President Obama late Thursday vetoed a bill that was designed to facilitate electronic mortgages and e-commerce. The veto arose in the wake of fears that language in the legislation would make it easier for servicers to get foreclosures approved by the courts.
The bill (H.R. 3808) is called the Interstate Recognition of Notarizations Act and requires state and federal courts to recognize paper or electronic documents with seals from out-of-state notaries.
The Senate approved final passage of H.R. 3808 on Sept. 27 by unanimous consent — just a few days before Congress adjourned for the November elections.
"Our concern is the unintended consequences on consumer protections, particularly in light of the home foreclosure issue and developments with mortgage processors," said White House press secretary Robert Gibbs. "So the President is exercising a pocket veto, sending that legislation back to Congress to iron out some of those unintended consequences."
New reports have raised concerns the legislation could be used to shield lenders and mortgage processors from liability in "robo-signing" foreclosure cases.
Once accepted by the courts, notarized documents are harder to challenge. But the bill does not preclude challenges of fraudulent or inaccurate documents, according to one attorney. The attorney, requesting anonymity, also noted the bill is not retroactive.
In the case of robo-signings "the allegations are that the signatures are inappropriate — not that the notarizations did not comply with state law," said Anne Canfield, executive director of the Consumer Mortgage Coalition, whose members include some of the largest mortgage lenders and servicers.
"This bill simply allows for the interstate recognition of notarizations. It is designed to facilitate electronic transmission of notarized documents," she said.