Posted by tidarod on 8/25/05 12:43am
Msg #61572

Explaining the loan docs to the borrowers??

Sometimes I will go over some docs witht he borrowers. Like the note and prepayment penalty. I was just advised by another notary not to do this because I could be liable if they misunderstand anything I say. Does anyone else go over docs and if not, what do you say when they ask what they are signing? I don't want to sit there and wait for them to read the whole things, especially when CA law gives then 3 days to cancel ( for refi's).

Reply by Anon on 8/25/05 12:58am
Msg #61579

Re: Explaining the loan docs to the borrowers?? Never

Most states, if not all, have laws prohibiting the notary from explaining the loan documents to a borrower. Usually one needs to have a title license, producers, license, or be an attorney, settlement agent, or lender. Other states may have different requirements. Borrowers will always have questions. For the most part, notaries are allowed to point to the answer in the documents, but never explain the documents. Most states consider this the Unauthorized Practice of Law (UPL). Let the borrower call the lender or the title company, but never take it upon yourself to explain.

Reply by Tara_CA on 8/25/05 1:38am
Msg #61587

Re: Explaining the loan docs to the borrowers?? Never

I was taught that it's not our job to "explain" as a notary. We are and impartial party just there to highlight the important points of the documents so the borrower knows what they're signing. However, if they have questions and ask you to "explain" any details of their loan, you should ALWAYS politely remind them of your role as a notary and refer them back to the loan officer as THEY know the details of the loan. If you get involved, you could easily get yourself in trouble.

Reply by Iris_WA on 8/25/05 1:47am
Msg #61588

If you are pointing to relevant portions of the note (such as "You are borrowing $X" at X%, your first payment is on [DATE] and there is/is not a penalty involved in prepaying (and if there is, pointing out the portion of the note they should read carefully if they wish to prepay) ... you are NOT explaining the documents.

It is written in black & white, so you are not explaining, as long as you are reading to them directly from the note.

Reply by Tara_CA on 8/25/05 1:52am
Msg #61591

Yes - Iris is totally correct. Those are all important items to "point out" in a doc. Hopefully there will be no suprises and borrower is already aware of all the details (loan amount, interest rate, 1st payment date, etc). But if there are questions regarding that info (why is my interest rate X, or why is there a prepayment penalty, etc), that's when you refer them back to the loan officer.

Reply by LisaWI on 8/25/05 8:12am
Msg #61606

My question on this very subject is the Mortgage, how do you identify the other 14 pages(we know what is on the first page) of a mortgage? If necessary, I will just read the bold subjects of the pages. Just curious if anybody has a shorter version for all those docs in a long mortgage.

Reply by Kimberly_IN on 8/25/05 8:54am
Msg #61611

I simply state that the mortgage sets out their lender, loan amount and alot of standard language (keeping up on H/O ins, taxes.....explains default terms). It also secures an interest in the property for the lender until the account is paid in full. 9 times out of 10, they allow me to leave it at that.

Reply by Dorothy_MI on 8/25/05 9:24am
Msg #61619

In regards to the mortgage, I point out their name(s), address, loan amount, maturity date, lender name and address, whether there are any riders, legal description, then say, "The rest of this goes on to say, Make your payments, pay your taxes, pay your insurance, keep the place up and don't store hazardous wastes. Sign as your name is printed. This usually gets a chuckle out of them and they sign.

Reply by PAW_Fl on 8/25/05 4:38pm
Msg #61769

I tell them, "the next 11 or so pages is legaleese for 'You don't pay, you don't stay". They usually get a giggle out that too. One RE attorney, said, "Yup, that about sums it up."

Reply by Ted_MI on 8/25/05 9:02am
Msg #61616

Tidarod,

With respect to the three day right to cancell, well it may also be california law, but as I understand it it is basically federal law, when the property in question is the principal residence.

Reply by buylamb on 8/25/05 11:33am
Msg #61669

If your explanation is the basis for the customer signing the papers....you have the liability as they will perceive you as the "expert" and if it goes wrong guess who they are going to come after. Your E+O ins will not cover that and you are practicing law without a license. You can and should explain the Notary role and stay within that. The customer should know fromthe start that you did not draw up the papers so you cannot speak to their content. Use the phone call the lender......I have had signings not complete because the lender did not care to be available when necessary.

Reply by tidarod on 8/26/05 9:34am
Msg #61956

Thank you for clearing this up for me.

For now on I won't say anything. If they have any questions, I will answer those by showing them where to get the answer. You have all been very helpful. THANK YOU.