2e: The Legal Environment

Now that we have a foundation for the understanding the real estate and real estate lending processes, we are going to discuss the legal environment which we operate in.  It is worth remembering that as Notaries all the work we do is part of a legal process, and subject to legal scrutiny and liability.   Often the documents we notarize involve important life decisions, significant financial sums, or both.   

Grahmm-Leach Bliley Act

One important law to understand is referred to as The Gramm-Leach-Bliley Act, which is also formally known as the Financial Services Modernization Act of 1999.  Its impact of this law was to allow commercial banks, investment banks, security firms and insurance companies to consolidate.  So what does this mean to notaries?  Often referred to as the GLBA, Signing Agents sometimes advertise that they are “GLBA compliant”.  The fact is, we should all be compliant at all times.  The most important aspect of this bill for notaries is that companies are required to develop a written security plan that describes how the company is prepared for and plans to continue to protect clients’ nonpublic personal information.

We will talk about this several times in this course but a reminder again, Signing Agents are responsible for protecting the personal information we have access to or deal with at any time.  While processing the loan documents, many of these documents contain private information including borrower’s name, address, and phone number, and extremely sensitive information such as social security numbers, employment information including income.  We must do everything we can to protect all this information.  There are things you can do protect the borrower.

When you receive documents via email and you download them to your phone or computer, make sure you have security systems in place that will not allow anyone else to have access to your computer.  Passwords and security systems, lockouts, using a VPN especially when you are not at home, these are all things you can do to protect your computer.

Never place a package of documents where they can be viewed by anyone except you. Your work area should be somewhere in your home away from the primary traffic areas and locked.  When transporting the documents, always keep them in a closed case and near you.  

When at a signing keep the documents in front of you.  Hand borrowers the documents one at a time and make sure you get them back after they are signed.  If anyone other than the borrowers are at the signing table, check with the borrower to see if they want you to discuss the terms of their loan in front of the other party(s).

When placing documents into a shipping envelope make certain that the envelope has been secured and there is no chance the documents may fall out of the envelope during shipping. 

If you have a cancellation, be sure to verify with the lender whether they want the unsigned documents returned or destroyed.  If you are stuck with a printed set of documents, you must destroy those documents safely and securely.  Please remember, you must never throw documents into a trash can.  You must absolutely shred and destroy the documents.

In general keep in mind that you are responsible for the caretaking of these document and this information, so you must be careful and take steps to protect this data at all times.  No one wants to be the victim of identity theft and no signing agent wants to be responsible for the victimization of one of our clients! 

The Patriot Act

Consumer Financial Public Bureau (CFPB) 

The Consumer Financial Public Bureau was created following the financial crises in the 2007-08 period when there were serious concerns of mortgage and other fraud leading to financial crisis.  It is an agency of the United States government that is responsible for consumer protection across much of the financial sector. It included areas such as banks, credit unions, securities firms, most lenders, and mortgage-servicing operations, debt collectors and more.   It was created as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010. 

The CFPB has the authority to impose penalties such as $5,000 for failure to follow the law $25,000 for gross negligence and up to 1 million dollars for intended violations.

CFPB 2015 Disclosure Agreement 

This disclosure replaces the early Truth-In Lending—the (TIL) and the GFE, which is the Good Faith Estimate, so this disclosure actually replaces those two documents.   The disclosure divulges the summary of key loan terms and estimates of both loans and closing cost. It provides the consumer with the ability to do comparison shopping. In addition, replaces the final TIL and HUD-1 Settlement Statement. 

The lender is responsible for providing the disclosure to the borrowers three business days prior to the final confirmation. Sundays and holidays are not included. So, what this means is that the borrower’s having to have this disclosure in their hands 72 hours before they are expected to sign their loan documents.

The importance of Notaries 

With this background, there are a few things we need to cover to wrap up this section.  At Notary2Pro we have always wanted our students and graduates to have a deep appreciation for how important notaries are, and for the most critical elements of the role of the notary in public life.  

I am just a Notary

Occasionally you may hear someone say that you are “just the notary” during a loan signing.  Sometimes, you may even hear other notaries say “I am just a Notary” If you learn nothing else from this section, you must take away this important message.   You are NOT just the notary!  As we’ve discussed earlier in this section, your responsibilities go far beyond just placing your stamp on a document.  

A reminder, first and foremost as a notary, you are responsible for identifying the signer with reasonable certainty

You are responsible for making sure that the borrower understands the terms of their loan.

You are responsible for making sure the documents are properly printed and executed.

You are responsible for the delivery of the documents per instructions provided you.
If someone refers to you as “just a notary”, we aren’t suggesting arguing with them.  But, it’s important to remember you have a job that needs to be taken seriously.  Please always behave in a professional manner and put forth your best effort because you should be very proud of what you do!  As we promised, let’s go into more detail about your core responsibilities of Identification, competency, awareness, and competency and how this works.  


As we’ve talked about, The job of the Notary really comes down to Identification.  No matter what you learn about being a Signing Agent, the most important duty we have is to properly and absolutely identify the person signing any document you are witnessing.

There are a number of acceptable proofs of identity.   Let’s review a few of these:

A notary can personally know the signer for a sufficient period to know the person’s identity.  This does not mean that you have met the signer a few times at the grocery store or school, etc.  This means that you have a long history with the signer and are certain of their identity.

This is extremely rare and therefore in almost every case you will be reliant on official forms of identification.  The most common forms of acceptable identification include a current state issued driver’s licenses, federally issued military identification cards and passports. Of all of the forms of identity presented, the passport is the most difficult to be fraudulently duplicated and therefore, is the surest.  

There are certain criteria that must be a part of any form of identification presented.  All the following must appear on the single form of identification.  

  • First, it must contain a photograph of the individual.
  • Second it must have their signature.
  • Finally, it must have a written physical description.  The physical description should include the individual’s height, weight, color of hair and color of eyes.

Once you have been in the business for a while you may find that you take for granted that the identification presented to you is valid.  However, do not become jaded!  Remember, in order to protect yourself and those who will be affected by the notarized document, you must thoroughly examine the identification provided to make sure that the physical description, photo and signature match the signer in front of you.

Validation of ID   

There are three kinds of false identification.  Fake, altered and borrowed.  When you are examining the identification, you should check the following:

  • Check for anomalies such as thickness, size or color. Watch for cuts or overlays, air bubbles and peeled back corners on the lamination.
  • Colors should be crisp, sharp and very distinctive.  The ink should not bleed onto other colors or other parts of the card.  
  • Check out the back of the driver’s license.  If it is blurry or dark, they may be photocopies.  Counterfeiters often spend a lot of time on the front of the driver’s licenses but not much time on the back of them.  If you suspect a fake, ask the bearer to state their birth date or address.  If they cannot quickly do this that is a telltale sign that this is not their real identification.
  • Always check for ghost images or holograms in the ID design. Holograms will be damaged if they are altered.  A hologram is designed so that it will appear in a 3-dimensional state and totally disappear when rotated. It is very rare for a counterfeiter to copy the actual hologram in use by a State or Government Agency. 
  • Examine and get to know the drivers’ licenses from your state including all those visible and not so visible designs that make it unique.

There are resources available to help you determine the authenticity of various forms of government issued identification.  Here are a couple of those resources and the information that you will need to acquire them.

What to do if you suspect a fake.
If, for some you reason you suspect that the identification you have just seen is fraudulent, you are under no obligation to notarize a document based on that identification.  It is always a good idea to take all of the information off of the ID and put that information into your Notary Journal in the event the ID does end up being fraudulent.  You may have to rely on that information someday to defend an action against you.  You also have the option of asking for another form of identification.

In most states just producing a fake Identification or one belonging to someone else is a Felony.  Be very careful if you run into this situation.  We will discuss security elsewhere in this course, but always make sure that someone knows where you are going for every signing.  Just send an email to someone with your itinerary and whatever you do, protect yourself.  Your safety is the most important thing and if you suspect you may be in jeopardy, get out.  If you encounter a fake and are concerned about your safety, call the police after the signing.  You are also responsible for reporting the use of a fraudulent ID to the authorities if you have grounds to suspect it is a fake.

Credible Witness

There is an alternative to standard IDs in some states.  This is called a “Credible Witness”.  This is an unnecessarily confusing process for most Notaries.  It is quite simple.  First, if you are using one Credible Witness, you the Notary must personally know the witness. The witness in turn must know the signer.  

The use of credible witnesses is allowed in most states.  You must check your state’s rules and regulations.  Some states allow the use of one credible witness and others demand that two witnesses be used.   A credible witness is an individual who vouches for the identity of a document signer.

To do this, the witness must personally know the signer. In some states the credible witness must know both the notary and the signer creating an identity thread.  The witness will be required to sign the Notary Journal and the Affidavit of Credible Witness. 

One Credible Witness

If the document signer does not have any form of acceptable identification, the document signer can be identified by a person known as a Credible Witness. The Notary must put the credible witness(es) under oath or affirmation that they believe that all of the following is true:

That the Credible Witness:

  • Personally, knows the signer (based on the same criteria as “Personally Known” above).
  • Personally, knows the signer is the same person named in the document.
  • Reasonably believes that the circumstances of the document’s signer are such that it would be very difficult or impossible for that person to obtain another form of identification. (This is common in cases where the signer is in an assisted living facility or hospital.)
  • Believes that the signer does not have their possession another form of identification.
  • The Credible Witness is NOT named in the documents and does not have a financial interest in the document. 

Two Credible Witnesses 

The law in some states indicates that in order to identify a document signer who does not possess any type of acceptable identification, a Notary Public may use two Credible Witnesses who are not personally known to the Notary Public for the purpose of identifying the signer.

If you use 2 credible witnesses, they do not need to know the notary but must be able to swear that they can vouch for the identity of the signer.  They will need to have valid identification which will be entered into your Notary Journal.  They will be required to sign your journal.


Let’s talk about another (sometime challenging) area of a notary’s core responsibilities, the area of competency.  This is a frequent concern in many parts of the notary business, for example with Wills, Power-of-Attorney and other documents, although it can arise in any type of signing.  

Competent is defined as legally capable.  A person might suffer from a medical condition such as Alzheimer’s, or Dementia or they are taking medication that impairs their judgement, and therefore be incompetent A person under the influence of alcohol or a controlled substance may also be incompetent.  If you have reason to believe any of these conditions exist, you must stop and not proceed with the signing.   

Title insurance policies provide coverage against claims for duress, incompetency, or incapacity.
If a principal shows signs of incompetency, the title company depends on you, the signing agent to stop the transaction if they detect either of these situations.


Let’s be clear, you are not a doctor or psychiatrist.  Title companies do not expect a Signing Agent to give a medical opinion regarding the competency of a person.  But an individual can form an opinion of a person’s competency from observation and conversation.  If as a signing agent you suspect the signer is not fully competent, then you should ask a few simple questions.  Ask the signer if they know what they are signing and what the document means.  Depending on the answers, you may choose to ask additional questions such as the day, year, time to the nearest hour and the name of the current president. The questions and answers should be documented and in the file.  This documentation can prove to be crucial evidence if the competency of the signer is ever challenged.

If a signer appears to be under the influence of alcohol, the signing should be re-scheduled for another time.  If the signer does not appear to be competent for some other reason, you should stop the process.  Depending on the exact concern, the principal may have to provide a letter from their medical doctor as to their ability to make financial decisions.  If their doctor does not deem them capable, a conservator or guardian could be appointed by the appropriate court.  

Commissioned notaries should be as concerned about a signer’s competency as they are about Identification.  A notary can be held personally liable for notarizing the signature of an incompetent person and face claims against their notary bond or errors and omissions insurance.  

Notaries who refuse to notarize a document for someone who appears to be incompetent should document the refusal in their notary journal.  If after asking a few questions as described above you deem the signer competent you should document their journal accordingly.

Remember, documents signed by an incompetent person can be challenged.  If the document was a deed transferring title and it is proven the signer was not legally capable the transfer can be overturned.  The title insurer would have to defend the insured which could result in a costly claim.  Notaries are the best defense to prevent these claims.