Posted by Kimberly_IN on 9/4/05 4:29pm
Msg #63714
Closing question......
I did a closing on Friday (09-02-05). Their HUD showed prepaid interest for 25 days from 09-06-05 to 10-01-05. When I got to their note, it showed their first pmt due 10-01-05. Shouldn't their first pmt be due 11-01-05? I couldn't get ahold of anyone during the closing so I had everything signed and e-mailed the lender when I got back.
| Reply by Iris_WA on 9/4/05 6:58pm
Msg #63721
Hmmmm.... seems like you could be right. But, don't quote me on this, interest on real estate loans is paid BACKWARDS. That is, when the Borrowers' new loan goes into effect, their first payment will usually cover interest on the NEW loan back to date of closing/signing.
So, interest noted as "prepaid" on the HUD is, to best of my knowledge, interest due on the old loan. It's usually padded by a few days (in the event payoff doesn't take place as planned). Was there a prepayment penalty on the old loan? If so, perhaps the LO attempted to pad the interest to bring them to the date past which they would not have a penalty.
Just guessing here, otherwise, I would tend to agree with you.
| Reply by PAW_Fl on 9/4/05 7:05pm
Msg #63723
I believe the note to be in error and was probably drafted before 9/1, thus the 10/1 payment date. The HUD is correct in showing the September interest for the loan being from 9/6 through 9/30. The NOVEMBER payment (which is what should probably be showing on the note), pays interest in arrears, thus covering the interest for October.
Look at the escrow disclosures and TIL and see if they too show 10/1 as the first payment date. There may also be a first payment letter and other docs which show when the first payment is due.
| Reply by BeccaWI on 9/4/05 9:28pm
Msg #63729
That is a really good question. I had one the other day where the interest was negative. I never saw that before. Called the ss co, they said they didn't know and just let it go. Couldn't get ahold of the l/o. Any ideas?
| Reply by Joan_OH on 9/4/05 9:30pm
Msg #63730
It could very well be a HUD/Title Co mistake. I get a few of these at the beginning of every month. In this case, the HUD will have a 6 day interest "credit" with the note being due on 10/1/05. This would be good in that only a new HUD will need to be signed and not a redraw.
On the flip side, it could have been a lender mistake and the processor put in 10/1 instead of 11/1, but the instructions to title read 11/1 requiring them to collect interest for the rest of Sept.
I had one on 8/23/05 where everything was dated 5/23/05. It was obviously a processor typo error in that the 5 is right next to the 8 on the keypad. Had to redate & initial everything!
Joan-OH
| Reply by Barry Silver on 9/4/05 11:29pm
Msg #63738
I could be wrong here, but I believe interest is usually collected a month in advance. The loan closed and the pre-paid interest begins from the end of rescission to the next payment date. Upon the next payment date, they are again paying interest in advance; however, I am not a mortgage broker, nor am I a lender, settlement agent, etc. In other words, that is my guess.
| Reply by PAW_Fl on 9/5/05 10:00am
Msg #63764
Sorry, Barry, but you are mistaken with the interest due on mortgages. The reason a borrower gets to "skip" a payment is because interest is paid in arrears. The November mortgage payment includes interest that has accrued (during October), any amounts to be applied to principal and impound/escrow.
The HUD will reflect any interest due for the current month as the first payment is usually more than 30 days (1 month) after the settlement date. Thus, if the settlement date was 9/6, the first payment date is usually 11/1 which pays for accrued interest from 10/1 to 10/31. The borrower must "pre-pay" the interest for the period 9/6 through 9/30 as there would be no October payment to capture the accrued interest for September.
The HUD will also reflect the payoff of any existing mortgages (assuming a refinance), that includes all accrued interest to the payoff date and outstanding principal. If you look at a payoff statement, it should show a "per diem" rate so exact interest calculations can be made, and/or a "good until" date in which the interest is figured in to the payoff up to that date.
The reason interest cannot be collected in advance is because the accrued interest depends on the principal balance. If you make $20,000 principal payment, the interest amount would be substantial decreased.
The following excerpt is from Countrywide (http://www.countrywide.com/refinance/r_tax.asp):
Pre-paid/Accrued Interest:
When you refinance, you pay both the accrued interest on your existing loan and the pre-paid interest on your new loan for the current month. This is because the last loan payment you made was for the previous month, not the current month (loan payments are always for the month just finished, not the month ahead.)
Here's an example. Say you close on May 21st. You will need to pay the accrued interest from May 1st-21st on your old loan, plus pre-pay the interest from May 22nd-31st on your new loan.
It is a common misconception on a refinance loan that, like a purchase loan, you get to "skip a payment." This is not true on a refinance loan because you have the accrued interest on the old loan and pre-paid interest on the new loan (purchase loans only have pre-paid interest). Regardless of the time of the month you close your refinance loan, there will be a total of 30/31 days interest (typically, an amount slightly less than your current monthly payment).
| Reply by Barry Silver on 9/5/05 6:04pm
Msg #63802
Muchos Gracias. I thought I had it wrong. Let me refer to you as a lifeline in case I am ever on that "Who wants to be a Millionaire."
Funny, as much as I think I know, there is so much more to learn in this business.
Thank you.
| Reply by Renee Kovacs on 9/5/05 3:36am
Msg #63746
I'd give the T/C a head's up also, Kim - it may have been their error. Lender may have intended for them to do an interest credit on the Hud (9/01 - 9/06) instead. Sometimes that's a choice offered, saves cash up-front, and that would make first payment date correct. This might also be the easiest way to correct this transaction - since a first payment date that's wrong also means maturity dates are wrong (Note and Mtg/DOT) and that MUST be correct.
| Reply by Nd_WA on 9/5/05 6:17am
Msg #63747
This could be an exception where the "Hardship Letter/Notice" is enforced by the lender. If maturity dates on the Note/TIL/DOT are correct according to loan term then 10/01 payment would simply be applied toward the principle (same logic when we want to shorten the loan term).
| Reply by Kimberly_IN on 9/5/05 7:49am
Msg #63749
All paperwork showed 10-01 as first pmt. The thing is, the LO apparently told the BO that their 1st pmt would be 11-01. This closing was at 7 PM, of course, neither the SS or the LO were answering their phone. (this was the 2nd time out there, BTW...1st time, I was missing docs) I went ahead and signed them and sent a note to the SS.
Back to the prepaid interest. I haven't ever worked for a lender but this is what I was told once by a lender when I worked in title insurance. I was once told that an interest credit can be for up to 5 days. (Anything funding from say 09-01 to 09-05 could show as an interest credit, 1st pmt would be 10-01) Anything funding the 6th or after would have to show prepaid interest charged through the end of the month with the first payment being 11-01. Any lender out there to confirm that?
| Reply by PAW_Fl on 9/5/05 10:11am
Msg #63765
From my lender days, your analysis is correct with one minor adjustment. The "rule of thumb" is to offer a credit for up to 5 days, but a lender typically can offer whatever they want.
That's why, in this case, I think the first payment date is probably an error, since the disbursement date in 9/6 and the HUD shows pre-paid interest from 9/6 to 9/30. Then again, the HUD could certainly have been in error and should show an interest credit for 9/1 to 9/5 and a 9/6 disbursement. It all boils down to the loan processors taking into account the doc prep dates and the actual execution dates. As you can see, it is easy to make a mistake when one person (of software product) does one thing and another person (or another software product) does something different, but both use the "current" date as the starting point rather than the "effective" date.
| Reply by BobRogers_FL on 9/5/05 1:07pm
Msg #63775
Not a closing question
I am absolutely amazed at the answers provided in this thread. Not one on the most experienced people in this business has stood up and said, "what are we talking about here". This is not something that an NSA needs to be concerned about. You are not authorized to interpret the term of the loan, you are only there to supervise the signing of the documents and notarized those documents that require notarization. All other questions must be directed to the proper authorized persons at the TC or Lender offices. If you can't contact them during the signing, that is what the rescission period is for. Inform the borrower that you can't explain this and that they need to contact the lender for resolution on the next business day.
| Reply by Kimberly Crowe on 9/5/05 2:42pm
Msg #63781
Re: Not a closing question
Chill out, Bobby. I wasn't trying to "interpret" anything nor did I make any comments to the BO, I was just curious. I made a note to the SS when I faxed in docs and I'm leaving it at that. It won't hurt my feelings a bit to be paid again to go back out because of their mistake. I've been in this longer than you have, therefore, I know of the proper way to handle situations like this. (I say that in the nicest way, of course)
| Reply by Renee Kovacs on 9/6/05 5:50am
Msg #63840
Re: Not a closing question
Kimberly - I, like you, try to learn everything I can and believe that the more we can learn, the better we can be at whatever we're doing. Again, I want to again suggest giving the title co a 'head's up' about this, as a curtesy - on the chance that it IS their error (and Paul is correct that interest credit is generally up to the 5th day, but is entirely at lender's discretion), it provides them the opportunity to have a correction done w/o jeapordizing the funding date. This helps THEM save 'face', helps the borrower, helps the SS who hired such a considerate person, helps YOU ulitimately ... however, I suspect you already know all this =)
| Reply by Kimberly_IN on 9/6/05 11:08am
Msg #63855
Re: Not a closing question
Thank you, Renee! I like you too, given the fact you don't rip somebody up because they are curious about a situation that may or may not have anything to do with "our job". (thanks to everyone else like Renee, also) I gave the SS/title company a heads up in an e-mail so I'll leave it at that.
| Reply by Sara_NV on 9/5/05 4:50pm
Msg #63790
Re: Not a closing question
I totally agree with Bob's comment. None of this should be a concern to the signing agent. This isn't our job.
| Reply by Sylvia_FL on 9/5/05 6:50pm
Msg #63807
If the borrowers want to question it, then it is up to them, and for them to contact their lender.
I wouldn't be too concerned about it.
|
|
