Posted by MW/VA on 4/24/08 7:35am
Msg #244813

Error on TIL-what would you do?

There was an error on the TIL for a signing I did this week. The TIL had the boxes checked for Prepayment Penalty & Finance Charge as "May". The Note clearly stated that there was no Prepayment Penalty. Also, the box for Assumption was incorrectly check to say "may assume". This was all in contradition to the terms of the loan. I erred & the borrowers did a correction to the docs. I should have called someone, but I didn't. Well, the lender would not accept changes to the TIL & insisted the borrowers sign it without corrections in order for the loan to fund. I did a return trip to have them sign the "unadulterated TIL". Needless to say, they were not happy & were very uncomfortable signing a "Truth in Lending" that wasn't truthful. I can't understand why the TC didn't correct the error. Looking for feedback on this one, as it just doesn't sit well with me.

Reply by SReis on 4/24/08 7:51am
Msg #244815

Not really an error in my eyes...

Just because it says "May" does not mean it is. Now, if the TIL had said there WAS a pre-pay penalty I could see borrowers having an issue but this just says there may (or may not) be one. TIL is a disclosure doc anyway, as long as the mortg/note have the correct terms that is most important. Some TIL are estimated ones too, so what is disclosed may not match the final terms. Although, in that case, there is usually a final one included as well.

In any case, it is NOT our responsibility to try to "fix" the docs. If there is an issue & borrowers refuse to sign just make sure you call title next time, lesson learned.

Reply by TRG_wy on 4/24/08 7:53am
Msg #244816

Having admitted your booboo I will not expand on that.

The borrowers are well within their right to expect the document they sign to be correct, the lender be damned. Title should have made the appropiate corrections for the re-signing of the document.

If I were the borrower here I would have gotten the LO involved and demanded the correction before I signed or I would cancel.

Reply by CF on 4/24/08 7:56am
Msg #244817

Was it WAMU? This has been going on for some time if it was them. I have the borrower strkie it and check the box that says NO and initial. WAMU has put a letter in their package that states that if there is no Rider or then there is no penality....but many BO's have not wanted to sing it that way. I would not sign the TIL that way! Just my 2 cents and what I have done....a notary does not need to be present for a new TIL to be signed.

Reply by MW/VA on 4/24/08 8:03am
Msg #244819

It wasn't WAMU. I did exactly what you described & know I have done it on other packages. The TIL is an important doc & I certainly wouldn't sign it that way either. Since it was a SS that I work for regularly, they called me & asked me to get it corrected. That is not unusual, as it is my policy to readily correct errors I have made. I also do signings for this TC on a regular basis, and am trying to figure out what I will do the next time it occurs. I took this to be a "typo" and handled it accordingly.

Reply by desktopfull on 4/24/08 8:09am
Msg #244820

As SReis pointed out there isn't an error, 'May' doesn't mean 'Shall'. also, the TC can not correct the lender's docs, the lender has to make any corrections. If there wasn't a rider attached to the note and mortgage stating there was a pre-payment penalty then there isn't one. I don't understand the confusion on your part. Under the circumstances you should have called the lender and let them explain the reason the TIL is worded the way it is and not made the correction without their approval. The only TIL's I get anymore say 'will' or 'will not'.

Reply by speedracer on 4/24/08 11:02am
Msg #244849

Never make any type of corrections to anyting without contacting someone. If the borrower's don't like the terms they can always cancel.

Reply by Art_MD on 4/24/08 8:17am
Msg #244824

Error on TIL- or is it?

I've seen several TIL where there is a clause in the note that say if they pay off early, interest is paid thru the end of the month e.g. refinace on the 10th, you pay interest thru the end of the month. This 20 +/- days of interest in clasified as a prepayment penalty. If they refinance exactly on the day the payment is due, no extra interest is required. This is why you can't say a straight yes or no to prepayment penalty.

Art

Reply by Becca_FL on 4/24/08 9:02am
Msg #244831

Re: Error on TIL- or is it?

Art is correct. The PPP on an FHA loan in not a hard PPP, but must be disclosed.

It is pretty clear to me that MW was closing an FHA loan. FHA loans ARE assumable and FHA and VA loans accrue interest monthly with no per diem interest. If a borrower was to refi their FHA loan and close mid month or even on the 1st of the month, they would still be responsible for the entire months interest. This is one reason why there is a push at EOM...to save the borrowers from paying additional interest.

Reply by Teresa/FL on 4/24/08 8:33am
Msg #244827

Was it an FHA loan?

If so, some HUD has mandated that the TIL show that there may be a penalty.

With an FHA loan, unless you pay off the loan on the due date you are penalized by having to pay the loan interest to the end of the month. For instance, if your payment is received on the 2nd day of the month they can charge you interest through the end of that month. If your payment is received on the 1st of the month (the due date), no "penalty" is applied. That's why most FHA loan refinances are closed at EOM, to lessen the penalty.

Here is the disclosure that is shown in FHA packages:

"About Prepayment

This notice is to advise you of the requirements that must be followed to accomplish a prepayment of your mortgage, and to prevent accrual of any interest after the date of prepayment.

You may prepay any or all of the outstanding indebtedness due under your mortgage at any time, without penalty. However, to avoid the accrual of interest on any prepayment, the prepayment must be received on the installment due date (the first day of the month) if the lender stated this policy in its response to a request for a payoff figure.

Otherwise, you may be required to pay interest on the amount prepaid through the end of the month. The lender can refuse to accept prepayment on any date other than the installment due date."

The above disclosure is part of a two page document that combines other issues as well.

I have seen this shown two ways on the TIL, as you described, where the lender has checked off the "may" box for the prepayment penalty and with a separate statement added to the TIL that says "PREPAYMENT: IF YOU PREPAY YOUR LOAN OTHER THAN ON THE REGULAR INSTALLMENT DATE YOU MAY BE ASSESSED INTEREST CHARGES UNTIL THE END OF THE MONTH AND YOU MAY BE ENTITLED TO REFUND OF PART OF THE FINANCE CHARGE."

It is confusing, as this is not what most people think of as a prepayment penalty (the typical 6 months interest), but it is how HUD is mandating it be disclosed.

Reply by Becca_FL on 4/24/08 8:42am
Msg #244829

It sounds like an FHA loan and you had no business changing anything on the TIL without approval. You need to get a better understanding of FHA loans.

Reply by Linda_H/FL on 4/24/08 9:15am
Msg #244832

Not just FHA loans - ANY loan -

we have no right to allow the borrower to change the docs at will without approval from TC or lender.,..if the terms are NOT clear or are NOT what was agreed then the LO needs to get involved...

I've had signings where the borrower has almost put pen to paper to make changes they didn't like (like the lil old lady who didn't like the fact that the mortgage had a clause explaining Mortgage Insurance - since it wasn't required in their loan she didn't want it in her mortgage) - I've stopped them and told them I cannot let them alter the original docs - they need to call their LO to discuss it and, while they do that, I'm calling TC/SS on my phone...

MHO

Reply by Sylvia_FL on 4/24/08 9:59am
Msg #244840

Re: Not just FHA loans - ANY loan -

Years ago I had a guy who didn't like the mortgage. He took the pen and started making changes. I advised him that if he made those changes that his loan would probably not go through, he said he knew that but he wasn't signing it as is. It was a Saturday and I could not reach anyone.

Reply by BrendaTx on 4/24/08 9:19am
Msg #244834

Again I am in disbelief.

** I have done it on other packages. **

Who should decide to change loan documents besides the lender?

Reply by FLdocrunner on 4/24/08 9:31am
Msg #244836

Lets review shall we?

Are we notaries or title professionals? Lets review the position of notary signing agent shall we? Print docs that are sent to us, give brief explanation of what doc discloses to borrower, witness signature and send back to title company all executed docs in a timely manner. Every confirmation tells us to call with any problems or questions. I am pretty sure they mean it! JMHO of course. What the docs say is none of our business, if B/O has a problem with them then it is their responsibility to contact their loan officer and the notaries responsibility to notify title or SS.

Reply by MichiganAl on 4/24/08 1:51pm
Msg #244873

Me too.

Altering the TIL? Unreal.

And to add to what others have already said about the meaning of the word "may" and about FHA loans, VA loans can also be assumable (I'm doing an assumption loan today) and sometimes when they say their may be a prepayment penalty, it's actually just a clarification that says something to the effect that if payment is received after the first of the month daily interest is applied until payment is received. All in all, just a really poor decision and way out of our realm.

Reply by GA/Atty on 4/25/08 12:18am
Msg #244951

Attorneys! n/m

Reply by JanetLA on 4/24/08 10:46am
Msg #244847

This is an error

by the notary... In the original post this notary states:
"That is not unusual, as it is my policy to readily correct errors I have made."
It sounds to me as though this error situation needs to be examined. It would be unusual for me to make an error that I have to correct. I am not saying that I am perfect, but if I do make a mistake that I don't catch, it WOULD be unusual... I cannot believe that it is a common problem for professional notaries that double (triple?) check the documents before sending them back.

Reply by MW/VA on 4/24/08 12:11pm
Msg #244856

Re: This is an error

By correcting the error, I didn't mean correcting the docs. I meant going back to have them sign the TIL! Thanks all, I needed to get myself straight on this for my own knowledge.
Many of you brought up that it was an FHA and how the TIL is worded in FHA situations.
Thanks greatly for that info. It's been resolved all the way around & we can end the discussion.