Posted by Art_MD on 4/30/10 3:19pm
Msg #334363

no good deed goes unpunished


In MD, and probably other states, there is a fee when a new DOT/mortgage is recorded.
However, if you are refinancing your principle residence, the amount of your old mortgage is exempt from the fee IF YOU FILE A REFINANCE AFFIDAVIT. I.E. old loan balance 200,000 new loan 250,000 you pay the fee on the difference - 50,000.
At .7% you are talking $1750 vs $350.

On a significant % of closings, the amount on 1202 (?) is at the .7% of the full new loan amount $1750. The borrowers see the line and just assume it's correct.

When asked to explain what the line is, I've been know to explain, mentioning the refinance affidavit. I ask the borrowers PLEASE DO NOT mention me when they question the amount with the tC/lender. (refinance affidavit must be filed at time of recording - you'd never get the money back if you tried to file later - county won't give back the $$)

So, got a call from a title company saying that the borrowers said I told them the amount was wrong.

So here I was, trying to save the borrower $1400 and they screw me.

Art

Reply by BossLadyMD on 4/30/10 3:26pm
Msg #334365

Maybe they were confused as I sure am! TC/lender need only attach a refinance affidavit and only the difference is assessed a 7% fee?

Reply by Linda Juenger on 4/30/10 3:50pm
Msg #334368

wow, never heard of such a fee. Shhh don't tell our county about this.

Reply by Art_MD on 5/1/10 10:51am
Msg #334483

Re: no good deed goes unpunished - Boss lady

Yes, only need to attach the affidavit - signed by all on title and notarized. But, if they don't inform borrower or include the affidavit in the package, they will collect the .7% (not 7%) and pay it to the county. No $$ out of the LO/TC pockets.

Art

Reply by Hassan Pater-rov on 4/30/10 3:57pm
Msg #334369

I have seen a lots of title Companies on this RF AFF. charge the difference. As a matter of fact, the first time it was brought to my attention and I learned from if, it was the customer 5 years ago disbuted this charge with the TC. and he won.

Reply by MikeC/NY on 4/30/10 4:00pm
Msg #334372

We have those in NY - they're called CEMAs, and are more complex than just an affidavit, but the net effect is the same. It seemed to me that a lot of TCs/lenders and borrowers were unaware of these things, the TCs/lenders probably because they were from out of state and didn't know NY law, and the borrowers because... well, they're borrowers, and no one told them. I've done a bunch of them, all for the same NY law firm.

I would never bring this to the borrowers' attention because that's above my pay grade. If it was a CEMA and they asked me about the multiple mortgages they were signing, I could explain to them in general terms what the purpose of a CEMA was and what the different documents were for. If it wasn't a CEMA but could (or should) have been, I kept my mouth shut - I'm there to get papers signed, not to tell them what their TC/lender did wrong. Discussing the terms of the loan with the BO is never a good idea, even if you are well-intentioned and are just trying to be helpful, because if you kill the deal you might wind up in deep you-know-what with the TC or lender. It's sort of like the Hippocratic Oath - first, do no harm...

They probably didn't screw you on purpose - more likely, they got into a discussion with the TC, who didn't know what they were talking about and refused to do anything about it, and somewhere along the line they blurted out "but that's what the notary told me!" Or, they didn't care and just threw you under the bus right away. Either way, same result.

Sorry to hear you ended up in trouble for it, but you DID cross that line into territory in which you had no business being. I hope it didn't cost you a client. Next time, just bite your tongue when you see stuff like that.

Reply by Lee/AR on 4/30/10 4:08pm
Msg #334376

Ditto 're-issue rates' on Title Insurance Policies. Much cheaper, but no TC bothers. It kills me, but I keep my mouth shut, having learned years ago that no good deed goes unpunished.
Shame, but true.

Reply by taxpro on 4/30/10 8:17pm
Msg #334415

Hey Art,
Good to see you're paying attention, but you're right! You can get yourself into trouble for noticing an error on the title docs, and mentioning it to the borrowers! Here, in Kansas, we have a Mortgage Registration Tax, and it sounds similar to yours, but the new mortgage is only exempt if it is with the same LENDER! So, if the new mortgage is with a new lender, they have to pay the full amount. You know how mortgages get sold and resold, so sometimes it's hard to determine who was the original lender. Occasionally, I'll see a Kansas Mortgage Registration Tax Affidavit in the package, but it's not for the borrower to sign and have notarized; it's for the lender or title company to sign and have notarized, saying they have personal knowledge that the amount of the original mortgage is exempt. Since my borrower doesn't have to sign this document, I just skip it. I just hope that the title company is on top of it if they are entitled to the exemption because the amount of tax is significant!!

Reply by Maureen_nh on 4/30/10 9:36pm
Msg #334427

I had a signing on a NY property and the lender/title separated the docs out some how so that the borrower has a smaller tax liabilty. They explained it to me after I called asking what those docs were.
Sometimes I see something I think may be wrong and explain to the borrowers that I really don't know how or why the numbers are what they are but maybe they should look at them a bit closer and call their LO for a clarification.
That is as far as I feel I can go in salvaging my conscience.

Reply by MikeC/NY on 4/30/10 10:41pm
Msg #334435

Here it is in a nutshell, Maureen:

The main purpose of a NY CEMA is to allow the borrower to avoid paying taxes twice on the same mortgage when they refinance. A CEMA has a mortgage and a gap mortgage, a note and a gap note, and the CEMA document itself which ties everything together into one new mortgage and note (CEMA stands for Consolidation, Extension, and Modification Agreement).

The "gap" is the difference between the original mortgage/note and the new mortgage/note - since the borrowers already paid taxes on the original mortgage, they now only have to pay a tax on the "gap" amount. If the original was for $300K and the new is for $350K, the borrower only pays taxes on $50K "gap" rather than on the full $350K. At a tax rate of $4 per $1000 of mortgage, the difference can be significant.

There's probably an easier way to do it, but we don't do things the easy way here....

Reply by Art_MD on 5/1/10 10:47am
Msg #334481

Here in MD at $7/$1000 on a $300,000 refi, were talking $2,100 that shouldn't be paid to the county/state if it's a refi of their principle residence. It doesn't matter if it's a different lender. Here too, the fee is only on what you refer to as the gap (also called new money).

Art

Reply by Art_MD on 5/1/10 10:59am
Msg #334484

I have a site (a MD title co) where all you do is enter you loan info and it calculates what fees should be. It also explains exemptions.
Anyone interested pm me.

Art