Saturday, November 10, 2007

Could We Have Done It Differently?

I've spent a lot of time reflecting back on the adjustable rate subprime loans I've handled over the years. What responsibility, what role, did signing agents play that brought us to our current situation? Could we have handled our part differently? It's always a fine line that we walk. Show the terms, but don't explain them. Be neutral and independent, but don't bite the hand that pays you. Don't advise, don't convince someone to sign anything they don't want to, but understand that if the borrower doesn't sign or if they rescind, you might not get paid or you might only get a trip fee.

So, if borrowers felt that they were misinformed or didn't understand what they were signing, how could the signing agent have prevented this (and how can we prevent it in the future)? Even though we can't EXPLAIN loan documents, everything a borrower needs to know is right there in three key documents; the settlement statement, the truth in lending form, and the note. In my opinion (and I know that the point and sign notary will disagree), it's not beyond our scope, it's not UPL, to SHOW the borrower their key information. On the note, they should see their interest rate, the first payment due date, when and if the loan becomes adjustable, the index, the margin, the cap, the payment grace period. On the settlement statement, they should be able to see where the mortgage fees are, the title fees, if there's an initial escrow being set up, if there's anything else being paid off, and any money they owe or are getting at closing. On the TIL, you should be able to show them what the monthly payment is without escrow, what estimated payments will be after the initial fixed period expires if applicable, and whether or not the loan may have a prepayment penalty. Also, it helps to understand the difference between an interest rate and an APR. Many loan packages have an additional sheet that explains the A through D boxes on the TIL, including the APR. I always keep a generic one on me if the borrower requires a clarification.

If a borrower SEES everything above, then they've got a solid knowledge of their loan terms. They can walk away feeling comfortable that they understand their loan, and a signing agent can walk away knowing they did their job without explaining, advising, or UPL.

1 comment:

Renee Kovacs, NSA said...

Alex - I believe the points you illustrated not only should be made clear to the consumers, but MUST BE. If they're not yet clear by the time the NSA arrives, then yes, it becomes the NSA's responsibility as a person of ethics and integrity, as a human being, AND as the contracted agent of both the settlement agent, and by that extension, of the lender.

Unfortunately, this is all just opinion and opinion is all we have.

Knowing you and your high level of polish as well as your ethics - I'm sure you know as well as I do how easily and smoothly loan terms can be made very clear to even the least savvy consumer, without getting near the UPL line.

There's a couple other things that could be added to this - the income on the 1003 and the 4506/T, which would've caught some of those stated loans in the net of "full, impartial disclosure".

When I present the 1003, I tell consumers that they will sign attesting to the information it contains (read the verbiage at the sign. line). This usually prompts either a skim-over of the data, or the question "What's ON here?" I can then POINT - here is this, here is this, here is your INCOME, here are your declarations, etc.

Similar with the 4506 - if we invest the time in READING these documents, it's very easy to find the key sentence or statement within the actual document to answer almost any question.

Obviously, every document has a purpose and those purposes are going to be contained within the verbiage. I don't say 'read it and find out', and I don't often have to say 'call your L.O.', but 99% of the time, I can immediately point to the answer.

"Why am I signing this? What is it?" It says right here, 'by signing this, you provide blah blah blah.'

Once you've read a mortgage enough times, you know what it says, you know where it says it, and I consider that part of the minimum of what I should know.

Who benefits the most from holding 2 or 3 day seminars on how to be an NSA, and arming them with a longer list of what they CAN'T do, and handing them a glass of UPL Kool-Aid before they leave?

Interpreting the legal aspects of a document is UPL. Offering (or even MUTTERING) opinion or advice of any kind is either UPL or a career-breaker (or both). Efficiently presenting a document is our job and duty.