Posted by SReis on 6/18/08 11:16pm
Msg #251961

RTC & Modifications Question

Does anyone know what/if any effect a modification has on the borrowers' RTC. For example, borrowers sign loan pkg Fri, RTC ends Tues but borrowers do not sign MOD (subordinating a part of their orig loan to this new loan) until Tues evening. If borrowers were not aware of certain facts of modifcation (ie: monthly pymt amt higher on sub), would they have any recourse since the RTC has pretty much run? Seeing more & more of these & not really sure of the implications. I've tried to do some research but can't find a definitive answer. TIA

Reply by Therese on 6/18/08 11:21pm
Msg #251962

If the borrower is refinancing with the same lender there would be no RTC. I believe this is true for modifications as well.

Reply by SReis on 6/18/08 11:36pm
Msg #251964

Its actually 2 different lenders. There is a new lender for the now 1st mortg & then the orig lender for the MOD, which I understand would not on its own have a RTC. This is a bit disturbing because the borrowers were under the impression that the loan docs they signed Fri included ALL of their monthly pymt, when in actuality they still owe another $150 a month to their subordinate lien. They did not, however, find this out until 8pm on the last day of recission & were unable to contact their LO for more explanation. They chose to sign anyway & hope to call LO in morning for clarification. I only hope that if they choose to back out the lender will be compliant given the circumstances, because as I see it their RTC is over. Although I'm sure they would have a very good argument in crt re: being misled & not being given info in a timely manner.

Interested in other opinions on this. This is the 3rd MOD/Subordinate Lien closing I have had to do in the last couple of weeks, where they subord a portion of orig loan to new loan being taken out but it never is done at the time of "new' loan closing. In anyone else seeing them?

Reply by Becca_FL on 6/19/08 12:27am
Msg #251967

Sorry Shannon, I've not seen one of these in a coons age. The tough part of this type of mod is showing the brw that the 2nd lender is accepting the subordination and making it clear to the brws that the mod does NOT include the subordinating lien.

Thankfully, the many 80/20 deals I did down here were with one lender and that lender is making an effort to mod the first mtg, leaving the second to ride. With interest rates lower than they were when deals were signed, it's not a bad deal for most. The unfortunate thing is that the property they purchased two years ago is worth 30-40% less today.

Crappy times.

I appreciate your input here, Shannon. Please keep up the good commentary.

Reply by CaliNotary on 6/19/08 1:08am
Msg #251972

"They did not, however, find this out until 8pm on the last day of recission & were unable to contact their LO for more explanation. They chose to sign anyway & hope to call LO in morning for clarification. I only hope that if they choose to back out the lender will be compliant given the circumstances, because as I see it their RTC is over. Although I'm sure they would have a very good argument in crt re: being misled & not being given info in a timely manner."

What argument would they have in court? We've seen how well the "Nobody told me my loan would adjust after 3 years, I didn't know what I was signing" defense has worked out for people.

If people are stupid enough to allow themselves to be pressured into signing loan documents they don't agree with and/or understand, especially in today's real estate climate, then I have zero sympathy for them.

If it's a deal where they have no other options then they should just suck it up and be glad that they were somehow able to get a new loan when so many people can't these days. If they do have other options then they have no business signing paperwork and just hoping it works out for the best after it's too late to do anything about it. They should have used the RTC, found out what they needed to find out, and made them redraw the docs if necessary. Better to pay a redraw fee than to be stuck in a crappy loan for several years.

It's called personal responsibility. Why people are so willing to put the burden of their own fiscal responsibility on others is beyond me.

Reply by SReis on 6/19/08 7:56am
Msg #251986

Cali, I would normally agree with you here but what troubles me is that they were not given the MOD to sign until the night of the last day to rescind & that it was never really explained to them that they had a separate $150 pymt due. To most of us it may seem like common sense if you were having a subord done that there would be an add pymt but its not so clear for others.

As for their choice to sign the MOD, your right it was their choice. I don't know their circumstances & why they are choosing to do so but I don't necc. think that it absolves the LO here from any wrongdoing esp. if they never received any paperwork prior to the MOD signing explaining the details.

Reply by MikeC/NY on 6/19/08 9:53am
Msg #252001

"what troubles me is that they were not given the MOD to sign until the night of the last day to rescind"

For me, that would be a big enough red flag to cause me to exercise the RTC and get things sorted out. As someone said previously, it would be cheaper to pay the redraw fee than to be stuck with a potentially dangerous loan.

Unfortunately, you're not in a position to give advice or a warning, even though you see the train coming. As Cali said, people have to take responsibility for their own financial affairs. They should have known what was in that mod before they signed the package in the first place. Not knowing and still allowing the RTC to run was just a dumb move on their part.

Reply by NCLisa on 6/19/08 7:29am
Msg #251985

2 different loans, the rtc is only good for the loan package it comes with. Modifications do not need an RTC as it is only a modification of a loan, and not a new loan.

If the borrowers are not happy with the modification terms, then they should not be signing the papers. The modifications are to help them get out of the bad decision they made in the first place.

Reply by PAW on 6/19/08 9:35am
Msg #251992

Maybe I'm not understanding this, but here goes anyway. Let's see if I have the facts straight:

Borrowers have an existing loan (or an existing 1st and 2nd) already in place.

The new loan replaces the first loan if there is a 2nd already, but not the 2nd. -OR-
The new loan is in addition to the existing first loan, but the new loan must be in the first position, thus the need to subordinate the original first loan.

In either case, the borrower(s) should be aware that their existing loan will remain and the payments will continue to be needed to be paid on the existing AND the new loans.

I asked another broker friend of mine about the need to extend the RTC if a subordination agreement needed to be signed. We both agree that it would not since the terms and conditions of the loan subject to the right of rescission were not affected. However, if the subordination agreement was not signed and agreed to by the borrowers, the new loan may not fund since a condition of funding is that the new loan occupy the first position (thus the need to subordinate the original loan to the second position).

Reply by Linda_H/FL on 6/19/08 10:58am
Msg #252014

Okay...I have to ask this question, and it's asked with

all due courtesy and respect...does ANYONE else find it strange that an attorney is posting on notary forum regarding this issue?? Doesn't anyone else think this attorney should either (a) know the answer to this without resorting to asking notaries/signing agents or (b) can't find the answer herself by way of research at her disposal??

"Seeing more & more of these & not really sure of the implications"....Sorry...I just don't get it - you, Attorney Reis, of all of us, should be able to answer this question yourself and for all of us...JMHO

Reply by Linda_H/FL on 6/19/08 11:12am
Msg #252017

Correction, should read (b) be able to find...sorry.. n/m

Reply by SReis on 6/19/08 11:17am
Msg #252019

Linda I think we have been through this before...

Just because I am an atty does NOT mean that I am all knowing. I again do not presume to know anymore than anyone else on this board just because I am an atty. In fact, like you, this is all I am doing at this juncture in my career. I do NOT deal w/loan processing in any different way than any other signing agent, and am NOT expected to give an legal advice during the signing process either. And as I stated, it was my understanding that the RTC was NOT affected but I was hoping for the borrowers sake that something may apply that I wasn't already aware of after attempting to research it myself.

Pls stop being bitter because you are not an atty, thats not my fault!

Reply by Linda_H/FL on 6/19/08 11:26am
Msg #252020

Re: Linda I think we have been through this before...

"Pls stop being bitter because you are not an atty, thats not my fault!"

LOL...not bitter at all....

Reply by SReis on 6/19/08 11:40am
Msg #252021

I'm sorry Linda

I usually try not to get personal but it upsets me that I cannot post on this forum a question w/o being attacked for being an atty. I am proud of what I am but again do not presume that I am any better than any of you or any more informed. I do NOT practice real estate law, separate from doing loan closings and I ALWAYS research before posting here. If you review my posts I am usually asking for reaffirmation of my opinion OR people's experience in scenarios that are not ordinary. I will continue to come here & post, as needed, and if it offends you I am sorry.

Reply by Loretta on 6/19/08 12:31pm
Msg #252026

Re: I'm sorry Linda

I think I speak for some of the notaries that post here, Shannan, to say that I am sorry that you got "bit" this morning. After working with attorneys for 12 years, I understand that they really don't know everything Linda should know that too.

Keep posting.....we all learn alot from each other, some things we use for our benefit (and no one complains when they have an interest in it) and some things we throw in the trash.

Reply by janCA on 6/19/08 12:56pm
Msg #252030

Re: I'm sorry Linda

I agree, Loretta. If one is not a real estate attorney, why would anyone assume that just because you wear an attorney hat, that you know all laws pertaining to anything and everything. My soon to be son-in-law is a corporate attorney, and I've heard people ask him legal questions about which he knows nothing about and his reply is, I don't know but I know someone that can answer your question. It's all relative to the type of law you practice, I would think. JMO

Reply by Linda_H/FL on 6/19/08 3:15pm
Msg #252072

I'm sorry too, Shannan - I didn't mean to attack

but your questions would have been better answered by calling a colleague rather than presenting it in a public forum to a group of laypeople. Even if we DID know the answer (which with a few questions answered I could probably hazard an educated guess) we shouldn't be going there...it's not our concern and answering questions about the "implications" borders on UPL - I'd also guess that, as to the modification/subordination, it's probably state-specific. MHO

Again..I apologize if it came across as an attack...that was not my intent. Curious, yes...but not attacking....I'm sorry.

Reply by PAW on 6/19/08 1:08pm
Msg #252033

Agree with Shannan

Though my background was primarily contracts, many attorneys who practice real estate law don't understand all the intricacies with mortgages, liens and the Fed. In many AOS's (Attorney Only States), attorneys that are doing the closing don't even specialize in real estate law. Most, that I have found, were from family or contract/business law disciplines. (Just an observation, no hard and cold facts.)

Reply by Lee/AR on 6/19/08 1:28pm
Msg #252040

Would an podiatrist be a good optometrist? No. n/m

Reply by Linda_H/FL on 6/19/08 3:07pm
Msg #252069

Probably not, Lee, but I doubt he'd post a question

about podiatry on a pharmaceutical CHAT forum...don't you?? That's my point...

Reply by hcampersFL on 6/19/08 3:26pm
Msg #252079

Re: Probably not, Lee, but I doubt he'd post a question

Well the question was thought provoking, and we have seen many less relavent questions posed here.

SReis is a premier member here and should be able to ask any question that they want. Really doesn't matter if it is any attorney asking or not.

Not trying to beat a dead horse, JMO.

Reply by SueW/Tn on 6/19/08 5:06pm
Msg #252104

Sorry but I'm with Linda on this one

I've also answered in a similar vein before when this poster asked a question that in my mind, being a MA attorney closing in an attorney only state, she should already know the answer to. I know I'm the square peg in the round hole and I've been flamed for my posts regarding this before but I'm sticking to my opinion on this. She's an attorney, ya can't close a loan in Mass. unless you're an attorney/under the direct supervision of an attorney. How can she supervise an SA if she doesn't know her stuff and comes to a forum for opinions? I'm betting she's making more than an SA and I'm also betting she would look incompetent IF she called TC to ask this same question. That's where we've got it over the attorney only thing, WE ACTUALLY CAN CALL SOMEONE THAT TAKES THAT RESPONSIBILITY AWAY FROM US and not look less than qualified. To the poster I'm sorry if she feels this is a personal attack but the fact remains, IF you're an attorney AND you're doing business in an Attorney Only state, and real estate closings are ALL that you say that you do, perhaps you should bone up on real estate law.

Reply by ReneeK_MI on 6/20/08 6:42am
Msg #252186

Yep, pretty much agree with Linda and Sue

You can't overlook the politics of this issue, and I hope that all atty-members of our N/R community here will allow us that. Atty-only states became atty-only in order to protect the interests of consumers (according to the applicable state Bars). In large part, that increased protection is supposedly the result of the high accountability the legal profession is held to.

The consequences of that (atty-only closings) are: a huge loss to the SA industry in those states, higher fees to consumers, greater opportunity and income streams to members of the Bar.

Well okay fine - but if the bar is raised, then the BAR is RAISED, and it should go both ways. I don't think anyone on the planet - including brain surgeons - EVER has to have all the answers, but I do think that any attorney performing real estate transaction closings should be expected to know MORE than any non-atty SA would know, out of the gate. I think any question they might have would be ill-placed in a notary forum because I would expect a real estate /mtg lending proficiency far beyond those non-atty SA's who've been essentially wiped off the map by those Bar Assoc's.

It's certainly nothing personal, and perhaps it IS a little 'bitter' in a non-personal way - bitter that $$$ always wins over what might, in reality, be fair or right or justified.

Reply by hcampersFL on 6/20/08 6:52am
Msg #252188

Re: Yep, pretty much agree with Linda and Sue

Okay I take back my reply! I didn't even notice she/he was from MA. That makes a huge difference. If your in an attorney only state then you should know how to close loans and what ANY

Reply by hcampersFL on 6/20/08 6:54am
Msg #252189

Re: Yep, pretty much agree with Linda and Sue

Let me finish....

laws are regarding closing loans in your state. You should be the one answering questions from posters on this site, not asking them.

Do your research, look in some of those law books you had to buy for school and find your own answers.

Reply by SReis on 6/20/08 7:29am
Msg #252191

Yup, bitter is eactly right for you all....

I know the laws in my state re: loan closings. I do not come here asking basic questions but people's experience in out of the ordinary situations, where the laws may not fit the exact circumstance. To be told that I cannot/should not ask people's opinions on something is outrageous. We are held to a higher stnd because we can be NOT because we are necc. expected to know more. Its more of an ethics thing than anything else. We are still NOT allowed to give our legal opinions during loan signings.

And don't be fooled by the hype, attys here in MA are not making much more than SA's anywhere else. My biggest client is trying to lwr my fee to $100 and another co. asked that it go to $125. SA's are still in business around here too (like in MD) no matter what the law says.

SO, pls don't be bitter because I chose to work my butt off for 3 yrs & then go through the torture of a the bar exam to become an atty. That is the only real thing that separates us. Again, just because I hold a law degree/bar card doesn't mean I am all knowing or any better than anyone else on this forum. Although I do appreciate that high esteem all you naysayers seem to have for me!

Reply by hcampersFL on 6/20/08 9:46am
Msg #252207

Re: Yup, bitter is eactly right for you all....

I'm not bitter. I think it's great that you have a Law degree. I know you worked very hard for it and that it cost a lot of money.

I just don't think you should be asking question or looking for opinions from SA, you should ask other Attorneys that do the type of work you do in your state, they would know the laws that apply much better than anyone on this board....maybe.

I was on your side until it was pointed out that you are in an Attorney only state. This makes a difference to me and to my opinion. Like they say we all have one.

Reply by PAW on 6/20/08 7:34am
Msg #252193

Re: Yep, pretty much agree with Linda and Sue

>>> Do your research, look in some of those law books you had to buy for school and find your own answers. <<<

I don't think you would find the answer to the specific question ("If borrowers were not aware of certain facts of modifcation (ie: monthly pymt amt higher on sub), would they have any recourse since the RTC has pretty much run?" in any real estate law book. The answer, sort of, is found in Title 12 of the United States Code. IMO, the question isn't a matter of law, but more a matter of policy and procedure and interpretation of the Code, as set by the Fed on what constitutes "material disclosures" (see below) that gives rise to the right of rescission.

According to the footnote in Reg Z, the term material disclosures means the information that must be provided to satisfy the requirements in Sec. 226.6 with regard to the method of determining the finance charge and the balance upon which a finance charge will be imposed, the annual percentage rate, the amount or method of determining the amount of any membership or participation fee that may be imposed as part of the plan, and the payment information described in Sec. 226.5b(d)(5)(i) and (ii) that is required under Sec. 226.6(e)(2).

The interpretation of the above is up to the Fed. Attorneys can only offer opinions as to what the law states and, as we all know, the laws are all too often not very clear on what is meant. That's why we have the court system, to affirm or deny the interpretation.

In my opinion (not a legal interpretation), in this particular case, the "disclosure" had nothing to do with "information that must be provided to satisfy the requirements" as stated above. The answer to Shannan's question should be provided by the Fed. She merely was asking for opinions from those who closings and signings.