Posted by Alz on 11/3/11 2:53pm
Msg #402707
Help Me Understand This One.
I met a Realtor at an event this morning, who recently became a notary public and signing agent. I forget how the subject came about, but during the course of the conversation I was told that the instructor who taught the loan signing course told the class that title companies, loan officers, and realtors could notarize documents for the clients, i.e. loan documents, as they were exempt somehow. I get that title companies do this for a living, but how is it that loan officers and realtors can legitimately notarize loan documents for their clients? When I say client, I am speaking in terms of selling a home or brokering a loan to the borrower.
I do not proclaim to know everything, but I have studied my state’s law as a notary public and was unable to find this exemption. Did I overlook something here? Call me crazy, but I told the realtor that I thought it would be conflict of interest, but what do I know?
| Reply by Priscilla Witman on 11/3/11 3:05pm
Msg #402711
Alz,
Page 10 of the CA handbook says:
Conflict of Interest
A notary public is not prohibited from notarizing for relatives or others, unless doing so
would provide a direct financial or beneficial interest to the notary public. With California’s
community property law, care should be exercised if notarizing for a spouse or a domestic
partner.
A notary public would have a direct financial or beneficial interest to a transaction in the
following situations (Government Code section 8224):
• If a notary public is named, individually, as a principal to a financial transaction.
• If a notary public is named, individually, as any of the following to a real property
transaction: beneficiary, grantor, grantee, mortgagor, mortgagee, trustor, trustee, vendor,
vendee, lessor, or lessee.
A notary public would not have a direct financial or beneficial interest in a transaction if a
notary public is acting in the capacity of an agent, employee, insurer, attorney, escrow holder,
or lender for a person having a direct financial or beneficial interest in the transaction.
If in doubt as to whether or not to notarize, the notary public should seek the advice of an
attorney.
I don't think this would be classified as an "exemption" per se...just what CA law allows for. As long as the notary doesn't have a financial interest in the document...
I agree that the whole situation seems a little weird. Seems like they're trying to keep everything in-house.
| Reply by Notarysigner on 11/3/11 3:12pm
Msg #402712
I know of two Escrow officers in my area who do loan signings out of their office after work....they trade off with each other in their office.
| Reply by SharonMN on 11/4/11 1:34pm
Msg #402795
"A notary public would not have a direct financial or beneficial interest in a transaction if a
notary public is acting in the capacity of an agent, employee, insurer, attorney, escrow holder,
or lender for a person having a direct financial or beneficial interest in the transaction."
I'm not in CA, nor am I a lawyer, but I would read this as permitting a notary who has an interest in the transaction solely because their employer might benefit but NOT one who has a personal conflict.
So someone that works for the lender could notarize documents, but not the loan officer who is getting paid if the loan closes. Someone that works at the title company could notarize the documents even though the title company is getting paid to do the loan work, as long as they personally are not getting paid based on whether or not that particular loan closes.
Regardless of whether the loan officer or Realtor can notarize documents for their own transactions LEGALLY, it's not the best business practice.
| Reply by JanetK_CA on 11/4/11 8:22pm
Msg #402834
"Regardless of whether the loan officer or Realtor can notarize documents for their own transactions LEGALLY, it's not the best business practice."
I think this statement pretty much sums it up and I agree. Technically, they're not a named party to the transaction (like the borrowers or sellers are), so California law seems to allow it, but that doesn't make it ethically a good thing to do. In fact, I remember several years back Beneficial / HSBC got into legal trouble (nationwide) with their business practices and I believe one of the upshots of their settlement was that they were no longer able to have their in-house notaries (very often the branch manager) handle their loan signings. It was perceived as a potential conflict of interest, state law notwithstanding.
Back when I first got my notary business really rolling, I used to do a ton for them because of that. Too bad they vanished. Even though the pay wasn't great, they used to stack them up for me. I just showed up and signed away...
| Reply by Dennis_IN on 11/3/11 5:06pm
Msg #402719
I spoke with the IN SOS's office last week about this very topic. They said that they would have a BIG problem with, for example, the Sellers Realtor notarizing the Deed and getting other docs signed by their client. Because they have a vested interest in the transaction; therefore, they should not act as a notary for their own transaction. THEN, I speak with the TC and they don't have a problem with it, go figure...I guess they don't care as long as the deal goes through....
There should not be a problem if a Realtor also acts as a signing agent for deals they are not connected with. I know several Realtors in my area that also close loans...
| Reply by Les_CO on 11/3/11 5:33pm
Msg #402721
Your last sentence says it all.
Title companies close RE transactions every day. They sell the party(s) to the transaction title insurance, and charge for their other services. Do they have an interest in the transaction? You bet! If the deal doesn’t fly they don’t get paid. There is a difference between being a ‘party to’, and having ‘an interest in’ a transaction. JMO
| Reply by Dave Heine on 11/5/11 5:49am
Msg #402844
So Les, if I follow this logic as a title agent, I should not notarize my clients loan documents because my company gets a "financial interest" in it by way of payment for my services. Then following that logic, an attorney should not notarize any documents for thier clients because they bill an hourly rate.
Then by the same token, you should not be notarizing loan documents under the logic you used, because you as well get paid in the transaction so wouldn't you have a vested interest. Even if you get paid for no-signs, you are paid in the deal and have an interest financially in it. The only notaries that could do this then are notaries that do it for free and are not connected to any party in the transaction.
| Reply by MW/VA on 11/3/11 6:34pm
Msg #402727
IMO these are lawsuits waiting to happen. It's clearly
a conflict of interest, because they have a financial interest in the transaction. I wonder where they took that course? (maybe it was XYZ--LOL).
| Reply by Alz on 11/3/11 6:41pm
Msg #402730
Didn't get a chance to ask about instructor's company n/m
| Reply by MikeC/TX on 11/3/11 9:11pm
Msg #402741
Whatever this person was telling you is nonsense. I'm not aware of any state that allows a notary to get involved in a transaction in which he or she has a personal interest - and the absolute LAST people you would allow to do this would be real estate agents and loan officers.
And just as an aside - the word "Realtor" is trademarked by the NAR. Not every real estate agent is a Realtor, and it costs big bucks every year to be able to legally use that designation...
| Reply by Alz on 11/3/11 9:43pm
Msg #402742
Yep, know the difference. The RE Agent is a "Realtor". n/m
| Reply by jnew on 11/4/11 4:10pm
Msg #402811
Title companies act as a third party escrow intermediary. Title insurance can and usually is sold by the same company closing. They have been notarizing instruments for over a hundred years and I don't know why this would come up now. There is no conflict of interest, if there were they would not be used as closing agents, because it would violate the law. I hope no one is climbing on the ledge over this.
| Reply by MikeC/TX on 11/4/11 4:59pm
Msg #402817
It's not the TC that is the problem - it's the real estate agent and the loan officer, both of whom are typically commission only and definitely do rely on the deal closing in order to collect a check.
Regardless, there are no "exemptions" for any of them. I can't imagine where the instructor came up with that tidbit of misinformation.
| Reply by LKT/CA on 11/3/11 9:59pm
Msg #402747
Wise people just avoid even the appearance or hint of impropriety. UNwise people keep inching towards the line - then one day they look back and realize they not only crossed the line but are now about 50 feet over it.
| Reply by desktopfull on 11/4/11 10:25am
Msg #402772
When they are caught, they'll lose everything and still be scratching their heads saying "we didn't do anything wrong. There is a reason for using the "3rd. uninterested party" in the transaction.
| Reply by BrendaTx on 11/5/11 10:32am
Msg #402855
*I forget how the subject came about, but during the course of the conversation I was told that the instructor who taught the loan signing course told the class that title companies, loan officers, and realtors could notarize documents for the clients, i.e. loan documents, as they were exempt somehow.*
I don't know about an exemption, but in my observation from reading this board for many years, I don't know that there is a direct rule or law against loan officers and realtors. Charles of CA used to post on this board...I think that at one time he explained it.
| Reply by BrendaTx on 11/5/11 10:35am
Msg #402857
Alz, an answer on your question from the archives
Msg #106802
I started the thread...no wonder I remembered it. 
Hope this helps.
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