Posted by GOLDGIRL/CA on 1/17/10 11:57pm
Msg #318350

"Escrow docs made easy"

Much has been discussed about one-sentence, easy-to-understand explanations as to APR, when the borrowers freak and think that's their interest rate. Similarly, what handy-dandy, quick explanations do you give the borrowers (point-and-sign notaries need not read further) when you present them with umpteen pages of General Escrow Provisions, usually in agate type and all boiler plate stuff? I often save this until last, when they're happy the loan is all signed and don't want to see any more paperwork - so title docs go fast. Still, every once in a while, someone will want to know more details ....

Reply by Lee/AR on 1/18/10 7:06am
Msg #318351

Doesn't sound real professional, but "Lender & Title co. internal paperwork"...poof, gone, works for me. If they do want to read, I doubt they'd make it past the first paragraph. Never had it happen.

Reply by parkerc/ME on 1/18/10 7:29am
Msg #318352

Same here. Just mainly internal instructions to Lender and TC and BO can read through them if they like at their convenience.

Reply by CopperheadVA on 1/18/10 7:43am
Msg #318353

I'm not clear whether she was asking about the escrow instructions or the title docs?

I agree about the instructions - I just bundle them together and say these are instructions from your lender to the title co and we pass them by (unless they require borrower signature). I think the original poster may have been asking about the title docs, though? Goldengirl, can you clarify for us?

Reply by Linda_H/FL on 1/18/10 8:44am
Msg #318356

There's two questions, actually

How do you explain the APR? - it's the cost of your loan...

Then escrow instructions - "these are instructions from lender to title on how to process the package both before and after closing - nothing to do with signing your documents but they're here (and if signature is needed I add here 'but they'd like you to sign them') and you have a copy in your package"

Reply by CF on 1/18/10 9:39am
Msg #318363

Re: There's two questions, actually

I do not present any documents that do not require a signature. Very few lenders have some conditional instructions that need to be signed and I simply state "all of these conditions have been meet or we would not be here at the table signing....this is for the title company to close out the loan...sign and date at the bottom please"

I would never waste my time presenting docs that do not need to be signed. They have a copy and can read them on their own time.

Reply by Linda_H/FL on 1/18/10 9:46am
Msg #318365

Well, I have to disagree here, CF

I've had several documents that don't require signatures but I do feel they need to be shown to the borrowers - the Initial Escrow Analysis, General Affidavit, and the Amortization Schedule come immediately to mind (I'm sure there are others) - and I *DO* present those, especially the escrow analysis.

I show everything in the package to the borrowers (except lender's instructions to title) - I don't skip pages.

Reply by Cari on 1/18/10 10:00am
Msg #318369

I don't necessarily go out of my way to show them those

docs that do not need their signature, however, if BO ask, then I tell them that those are lender/tc/ss instructions....haven't had any problems.

I do, however, tell BO at the start of the closing, that both packets are indentical, and docs they don't sign are also in their 'BO' packet.

Reply by PAW on 1/18/10 9:59am
Msg #318368

Re: There's two questions, actually

So, what you're saying is that if the RTC did not require the borrower's signature, you would not show it to them?

I'm assuming that you would, because the RTC is an important document. If that's the case, you are making improper decisions whether or not a document is important enough to show the borrowers. There are often many documents in the package that pertain directly to the borrower or the loan, that do not require signatures. These documents, imo, still need to be presented to the borrower as well as alerting them that they are available in their copy package. It certainly isn't a waste of time.

I also disagree with your statement that you wouldn't be doing the 'closing' unless all previous conditions have been met. There have been numerous occasions where there were conditions that must be met at the table or within the 3-day rescission period, as directed in the closing instructions. Pointing out that page of the closing instructions is very beneficial to the borrower, even if the page or closing instructions as a whole, do not need to be signed.

Reply by CF on 1/18/10 10:54am
Msg #318382

Actually- I disagree just to disagree!!! Keep on trucking !! n/m

Reply by JanetK_CA on 1/18/10 3:19pm
Msg #318448

I'm strongly with PAW on this one.

Occasionally, one of the key documents I pull out right up front to show the borrowers the principle elements of their loan does not need a signature. One that comes to mind is the First Payment Letter (or whatever that lender calls it). I've found that one of the most common areas for error is with impound/escrow accounts. Sometimes this gets signed, sometimes not, but most borrowers want to see the information there. I also show them where to find payment coupons or at least the address to where they can send their first payment, just in case. And if they have an impound, I usually show them the page that gives the month by month itemization which has answers to lots of frequent borrower questions. Some of them "get it", so this we can skip over quickly, but for lots of others, this helps clarify several things, including some of the charges on their Settlement Statement. Again, I gear this to the individual borrower, but for those who aren't clear on these things, these few minutes are very much appreciated.

There are a small number of pages that I would skip over that don't require signatures, but not too many. With most, I'd just give them one sentence about that page and add it to the completed pile. I think this is one the the differences between a "point and sign" notary and a "professional signing agent" (for lack of a better term). jmho.

Reply by Susan Fischer on 1/18/10 9:44am
Msg #318364

This is my basic schpiel (sp?) for the APR:

This is the TIL. The APR is NOT your interest rate. This figure - the Amount Financed - is your loan amount minus some fees (show Amount Financed page if you have one) - if you take the Amount Financed - X - over the life of the loan -Y- , and express it as a percentage, you get Z, the Annual Percentage Rate. The closer this is to your interest rate, the lower your fees are.

So, the difference between your interest rate and the APR = the fees. Your APR is only -this- much higher, which, over 30 years, is pretty minimal.

Takes a minute or so, sign and date, and then have borrowers initial the Definitions of the TIL page (which seems to be a new thing).

This has satisfied borrowers for years now, and borrowers seem happy with the explanation.

Reply by Linda_H/FL on 1/18/10 9:49am
Msg #318366

Re: This is my basic schpiel (sp?) for the APR:

"Your APR is only -this- much higher, which, over 30 years, is pretty minimal. "

Careful crossing the UPL line here ...

Reply by Notarysigner on 1/18/10 10:49am
Msg #318379

Re: please go easy on me smile the APR:

..the amount you pay in interest if you were to pay your loan once a year. It is because you paid your payments monthly (decreasing the principle each month) is why the amount on the note is lower. IMO I hope I'm not in error.

Reply by Les_CO on 1/18/10 10:54am
Msg #318381

Re: please go easy on me smile the APR:

I kind of like that explanation….but I don’t think I’d use it

Reply by Notarysigner on 1/18/10 11:00am
Msg #318390

Re: please go easy on me smile the APR:

I asked a financial planner to tell me what was the best way I could explain the difference to a lay person and that was his response to my question. He was the borrower.

Reply by Les_CO on 1/18/10 11:03am
Msg #318391

Re: please go easy on me smile the APR:

I don't think I'd go to him for financial advice.

Reply by GA/Atty on 1/18/10 11:10am
Msg #318393

Actually I think that is totally wrong. n/m

Reply by Susan Fischer on 1/18/10 2:16pm
Msg #318442

Are you talking to me? Because the math is correct. Comes

out on the nose every time.

Reply by GA/Atty on 1/18/10 11:08am
Msg #318392

Re: This is my basic schpiel (sp?) for the APR:

I have found that it often helps to begin by restating the terms of the note:

"You are borrowing 200k at 5.00% and paying it back over 30 years."



Then I give them the "BUT":

"But you do not actually get the full use of that 200k - in other words, the lender is not giving you all 200K - some of it goes to their fees, the cost of the appraisal, what they are paying me etc. - so the money you actually get to use (196k) is what they call the amount financed, ie the loan amount less the costs"



Then I tell them how the APR is calculated:

"These monthly payments are calculated based on 200k at 5.00% (just like it says on the note). But if, instead of paying back the $200k, you were instead paying back a loan amount of $196k (the amount financed) with the same payments that were calculated for 200k at 5.00%, the interest rate would track higher (up to the APR).



Then I tell them why it is required:

"Lenders are required to tell you this so that you can compare one loan to another with the costs factored into the equation. For example, what if another lender were offering you 4.75% instead of the 5.00% you are getting, but it would cost you an additional $1500 to get that rate. The APR gives you the ability to quickly see overall which is the better deal without trying to compare 2 different variables for each loan (rate & costs)."

Reply by Linda Hubbell on 1/18/10 11:16am
Msg #318394

Sooo....

If they back out the math from P&I payments into the lower amount they have to work with after costs, the result would equal the APR...the cost of their loan...correct?

Reply by GA/Atty on 1/18/10 12:30pm
Msg #318413

Yes. n/m

Reply by Bob_Chicago on 1/18/10 11:21am
Msg #318397

"what they are paying me etc." Disagree with this part.

That is usually reflected in the title charges section, which is generally not
use in computing "amount financed" Look at a typical "itemiztion of amount financed"
to see what is included.

Reply by Linda_H/FL on 1/18/10 11:35am
Msg #318400

I present the TIL *with* the Itemization

gives me the opportunity to say "based not on your total loan but your loan less costs of your loan, which are itemized here" - they then immediately see how the lower amount was calculated.

Reply by OR on 1/18/10 12:29pm
Msg #318412

Re: I present the TIL *with* the Itemization---I like that

I was told that the Itemized the final figures for the Good Faith Estimate.

Reply by Susan Fischer on 1/18/10 2:53pm
Msg #318443

Yes, that's what I said too. There are lots of ways to say

the same thing, no?

Reply by Bob_Chicago on 1/18/10 11:17am
Msg #318395

If you have access to a financial calculator, and

enter the "amount financed" (loan amount less certain lender charges and
prepaid interest) as the loan amount, enter the payment and the length of the
loan, the resulting "rate of interest" on a annualized basis, would be the APR.
I can usualy get away with something like. "this isn't your interest rate, it takes your closing costs and spreads out over the term of the loan". I have previously showed them the note
with the actual interest rate.
You can also point out on the TIL the boxes referirng to prepayment and adjustable interest, as these are frequent questions.

Reply by Notarysigner on 1/18/10 11:20am
Msg #318396

Key word lay person n/m

Reply by Les_CO on 1/18/10 11:35am
Msg #318399

Re: Key word lay person

I usually say to someone mathematically challenged asking about the APR.…
See all these closing costs? If you were to write me a check for each of these costs, rather than paying them out of the proceeds of the loan, these two interest rates would be the same. Don’t be concerned about the APR. The interest rate you are paying is the exact rate that I showed you on your loan. If that doesn’t work I go into more detail.

Reply by Bob_Chicago on 1/18/10 11:47am
Msg #318404

" If you were to write me a check for each of these costs"

Actually, Les, I believe that those costs would still be reflected on the APR
Think of POC costs paid by bwr, such a appraisal.

Reply by OR on 1/18/10 12:21pm
Msg #318408

Re: I had a LO at the table when I first started say...

say it this way. The APR is the interest rate plus the cost of doing business calculated over a year. The interest (RATE) goes to the investor. The rest is used to hire some one to take care of the business end of the loan. I like the way it reads on this web site ...... I tried to like it but it did not work. Wikipedia, the free encyclopedia (Annual percentage rate). Hope that helps

Reply by Les_CO on 1/18/10 1:37pm
Msg #318432

Re: " If you were to write me a check for each of these costs"

You are absolutely right Bob! A poor example on my part. If I were closing your loan I’d have you explain it to me!

Reply by Notarysigner on 1/18/10 12:47pm
Msg #318416

Has anyone answered GOLDGIRL'S question yet???

Reply by Linda_H/FL on 1/18/10 12:58pm
Msg #318421

Yep..a few of us have n/m

Reply by Notarysigner on 1/18/10 1:04pm
Msg #318423

Re: Yep..a few of us have

To be honest..I think your example is very good. Hopefully you won't mind if I modify to pattern after yours..

Reply by Linda_H/FL on 1/18/10 1:24pm
Msg #318430

As long as you don't preface it with "Linda said...."...:) n/m

Reply by Marvin Everhardt on 1/18/10 3:10pm
Msg #318446

Re: As long as you don't preface it with "Linda said...."...:)

The fees on the itemization are added to the note rate to get the apr, correct??

Reply by Notarysigner on 1/18/10 4:34pm
Msg #318455

you got it.... n/m

Reply by JanetK_CA on 1/18/10 5:20pm
Msg #318460

How I handle TIL, APR, Itemization Amt Financed - K.I.S.S!!

Oy Vey!!!! I'm not going to go into each one, but I read several comments here that give me just enough heartburn to motivate me to spill some of what I consider a little bit of personal "intellectual property". (I'm not giving you my whole schpiel, but it's really not much more than this.)

IME, I don't think most people want to know how to calculate the APR. They just want to know why it's different from what their LO told them their interest rate was going to be.

The first thing I do is show them the Amount Financed: "This is the amount of $$ you need to borrow."

The second is the Finance Charge : "This is how much it costs to borrow this amount of money" (pointing to the Amount Financed).

"The APR is a formula that includes your prepaid closing costs, so it's typically a little higher than the actual interest rate we saw on your Note [which we've just reviewed], which is the figure that is used to calculate how much interest you pay." (I usually state the last part when going over the Note.)

Itemization of Amount Financed: "This is the worksheet for the calculation of the figures on the TIL, using the numbers that are required to be included in these calculations. They don't necessarily match one for one with what you're being charged on your Settlement Statement/HUD."

Done. I may cover a few other things on that page, but what I wrote above is pretty much all I have to say on those points. And at least 95% of the time, people get it and are satisfied with that.

IME, there are only three types of people for whom this isn't sufficient: those who are mentally challenged about this stuff (or too stressed or hyper to listen and process any information), those who don't care, and the accounting/CPA types who want to calculate it themselves anyway - and they think they know more than I do (and they certainly do, in this instance) and wouldn't listen to anything I tell them about this anyway.

Don't over complicate it, folks, and don't state anything that is an opinion or judgment about those numbers. (And BTW, there are some borrowers who already know enough about their docs to make any of this unnecessary, so for them we might skip this altogether.)

Reply by CaliNotary on 1/18/10 10:00pm
Msg #318479

I keep it even simpler

When it comes to the APR, I simply say "this incorporates closing costs, as well as interest, which is why it's higher than the interest rate".

A lot of times they're already nodding their heads because they're familiar with the concept of APR, and if they're not nodding, they usually accept the answer as something that makes sense and don't question it further. And if they don't ask, I don't offer anything additional to explain it.

I'd say that in about 98% of my signings there is no need for additional explanation.

Reply by ReneeK_MI on 1/19/10 5:47am
Msg #318499

Cali wins the K.I.S.S. award

Almost identical to my auto-spiel, which is "The APR factors together the actual interest rate of the loan with the fees you paid to obtain the loan."

Agree, 98% don't want or need anything further.

The need to K.I.S.S. is pretty evident in this thread, the calculation of the APR is complicated IF/UNTIL you really understand it - then it's pretty simple. (Brain surgery might be pretty simple too, if you really understood how to do it!) Some of the misunderstandings in this thread (just the ones I remember at the moment):

- the Itemization of Amount Financed, when it's a companion of the Final TIL, DOES (or SHOULD) match the Settlement Statement. My spiel for this doc "Not every item on the Hud is included as a fee in the APR - some items, such as your escrow set-up, are not actual loan fees. This document shows which items are IN and which are NOT in the APR calculation." Done. (FYI - the total "Pre-Paids" category are the ones IN the APR).

*If something on the HUD changes that does NOT affect the APR, a new TIL/Itemization isn't generally provided. In those instances, the figures on the Itemization won't spot-on match the HUD. There's also a small margin of change/error allowed in the APR calculation as well.

- I think the word "Annual" (in APR) throws off a lot of people. The APR is calculated over the entire life of the loan, but expressed as an Annual Rate. (Someone in here said it was 'the interest if you paid the loan off in one year' or something like that. I often hear L.O.'s say "it's just for the FIRST year of the loan." No ...it's calculated over the entire term & expressed as an annual rate.)

- Susie & a couple others (forgive me for not remembering who) have the math down (kudos). It can be formulated in another arrangement of the same factors (of course), and for those engineers & CPA's who need that, I have a K.I.S.S. auto-spiel: Total dollars of interest paid over the life of the loan PLUS total dollars of Pre-Paids DIVIDED back into an annual rate expression (i.e. If it really WAS all dollars of interest, what annual interest rate would it be?)

- The "Amount Financed" is the loan amount, minus the Pre-Paids used in the APR calculation. The explanation is - the lender might be 'giving' you 100,000 but if you're 'giving' him back $4,000 in pre-paids, then he's effectively only 'giving' you 96,000. (Key word: effectively). In other words - if I give you 10 apples and you give me one back as the FEE for those - you now have 9 apples.