Committee To-Do: Review CP stack of searches of statutes. Bring back items to be discussed by the entire group.

2. Legal Sub-Committee To-Do: Suggest that the Task Force will need to request an opinion from the Attorney General for E-Sign vs. UETA.

3. Legal Sub-Committee To-Do: Look at the race/notice issues for the pilot.

4. Legal Sub-Committee To-Do: Look into what statutory changes are needed for pilots to go forward with "real" electronic documents.
   

5. Legal Sub-Committee To-Do: Recommend using Track Index as official index.

Considerations for pilot:

6. What documents will be used in pilot? The private sector must create them or need help creating them.

7. Pilot should include documents that need approval of examiner of title.

Considerations for Technology Application Demos

8. Technology Application Demo on 12-13: Talk about encryption and digital signature

9. Technology Application Demo on 12-13: Talk about race issues

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Updated: (jhr)