Posted by GRF on 4/28/07 12:29am
Msg #187641

Negatively amortizing loans - long

I have been doing closings now for 6 months and have used this site as a learning tool before I started and as I have went along. Thank you for all the informative posts.

I have searched this site for input to a problem I am experiencing but have been unable to find posts related to this. I am getting 3-5 assignments a month that involve loans that are deferring interest. I have closed a few loans where the people are fully aware of the loan and understand what they are signing. But the majority of the loans involve one particular lender. The broker, title companies and signing services vary but the actual lender is always the same. The borrowers are being told they have a fixed rate of 1-3% for x numbers of years. Then the rate will be adjustible. The note that is provided at signing has a rate of anywhere from 8-12%. No where in the document does it state the "teaser rate" of course. The note is also always buried in the middle of the package.

Needless to say EVERYTIME I do these loans the borrowers are highly upset and the questions just start coming. Today in particular BO has scores in the mid 700s rate on note says 8% he thinks it is 2.25% (yeah right). The loan he has now is 6.125% So I have the BO call LO who doesn't know he is on speaker phone. The BO starts asking questions and every questions is avoided like you wouldn't believe the BO pushes to get answers and the LO actual says to the BO that the rate on the note is just an "indexed rate" your rate is ..... The BS coming from this guy AND his manager is out of this world.

The BO decided to sign documents and are going to call an attorney first thing next week to look at docs. Thank god. Which will probably cost them another several hundred dollars on top of the $6k in broker and lender fees. When I left the appointment I called the signing service and the title company and informed them not to call me if they have a loan involving this lender.

Unfortunately I have been called by other signing services and title companies to do loans for this company and I do not know what I am getting till the package comes. Which for this lender has been late probably 80% of the time. These closings always end up involving several hours due to late docs, trying to track down ghostly LOs, BOs dragging their feete becausse they know something isn't right, plus over half of them have refused to sign. Which actually I am happy when they refuse to sign. I am also a licensed real estate agent and my blood is beginning to boil with this crap.

So I am asking you guys for your input on dealing with this problem.
1. Do I simply refuse the signings the second I recieve the docs and realize what they are, which is usually an hour or two after I was suppose to be at the appt? If so do I call the BOs and tell them I am not coming?

As a licensed real estate agent my responsibilty is to make my real estate client aware of the terms of the loan? How does this apply when I am working as a signing agent? Do those limited law practices carry over?

I know speaking out will probably have consequences to my future dealings with some of these companies but given the magnitude of what I consider fraud, it is well worth it. I just want to know what my options are legally. If there are any attorneys in the group I would especially appreciate a response.

If intervention is recommended, how should it be handled?

Reply by Gina Fox on 4/28/07 12:32am
Msg #187643

A few typos, sorry it is 1:30 am and needed to get this out so I can sleep.

Reply by Tim_Mphs/TN on 4/28/07 3:17am
Msg #187666

I have done a few of these myself. I always consider it part of my duty as a notary to be sure the borrowers know what they are signing (if it is a notarized doc or a doc). So, I normally point out the key features of the docs as I we go along. On the few of these I have done, the borrowers got the LO on the phone and refused to sign it - or they signed and then rescinded.

I had one of these late last year that was fresh in my mind when the Tennessee Dept of Financial Institutions had a seminar here in Memphis about the new anti-predatory lending law that was scheduled to go into effect on January 1, 2007. I asked the chief rep of that state agency about this and he said if the lender did not fully disclose the terms of the loan before the signing, it could be considered fraud and they sure would like to know about it. This falls under the federal laws that require them to send out a Good Faith Estimate whenever the terms of the loan change significantly as they work up the package. Many states have state laws that mirror the federal law on that. The trick is that unless someone complains and has proof (meaning, they would have to either be the NSA with copies of the docs or the borrower who has already signed - they don't get their copies to keep unless they sign, right?), it is very difficult to prove fraud or even bad faith dealings.

You may want to consult an attorney in your area to see what, if any, obligation you have to report suspected fraud in your state, as well as to whom it must or should be reported.

The other thing that stood out to me in your post was this about the docs arriving after the scheduled closing time. I realize that we all need to decide how we run our own businesses, but I strongly urge you to set a deadline and stick to it. I am willing to be late sometimes, but this 2 hours after the scheduled appointment is just downright disrespectful to everyone involved.

All IMHO and no legal advice or opinions are intended to be given,as I am not an attorney.

Reply by Susan Fischer on 4/28/07 5:24am
Msg #187668

Great response, Tim. Fully agree. People before profit.

Right's right, and wrong ain't, IMHO.

The feeling we get when something isn't right is called scruples; moral judgment; The Right Thing; and other life lessons to which we can relate.

So, if it looks wrong, and smells wrong, and acts wrong...it's not right. And the choice becomes clear: don't be a party to it, and do what you can to stop it.

Because otherwise the $$ becomes Filthy Lucre.

First, People. Then money. Then things.

Gotta love Suzi Ormand.

Cheers!
Susie

Reply by Susan Rittof on 4/28/07 7:17am
Msg #187669

Re: Great response, Tim. Fully agree. People before profit.

Are the true rates and times they kick in listed honestly on the TIL?

Reply by Lee/AR on 4/28/07 8:26am
Msg #187670

Re: Great response, Tim. Fully agree. People before profit.

I have one waiting for shredding and yes, TIL shows true rate, not teaser and shows that in year 3 (on this one), the payment more than doubles for the remaining 27 years of the loan.
We didn't get even that far before B was on phone to LO and then refused to sign.
Also did another for someone who fully understood it and was quite happy about it--and will add that, in this case, it made a lot of sense.

Reply by GRF on 4/28/07 9:09am
Msg #187672

Re: Great response, Tim. Fully agree. People before profit.

The rate the people are quoted is a rate that there minimum payment is being based on. The actual interest rate for the loan amount is much, much higher. This company also tells people the teaser rate is locked in for x years sometimes when actually the rate becomes adjustable when the first payment is due. That wasn't the case in this loan but I have seen it with their loans. I have know doubt I want to stop this company in our area I just need to know how to do it legally. So I will wait till Monday and talk to a lawyer.

Reply by Becca_FL on 4/28/07 11:26am
Msg #187698

GRF, Are you talking about the CW Payment Advantage?

You will get better answers, more direct answers if you tell us what loan program you are talking about.

If I were to guess, I would say you are talking about the above mentioned product. If so, the interest rate for the note is on page one of the note, but the initial rate is found on page two. The initial rate that the minimum payment is based on the interest rate less 5% points.

There is nothing wrong with a negative amortized loan. Some people prefer to take a gamble.

Reply by Lisa Prestegard on 4/28/07 2:09pm
Msg #187748

Re: GRF, Are you talking about the CW Payment Advantage?

Or in speculative investment terms, let the market act as a shock absorber

Reply by GRF on 4/28/07 9:20pm
Msg #187813

Re: GRF, Are you talking about the CW Payment Advantage?

This is not a CW loan. I know all about these loans and have closed several, these BO 90% of the time know exactly what they are signing. And understand negative amortization.

These people were told as I listened on speaker phone that their rate was 2.xx%, this rate does not appear anywhere in the loan package especially the note. The LO told them that the 7.xx% in the note wasn't REALLY their rate, it was an indexed rate and didn't apply to their loan, to just ignore it. But according to the note, this is their fixed rate for 5 years then it will be adjustable. The current loan is 6.xx% fixed for 30 years. The LO assures them he is saving them money because he has lowered thier monthly payment by $400. per month. These people kept asking is my interest rate 2.xx%, he says yes. If this is true that is the rate that should be seen on the Note. The future rate would be index plus 3.xx%. I am not confused here I know exactly what they are trying to pull. And this isn't the first time they have done it.