Posted by jojo_MN on 6/19/09 10:15am
Msg #292841

Our liability of knowing false statements

Last night I did a closing where a couple was refinancing a house they bought 10 months ago to a lower interst rate. They paid $139,000 for it. Appraised value was the same. The new loan amount is for $144,000. It is a VA Loan. The 1003 states that their new appraised value is $224,000 (+/-). They were very concerned because they didn't want to lie. They called the loan officer who told them (oh, that shouldn't have been written in there).

Later, there is a breakdown of loan scenerios and it shows them as having less than 80% LTV so not needing mortgage insurance, where in reality they are over 100% because they know that the house couldn't have gained $80,000 in value in ten months. They haven't made any improvements and the appraisals were a little less now than then.

Their interest rate was also a little higher than told.

I don't want to be a loan police, but could I be held responsible by having them sign docs that are knowingly deceptive?

Reply by Philip Johnson on 6/19/09 10:43am
Msg #292849

What was their note for?

It looks to me that they did a streamline and rolled their funding fee & closing costs into the loan. That's why their current $139,000 = $144,000 and of course LTV is not applicable, because they are normally no money down loans and PMI is not needed. I would think the $224,000 on the 1003 is in error and no big deal.

As long as their note is right and their payments are in the ballpark, I don't think they are committing any fraud.

Reply by jojo_MN on 6/19/09 10:53am
Msg #292854

Re: What was their note for?

Their payment was a little higher and the note rate was a little higher. They signed a statement that their LTV on the house was less than 80%. They were at 100% before the refinance. The l.o. showed the appraised value at over $200,000 to get around the 80% rule to keep out of MI. The customers are worried that they might get in trouble for signing it. I told them to just call the loan officer for the answers.

Reply by Philip Johnson on 6/19/09 10:59am
Msg #292858

If it was a VA loan, there is no MI.

Why would a LO do this on a VA loan, when there is no PMI? I believe they are a bit confused about their loan and it would be wise to contact their LO.

Also because the LO shows their value at $200,000 does not make it so. The appraisal if there was one, makes it so. I would bet there wasn't one, because it was a streamline not requiring one. Oh well, what can you do?

Reply by jojo_MN on 6/19/09 11:08am
Msg #292859

Re: If it was a VA loan, there is no MI.

They paid $400 for the appraisal, even though no one came to the house. Haven't seen this type of actions for a couple years. Hope it doesn't become the norm again! I did tell them to call their loan officer AGAIN today to clarify everything. They called twice while I was there.

Reply by MW/VA on 6/19/09 1:11pm
Msg #292883

That's a tough one. As far as I know, the only one's that can be held liable for false statements are the borrowers. There was a lot of that going on a while back--overstating property values & overstating income. Even though the LO was pulling it, the "fraud" falls on the borrower for falsifying the info.
I saw one bad deal this week. Borrowers were paying over $14,000 to refi to a 4.5 ARM.
It smelled bad, they weren't going to sign but did reluctantly after a call to the LO. I did hear that they rescinded the next day.

Reply by LKT/CA on 6/19/09 4:04pm
Msg #292907

<<<I don't want to be a loan police,...>>>

Then the only thing you should be doing is presenting the documents and allowing the borrowers to choose whether or not they will sign. Notaries cannot save borrowers from their own ignorance or stupidity. Unless you've seen every bit of paperwork from the beginning of this transaction to the loan signing - there are probably details you don't know, regardless of what the borrowers are telling you.

<<<...but could I be held responsible by having them sign docs that are knowingly deceptive?>>>

That is only your interpretation from the limited info you have, plus, you are not *having* them sign...they are signing of their own free will - which is a requirement to notarize any signature. I would mind my own business.

Reply by jojo_MN on 6/19/09 4:11pm
Msg #292909

"I would mind my own business" I'm not butting into their

business, I am asking if I can be held responsible since they brought it up to me and I still let them continue signing. THEY are the ones that were concerned because their appraisal was being overstated by $80,000. THEY wanted to make sure that they won't lose their house as a result of the deception. I had them call the loan officer. I was just asking an opinion from others as far as to my responsibility.

Reply by LKT/CA on 6/19/09 5:05pm
Msg #292917

Re: "I would mind my own business" I'm not butting into their

You cannot be a party to fraud when you don't know that there is any. The short conversation you have with the borrowers and the paperwork before you is not the totality of this transaction and without knowing EVERYTHING from the beginning, in between and to the end, including what was said between the borrowers, the LO, the TC and anyone else before you receivedd this signing appointment, you cannot determine that fraud is involved. So then how could you be responsible for what you don't know? I don't see how you can. JMHO

Reply by parkerc/ME on 6/19/09 7:02pm
Msg #292931

IMO this goes back to your initial disclaimer that you should make 1st thing at the table . . .I am not an attorney... don't know the specifics of your loan...cannot advise you... etc., etc. . . " You placed them under oath at the beginning . . "you understand what you're signing. . the info you provide is true to the best of your knowledge and belief . . you sign as your own free will .. " etc. etc. If during the signing they express concern about anything, I tell them if they have any concerns about any part of the process or documents, call their LO. That said . . I am not a lawyer, etc., etc.

Reply by SharonMN on 6/22/09 10:59am
Msg #293096

I always make it very clear that my job is to identify the borrowers, and make sure they sign in the right spot and of their own free will. If they express any doubt about signing, I make sure they know they have 3 options (sign, not sign, or sign and use the RTC to get everything clarified) and it is their responsibility to choose one of them. I tell them it doesn't matter at all to me whether they sign or not and they have a right to not sign if they aren't comfortable and that's what they want to do. Of course, I refer them to the LO for questions.

Interestingly, often giving them the "you don't have to sign if you don't want to" speech makes them feel more comfortable so they DO end up signing.