Posted by Paul2_FL on 9/19/06 6:43pm
Msg #147047

Exhibit A (again)

I know this subject has been beaten to death before (msg 134688 for one) but I thought I'd resurrect it one more time because of a recent signing.

The borrowers in this case actually received the Exhibit A! However, this exhibit not only showed the parcel of land (A) that the borrowers agreed would be encumbered but another 14 acre parcel (B) that the borrowers owned free and clear and were not to be made a part in the mortgage.

Had Exhibit A been missing and the signing concluded without it, not only Parcel A of the borrowers property but also Parcel B would have been included in this mortgage and the borrowers probably would not have known it until they tried to do something with this land.

From this example you can see that this is another case for insisting that Exhibit A be included with the documents.

Reply by TitleGalCA on 9/19/06 8:22pm
Msg #147059

IMO...the short answer is yes, but it is incomplete.

A better answer is...a good title company, a good escrow officer, and an aware borrower makes for a good signing to correct the error by the lender in drawing docs to short cut what might hold up funding/closing.

In your situation, Borrower signs but marks up the exhibit A, calls escrow and lender the next day, clarifies the situation, insists on copies of a correct exhibit A, AND insists on an amendment to the escrow instructions before closing to show the property to be encumbered (just one scenario).

It is a toss up as to whether or not more time would be gobbled up by sending out new Edocs, a new notary, another fee to be added to the HUD, etc....or whether it would take more time/effort/money to work with escrow for assurance that the correct property is encumbered via new escrow instructions, or even (gasp!) trust.

It's where communication and working with professionals make a difference.

Hey - in any real estate deal, perfection just doesn't happen routinely. I'm just suggesting signing agents have a little flexibility as to these stringent requirements. It could make the difference between landing an account for you in these trying times or not.

Just food for thought.

Reply by Paul2_FL on 9/19/06 11:02pm
Msg #147100

I understand your point on this when the Exhibit A is in hand and there is a problem with it. The borrowers in this case did mark-up the document, initialed it, and kept a copy. I, in turn submitted the marked up copy back to TC with a note stating the problem. Hopefully, TC will correct it before the mortgage goes to be recorded.

As you had stated and should this situation ever come up again, I will recommend to the Borrowers to also "call escrow and lender the next day to clarify the situation and to insist on copies of a correct exhibit A, AND insists on an amendment to the escrow instructions before closing to show the property to be encumbered". Thank you Titlegal for that.

However, this still leaves open the problem I mentioned earlier when no Exhibit A accompanies the Mortgage. We, as notaries, who notarize a mortgage without the Exhibit A / Legal Description and where the Mortgage clearly calls for one, could be in violation of our State's Notary Law. We may also, to some extent, be liable for damages should the wrong property be encumbered. (Don't know this for sure but seems possible).

Reply by PAW on 9/19/06 11:08pm
Msg #147104

Though we cannot be held liable for the contents of the instrument, if we know the contents to be false, then we as notaries cannot notarize the signatures on that instrument. So, if the legal description is indeed false, but it is not detected or noticed by the property owners, then the notary is not liable unless he/she has special knowledge about the instrument and its content.

Reply by PAW on 9/19/06 11:04pm
Msg #147101

Many title companies do not allow for the borrower or "closers" to mark up the recordable (mortgage) document. So if the legal description is in error and cannot be modified, then it should not be signed by the owners, and if they sign anyway, their signatures should not be notarized as the instrument is now known to contain false statements. (F.S.A. 117.105)

However, if a marked up doc is allowed, then all may be okay.

Whenever I have a mortgage that includes an attached legal description (e.g. Exhibit "A", I always have the signers of the mortgage initial the attachment. Then if the recorded instrument does not include the initialed attachment, it means that it was replaced and possibly with an incorrect description.

Reply by Paul2_FL on 9/20/06 8:23am
Msg #147155

Paul, I do the same with regards to having the borrowers initial the attachment. (I actually have them initial each page of most documents unless instructed not to by the Lender or TC.)

I have to assume that when TC gets the marked-up Exhibit A back from the borrowers they will replace it with a corrected copy before recording. But, there still could be a problem. If the borrowers do not contact TC and request a "final" version of the exhibit before recording as TitleGal suggested, then TC could still submit a "clean" copy of the flawed exhibit. I realize the likelihood of this happening is small but the possibility is real. In the future I will recommend to the borrowers that they follow-up with their Lender/TC to make sure Exhibit A is corrected and approved by them before recording.