Posted by PJM/MI on 9/3/06 6:50am
Msg #143198

ARMS..Cost a leg, too

There is a good article at Business News Weekly regarding all those wonderful ARMS borrowers signed in 2004 & 2005. I was dismayed, however, to read how the borrowers signed without really knowing what they were getting into. Who the heck closed them?
I feel that the borrowers have every right to know AND understand what they are signing. I ALWAYS explain the Note in all its glory to the borrowers so they understand what they are signing.
After reading the article, I am wondering if alot of "newbies" closed these loans without fully understanding how to explain the docs to the borrowers. Just because we want to make some $, doesn't mean we should be in cahoots with a shifty loan officer and try to gloss over the fine print. I'd much rather get a trip fee on a no close due to a bad loan officer, then have the borrowers sign a Note that is not what they wanted. Yea, I am fully aware of the 3 day RTC..but if Mr/Mrs. Borrower are not happy with the loan, I am not one to tell them "Just sign and then use your 3 day RTC".
It saddens and angers me when I get to a closing and what was "promised" is not what is in black and white. And like in my previous post, a loan officer has told the borrower "don't make your mortgage payment..you'll be signed by the next payment date". (And then ends up 2 months in arrears.. has to sign jacked up interest rate).
Back to the ARMS... I see that several of the ARMS I closed back in '04 that are coming due have "For Sale" signs in the front yards.

Reply by Lee/AR on 9/3/06 8:38am
Msg #143206

"I see that several of the ARMS I closed back in '04 that are coming due have "For Sale" signs in the front yards." But this may be one of the good reasons for an ARM. If you're planning on moving before it adjusts, it is a good loan. There are other good reasons that people get an ARM. Tho' I do think that they've been oversold to people who really shouldn't have gone this route. My experience is that the B knows it's an adjustable rate. What they dont' realize is exactly what that rate adjustment is going to do to their payment. Depending upon where in MI you are, this could be but the tip of the iceberg... think Titanic.

Reply by Roger Kennedy on 9/3/06 10:12am
Msg #143214

I do tell them whether or not they have an ARM or Fixed. I always point that out. Then I also, in a joking manner (if it is an ARM) I guess I will see you in a couple of years.

Reply by JanetK_CA on 9/4/06 5:48pm
Msg #143408

Re: ARMS..Cost a leg, too - Semantics??

PJM, unless it's a matter of semantics only, I have to strongly disagree with you about "explaining" the Note. That could have you dangerously crossing the line into UPL. I WILL, however, go over the Note with the borrower, pointing out the key elements so they can readily see if it is consistent with what their loan officer/broker told them and what they were expecting, but it is their job - not ours - to actually "explain" the loan. Some signing services and title companies have explicit intructions to NOT explain the documents in the loan package to the borrowers.

This may be splitting hairs a bit, but it is a distinction that is important for us to make - and I felt this should be clarified for any new SAs reading here. We are to be the neutral party in this transaction. We are not privy to the borrowers' financial circumstances (like in the example above, whether or not they are planning to move in two years...) or any other issues they are dealing with. That's the LO's/broker's domain.

On the other hand, I do agree that too many people are just signing loans that they don't understand fully (or perhaps have been misled about), but it's not our responsibility to step in and try to straighten them out. Again, we have to be neutral and avoid UPL, regardless of the circumstances, however difficult that may be sometimes.