Posted by Nancy in Florida on 6/8/05 12:08am
Msg #43076

As notaries can we be held responsible for bad loans?

Since ethics has been a very hot topic on this board today, I had a situation the last week at a signing. It was a young couple, boyfriend and girlfriend and she was not on the loan. However she worked for a local area Title Company, once she saw the HUD the closing costs were out of sight and the Title charges were inflated. In the State of Florida Title charges are regulated by the State and as someone who has also worked at Florida Title Companies, she was correct they were grossly inflated. Of course I did not tell her that. The borrower had gone through a Mortgage Broker and the fees the Broker was charging were the worst I have ever seen. The Borrower refused to sign as is and tried to contact his Mortgage Broker. Nothing was conveyed to this borrower prior to the closing, he did not know the was a ARM, that he had a pre-payment penalty etc. He was going from a 5.50% fixed rate loan to a 6.50% 2 year ARM for the sole purpose of paying off credit card debt totaling $10,000 (the closing costs were higher then the credit card debt being paid off) I had contacted the SS and TC that the loan wasn't closing and I was about to leave and the Broker called the borrower and somehow convinced him to proceed. Although the girlfriend begged him not to sign and to try another lender and use her TC to lower the closing costs. They argued and he say he was going to proceed because this Mortgage Broker promised to change his credit score from 650 to 750. Girlfriend told him that couldn't happen and I sat there and said nothing. I just could not believe the lies that were being told to get this borrower to take this horrible loan. I went into this knowing it is not my business and I am not to judge, these are adults and buyer beware or rather borrower beware. However as a public servant working on behalf of the State do we have any responsibility to the fact that the Title charges were not within the State's guidelines? As a Notary Public how can we be responsible for knowing what the Title fees should be? I guess my question is if this loan is ever audited or if this borrower ever sues can I as Notary Public/SA be held responsible as parties to the loan because I notarized and reviewed the documents with the borrower? I never thought of this before but this was the first loan that seemed unethical (maybe even illegal) and that seemed to break so many State and Federal guidelines.

Reply by CAtitlegal on 6/8/05 12:24am
Msg #43080

***as a public servant working on behalf of the State do we have any responsibility to the fact that the Title charges were not within the State's guidelines***

Absolutely not. Remember first that your impartial to the transaction, and by your description, you behaved very impartially in what sounds like a loaded situation. The title company that was charging above the posted rates for that state will be responsible to the states insurance commissioner (or whatever agency that state has in place that regulates the title company). Title companies are regularly audited, reported, audited and reported somemore. In spite of it, many are not operating within their states guidelines. Nor could you ever be expected to know about title fees. It's not your area of concern, or responsibility as a signing agent.

If the borrower sues, I guarantee you he'll sue the title company. They are always considered the deep pockets in real estate lawsuits.

As an aside...sounds like the girlfriend was wasting her breathe. He should have listened to her.

Reply by Becca_FL on 6/8/05 12:28am
Msg #43081

As I understand it, Title Insurance rates within the state of Florida are promulgated. Title companies that operate within the boundaries of the state must adhere to the fees approved by the insurance commissioner’s office. Title companies that operate in other states must submit fees to the office for approval. So, if it was an out-of-state Title Co doing the closing, the rates may be correct, but (in my opinion and from what I have seen) much higher then the rates charged by in-state Title cos. Keep in mind only the Title insurance fees are promulgated. The closing fee, search, examine, courier, etc. are not and are usually set by what the market or area will bear.

I have worked for Title companies in Florida and with a national Title Co in California. PAW will definitely have an answer for us, but this is my take on the question.

Reply by PAW_Fl on 6/8/05 7:54am
Msg #43114

Becca, you are right in your understanding. Most title fees are not set by the state, though title companies, whether in-state or out-of-state, are regulated. Tittle **insurance** fees are closely regulated, but the other charges that title companies charge for are more along the lines of "reasonable and customary", which opens the flood gates.

I've seen astronomical charges by both in-house sub-prime lenders and their wholly owned subsidiary title companies as well as more common place charges for "A" and "B" paper.

As a signing agent and notary, even if you "feel" the charges are out of line, you can say nothing. You cannot comment or advise on the content of the documents, other than stating what is physically printed there. That is, you can say "your interest rate is 99%", and you must stop there. You cannot continue to say, "because your credit score is only 310".

Reply by CaliNotary on 6/8/05 3:02am
Msg #43095

I'm sure some people will think I'm a jerk for saying this, but if you don't know the answer to this question already, you shouldn't be notarizing documents in the first place, and you should especially NOT be doing loan signings.

Of course we are not responsible for the contents of the loan docs. And it is not our place to say a word about it EVER.

Reply by CarolynCO on 6/8/05 7:56am
Msg #43115

**this borrower ever sues can I as Notary Public/SA be held responsible as parties to the loan because I notarized and reviewed the documents with the borrower? **

Define review.

Reply by Nancy in Florida on 6/8/05 9:18am
Msg #43129

I didn't think we could be held responsible but I just wanted confirmation. I have been doing loan closings for years but as a RE Paralegal in NY and it was a totally different world. Everything was about laws and following guidelines etc. As a law firm I am sure they could be have been held accountable as they were legally representing the Lender in the transaction.

As far as answering CarolynCo, I define review as such, I hand the borrower a document and say this is your Note, your interest rate is 99% your payment is $3 million dollars per month, first payment was a week ago Friday, etc. Basically I just tell them the document and what the document states, I do not offer any comments just the facts of each document. If the borrower has loan related questions, such as why do I have a pre-payment penalty I refer them to their LO/Lender.

Reply by jojo_MN on 6/8/05 9:35am
Msg #43133

I was in a similar situation a few months ago. When asked, I told them I cannot give them my opinion on the loan and I told them that I am not an attorney and therefore cannot give legal advice, BUT there is a three day right to cancel and you can take the documents to an attorney or a loan officer to review if you sign the documents today. Guess what? They cancelled and I was there two weeks later. The interest rate was substantially lower and it only cost them $3000 versus $11,000 to re-finance. I was not paid by the first company but at least I can sleep better knowing that one couple didn't get ripped off by unscrupulous predators!

Reply by CarolynCO on 6/8/05 9:40am
Msg #43136

Nancy it sounds to me like you are doing everything correctly. The only way that I could see that we, as notaries, might be held accountable is if we tell borrowers what a rotten deal they are getting -- that they could be a much lower interest rate with XYZ company -- that this particular company is a sleeze ball by putting together such a loan packet. If the borrowers ever took the Title and/or loan company to court and we had given the borrowers our opinions during the signing, then we could be brought into the case because of what we told borrowrs -- "he said/she said such and such ..."

Reply by ERNA_CA on 6/8/05 1:28pm
Msg #43214

I have seen some outrageous fees by brokered loans, its usually the broker and lender that have the inflated charges not Title. There are defiantly a lot of predatory lending practices going on. Title cant say anything either, they see the fees but as long as they don't over charge they will be ok. But how easy will it be to go after the broker for inflated charges, are they regulated like the Title and Lenders are ? And if the borrowers sign as to agreeing to the fees, what can they do? I have often walked out of a signing and prayed they will take a closer look at thouse fees before going ahead. They are getting a quik fix but will find them selfs in deeper trouble in the long run.