Posted by PegiT_MN on 1/27/13 6:55pm
Msg #452565

Loan Applications vs. RESPA Signings

I just noticed a few threads on here tonight discussing the fact that we as notary signing agents are not to be taking loan applications. It appears that an SS told a notary that another notary got in big trouble for doing this. That is correct, we are not supposed to be taking a loan application because we do not have an originator's license.

I was a mortgage broker/loan officer for ten years before becoming a notary signing agent and I just wanted to point out that there is a big difference between taking a loan application and doing a RESPA signing (which is what most of us are being asked to do).

A loan application is the part where the loan originator gathers all the information needed from the borrowers in order to get the file into underwriting. The originator will ask the borrower everything that is on that 1003 application, enter it into their software system, upload the credit report to show liabilities, discuss loan products, interest rates, and payment information with the borrower. The loan originator will then most likely upload all this information into some sort of underwriting software that is used by the lender and that in turn will generate a laundry list of items the borrowers need to provide to the loan originator and underwriter in order for the file to close. The originator will then print out the RESPA documents that are to be signed by the borrowers. These RESPA documents are time sensitive as they need to be signed within 3 business days from credit being pulled.

That is where we come in. The loan originator will ask us to conduct the RESPA signing. We are not taking a loan application as that has already been done by the loan originator. We are merely watching the borrowers sign their RESPA documents and gather up the documents such as bank statements, pay stubs, divorce decree, W-2s, tax returns, insurance information, homeowner's association information, letters of explanation, etc. Whatever that underwriting software told the loan officer that would be needed in order to approve the loan. We are not there to give advice, sell a product, we are merely there to watch them sign and gather up the documents needed by the loan originator to give to the underwriter.

I just wanted to explain the difference between a loan application and a RESPA signing so that every notary signing agent can make sure they are not doing anything they are not supposed to.

I hope this information was helpful.

Reply by Jack/AL on 1/27/13 7:03pm
Msg #452566

It was! Thanky much. n/m

Reply by PegiT_MN on 1/27/13 7:14pm
Msg #452569

Re: It was! Thanky much.

I'm glad that was helpful to you Jack. Here is a little more information that might be helpful to everyone. The word "application" is being used to describe the process the loan originator goes through rather than the document itself. On the bottom of page 3 of the 1003 Residential Loan Application it clearly states the loan originators name, their originator identifier number, the name of the company they represent, and the originator identifier number of the company. This is who took the application. We did not take an application, we are merely gathering signatures from the borrowers.

The same theory would apply to tax returns. We are not licensed to do tax returns, yet we have them signed by the borrowers on a regular basis. That is because we are not preparing the tax return, we are merely watching the borrower sign what was already prepared by a licensed individual. Same thing with the 1003 loan application. We are not preparing the application, we are merely watching the borrower sign what was already prepared by a licensed loan originator.

I hope this helps.

Reply by walthtz on 1/27/13 10:31pm
Msg #452597

Re: It was! Thanky much.

Thanks for the heads up

Reply by Gregory/CA on 1/27/13 7:12pm
Msg #452567

Yes. Helpful. Thank you. n/m

Reply by jba/fl on 1/27/13 7:13pm
Msg #452568

Yes, very helpful. Yours is the most clear and concise explanation all day, and for the previous times that this subject has come up.

I think of RM's more than anything when this subject arises. I think that is where most RESPA signings are. I cannot believe that that many people and companies are non-compliant with the rules in place.

Thank you.

Reply by GOLDGIRL/CA on 1/27/13 7:18pm
Msg #452572

Thanks for clarifying the difference, Peg, but my reading of SAFE sez notaries are not to participate in any loan origination activities, including clerical stuff, which would obviously include our gathering of bank statements, tax returns, etc., as well as overseeing applicants sign these time sensitive docs. Everything you describe falls under loan origination because the loan has not yet been approved/granted. Another problem comes in, IMO, when we're asked to get all these pre-docs signed at the loan signing... but that's a diffrerent animal.

Anyway, seems to me the purpose of SAFE is to make sure all borrower info is collected, processed and overseen by licensed people ... not mere notaries. (This is along the same lines we do inspections.. to be sure broekrs are collecting and storing infomration according to licensing laws). Because we never notarize anything at a RESPA signing, we are there soley to perform clerical functions for the convenience of the originator. The would-be lender could just as easily send a taxi driver or the trash pickup guy/gal to gather all the info and send it back. Which, of course, would never be "allowed." They send us cos they have our e-mail address and because notaries have a certain cache and because we'll be doing the signing eventually. So really, notaries nor anybody else not properly licensed through their state a LOs or MOs should have anthing to do with the origination process .. at any point along the line (IMO of SAFE, of course!)

Reply by VT_Syrup on 1/27/13 7:32pm
Msg #452574

What bothers me about these laws and regulations is similar to what bothers me about many other rules. While someone had some goal in mind, which is often unstated, when the rules were made, the final rule may not reflect the intent. What you're saying about the huge difference between helping a would-be borrower fill out the application initially and just watching them sign an application that is already filled in, for a loan that is already "approved" but not yet funded, makes perfect sense. But it is quite annoying that the rules are written in such a convoluted way so that you really can't tell who is included, nor can you tell quite what the goal is. Is the goal to make sure that the person who helps the would-be borrower fill out the form is well-trained and can help create a fair and accurate application? Or is the intent to restrict who can see the information on the application to protect privacy?

Reply by Linda_H/FL on 1/27/13 7:21pm
Msg #452573

Every time I read the SAFE Act I get a different

interpretation out of it...yeesh

Reply by BrendaTx on 1/27/13 7:45pm
Msg #452575

I believe Peg has a good grasp on this...but, I have to say that when I asked this of a friend who was an LO she was stunned that it was going on.

It's a way for big box lenders to shove the local folks out of the way and make loans. They are doingwhat big box title companies do with NSAs.

It is an interesting discussion.

Reply by HisHughness on 1/27/13 8:04pm
Msg #452576

I think you present a compelling but not convincing case

I am a former reverse mortgage loan officer. A loan originator is just that: He originates a loan.

A loan closer, conversely, takes over after the loan is originated. As NSAs, we are part of the loan <closing> process.

So, the question becomes: Is gathering the requisite documents part of the process of originating the loan, or part of the process of closing the loan? Patently, it is part of the process of originating; without the signatures and the documentation, a loan would never be in shape to get to a loan closer.

I don't think I can serve as an adjunct to the loan originator. A loan has to be in the closing process itself before I can get involved.

Reply by Linda_H/FL on 1/27/13 8:15pm
Msg #452577

Here's what I see...and why I think Howard was right..

so far - another 3 readings I may change my mind..and I reserve that right

Appendix C to Part 1008—Independent Contractors and Loan Processor and Underwriter Activities That Require a State Mortgage Loan Originator License

(a) An individual who is a loan processor or underwriter who must obtain and maintain a state loan originator license includes:


(2) Any individual who performs clerical or support duties and who is an independent contractor, as those terms are defined in § 1008.23;

(3) Any individual who collects, receives, distributes, or analyzes information in connection with the making of a credit decision and who is an independent contractor, as that term is defined in § 1008.23; and

(4) Any individual who communicates with a consumer to obtain information necessary for making a credit decision and who is an independent contractor, as that term is defined in § 1008.23.

2, 3 and 4 are where we come in, I believe.

Reply by ReneeK_MI on 1/28/13 5:17am
Msg #452616

Appendix C seems to end the debate

It differentiates between employees and Independent Contractors - making the debate over what is/isn't "origination" vs. "clerical or support duties" a moot point.

We're definitely I/C's. IMO, game over.

Appendix C (starts half way down first column)
http://tinyurl.com/bfm7vf6

There have been some really enlightening facts & points made throughout this discussion, and I’m truly grateful for our community – I would love to believe that people in all professions & endeavors have access to such a treasure of brains to ‘pick’.

Thank you, Peg, for an awesome detail of originations vs. having a form signed – and I hope you don’t mind my ‘picking’ on a bit of minutia that is at the crux of why I never involved myself with so-called ‘RESPA’ signings. First, the term is a misnomer – RESPA does not require signatures on RESPA-required disclosures, and the URLA 1003 is not a RESPA-required disclosure but a Fannie/Freddie required document designed as a standard (and used as such) to both satisfy uniformity in the marketplace and HMDA & ECOA requirements.

RESPA guidelines & requirements here: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/res/respamor#WI

Nice, concise explanation of 1003 here: http://www.mortgagesanalyzed.com/documents/URLA/URLA.php

Fannie/Freddie requires the Initial 1003 to be signed upon application or “as soon as possible thereafter” (and this is not a law, but an industry standard & requirement for Fannie/Freddie) and specifically states that a fax or electronic signature is acceptable. (This is why so many Initial 1003’s end up at the closing for signature – “as soon as possible” being pretty subjective, no law being broken, no penalty imposed.)

My contention about ‘RESPA’ signings has always been that NSA’s are used as a means of manipulating an applicant – psychologically – by creating a sense of ‘official’ engagement with a particular lender, with the obvious intention of dissuading the applicant from engaging with any other lenders during the processing. Interesting tidbit: when a lender pulls a mortgage credit report, the Credit Bureaus add that applicant to a ‘hot list’ that other lenders purchase and market (aggressively) to. You can see how it behooves a lender to instill a sense of commitment at the get-go. Using NSA’s also most certainly has the benefit of expediency as a bit of hand-holding & direction for applicants can go a long, long way towards that end. Still, there is no reason whatsoever that the entire application process can’t be performed via phone, mail and/or electronically. There is no single document needed to process a loan application that can’t be mailed, faxed or sent electronically. Consumers tend not to be so savvy, and once they’ve had a warm body in front of them and have signed *stuff*, they feel a sense of commitment that’s far greater than otherwise. While I can appreciate the benefit of expediency and the applicant’s greater ease with some hands-on direction, I’ve been conflicted with the false sense of commitment and preferred not to be involved.

Reply by VT_Syrup on 1/28/13 8:56am
Msg #452638

Re: Appendix C seems to end the debate

I think Appendix C is faulty. It refers to the definition of independent contractor in 12 CFR 1008.23 (CFR is Code of Federal Regulations):

"Independent contractor means an individual who performs his or her duties other than at the direction of and subject to the supervision and instruction of an individual who is licensed and registered in accordance with § 1008.103(a), or is not required to be licensed, in accordance with § 1008.103(e)(5), (6), or (7)."

So most of us meet the definition of an independent contractor.

Appendix C says:

"The examples below are designed to aid in the understanding of loan processing or underwriting activities for which an individual is required to obtain a S.A.F.E. Act-compliant mortgage loan originator license...."

"(a) An individual who is a loan processor or underwriter who must obtain and maintain a state loan originator license includes:

(1)...

(2) Any individual who performs clerical or support duties and who is an independent contractor, as those terms are defined in § 1008.23;"

Well, the secretary of our local amateur radio club performs clerical and support duties, and meets the definition of an independent contractor, so she needs a license. Of course that's an absurd result, so clearly there is some understanding that this rule only applies in certain circumstances, but what those circumstances are, isn't stated (or is hard to find).

Reply by VT_Syrup on 1/28/13 9:09am
Msg #452640

Re: Appendix C seems to end the debate - further thought

A key line in Appendix C states

"(a) An individual who is a loan processor or underwriter who must obtain and maintain a state loan originator license includes:"

This might mean that anyone who appears among the examples below IS a loan processor or underwriter, and therefore must obtain and maintain a state loan originator license. OR, it might mean that IF an individual is a loan processor or underwriter, AND appears among the examples below, then the individual must obtain and maintain a state loan originator license.

If my second interpretation is right, maybe we don't have to worry. Hardly any of us are underwriters. And most of us don't meet the definition of a loan processor or underwriter in 1008.23:

"Loan processor or underwriter, for purposes of this part, means an individual who, with respect to the origination of a residential mortgage loan, performs clerical or support duties at the direction of and subject to the supervision and instruction of:
(1) A state-licensed loan originator; or
(2) A registered loan originator."

So of my second interpretation of Appendix C is right, Appendix C just doesn't apply to most of us.

Reply by Bear900/CA on 1/29/13 12:54am
Msg #452861

Re: Appendix C seems to end the debate

I’m going to take a leap of faith here.

I imagine I can go to truck driving school and learn how to drive a truck and any laws associated with driving one.

I imagine I can go to a forklift driving class and learn how to offload a truck.
Since they both may carry the same product, then no matter what, I need to learn the laws of driving a Mac truck.

Ladies and gentlemen, you are trying to fit notary work into the bounds of mortgage origination. Basically, that makes this whole discussion out of bounds because we are not part of that profession.
That’s what has been confusing me about reading these threads. The SAFE Act wasn’t written for notaries, doesn’t involve notaries and isn’t meant to distinguish an arbitrary fine line between loan origination and notarization.

The SAFE Act’s Final Rule opens with this:

SUMMARY: This final rule sets forth the minimum standards for the state licensing and registration of residential mortgage loan originators, requirements for operating the Nationwide Mortgage Licensing System and Registry (NMLSR), and HUD’s Federal oversight responsibilities pursuant to the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act or Act), to ensure proper monitoring and enforcement of states’ compliance with statutory requirements. This 2008 law directs states to adopt loan originator licensing and registration requirements that meet the minimum standards specified in the SAFE Act.

The rule doesn’t involve notaries any more than it does________ (fill in the blank).

It was put in place to 1) register all loan originators (l-o-a-n originators) for tracking purposes and 2) raise the bar for them through additional educational and examination requirements.

Why are you trying to fit this law onto yourselves like a dress at a mall? Are we trying to fit on for size?

I think you’re window shopping in the wrong store and looking for something you’re not sure you want to wear or not.

If the subject is as straightforward as whether or not you ant/can/may/should take an application please read my prior post concerning that.

Reply by GOLDGIRL/CA on 1/27/13 8:16pm
Msg #452578

Agree with you, Hugh

.. yet, like Linda, everytime I read SAFE or a CFPB analysis of SAFE I get a slightly different idea.

And as to why we are "allowed" to be in the loan closing process is another issue. This where attorney only states got started, I would guess.

Reply by HisHughness on 1/27/13 8:48pm
Msg #452579

Re: Agree with you, Hugh

***as to why we are "allowed" to be in the loan closing process is another issue. This where attorney only states got started, I would guess.***

We're not allowed; we're required, in our roles as notaries. I gather our greater involvement flowed from that. We're there, we're getting signatures, why not get them all? And if you're getting signatures, shouldn't you be able to tell the person what they're signing?

Reply by GOLDGIRL/CA on 1/27/13 8:59pm
Msg #452582

Re: Agree with you, Hugh

What I meant was ... it was decided somewhere along the line in certain states that only attorneys would be allowed to handle loan closings... and I'm guessing it came about because of 1. the attorney lobby; 2. most state legislators are attorneys, but mostly 3. cos there's an expectation of privacy when dealing with attorneys (lawyer/client privilege?) whereas notaries have no standing to ensure privacy. And what contains more info about a person than a loan pkg?

I think our role sort of evolved from notarizing signatures and giving oaths re certain docs ... to while you're there and since the rest of the loan needs to be signed, too, well, finish it up. And, of course, we need to alert the signer to what they're signing ... but don't tell that to a true point 'n' sign notary, who I often hear, are still out in force!

Reply by Malbrough_LA on 1/27/13 10:54pm
Msg #452603

I agree with Hugh...

Regardless of how it came about (lobbying, etc...) There is a linguistic difference b/w origination and closing. While this may seem only a semantic difference to some, it's a legal difference that makes a BIG difference!

The source is to be considered as important, but the outcome (the part which affects us as NSA's....I still hate this term btw, LA does not recognize anything of the sort. We recognize the term 'notary' which is why we refuse to accept NSA insurance separate from E&O...) is still the same.

Reply by Bear900/CA on 1/28/13 1:44am
Msg #452613

If for no other reason

then getting to know the depths of some and the earnestness of others I am enjoying reading this thread.

I confess I should pay more attention to the subject but much more relish the analysis then the probable outcome.

Thanks!

Reply by MW/VA on 1/28/13 1:23pm
Msg #452703

Thanks, Peg. This has been discussed many times before

& there are many who interpret the SAFE act differently.
I do RESPA signings. There is a Loan Originator that works for the lender, and I don't work for the lender. I'm not "taking an application". That's already been done & the info is on the paperwork. I'm collecting signatures & returning the app. so it can be processed. I am in no way acting as an unlicensed loan originator or processor. I am not involved in the loan process at all. Some will disagree with my interpretation, but my common sense tells me I'm ok with what I do.

Reply by MW/VA on 1/28/13 2:38pm
Msg #452726

Ref. msg. 430648 posted by Renee/MI on 8/16/12 n/m

Reply by ReneeK_MI on 1/28/13 3:22pm
Msg #452747

...an opinion revised upon reading Addendum C on 1/27/12...

Taking the Act on its own merit wouldn't (IMO) lead anyone to think any distinction was made between an actual employee and an independent contractor performing the exact same 'clerical/support' type service.

Upon reading the entire Addendum C, it is IMO a clear distinction, and I officially change my original opinion to the one I have now.

In other words, I was wrong before when I thought I was right and I could be wrong now but I do think I'm right, still it's just my own opinion and I'm fully prepared to eat these words again. =)

Reply by Bear900/CA on 1/28/13 7:13pm
Msg #452794

Re: ...an opinion revised upon reading Addendum C on 1/27/12...

LOLOL! That’s what I call a little Texas two-step!

As I said I love the earnestness here, and if we have a little dance or two that can be more fun than not. I have done my share and will no doubt continue.

Would somebody please inform this mortgage broker what a RESPA signing is?

We are not in the signing business so it’s a totally foreign term to us. Trust me; I have to explain things to other brokers so I know that they don’t know either. But I am sure I will have fun explaining it to them and that they have been doing it wrong all along.

I’m 99.99% sure what I think you mean it is, but taking a quote from The Princess Bride, “I don’t think that word means what you think it means”.

Anyone?
Please?

Reply by jba/fl on 1/28/13 7:19pm
Msg #452797

See OP for explanation n/m

Reply by MW/VA on 1/28/13 8:18pm
Msg #452809

Oops, sorry Renee. I posted that without reading your

comments above. I only ever have time to scan the threads quickly.

Reply by Chakwaina on 2/14/13 7:55am
Msg #455792

I went to the Federal Register for the SAFE act and at the beginning of it, it defines words used in the document itself

https://www.federalregister.gov/articles/2011/12/19/2011-31730/safe-mortgage-licensing-act-regulations-g-and-h

"§ 1007.102 Definitions.

For purposes of this part, the following definitions apply:Show citation box
Administrative or clerical tasks means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the residential mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan."


In this particular law "clerical" means more than what we would normally define it as. I have never done a RESPA that my duties would meet the definition of "clerical" in this law so IMHO, notaries can do RESPA closings.