Posted by Harry [NR] on 1/4/13 7:41pm
Msg #448954

Notary E&O Claims - Request for Comments

Okay, I'm not sure what's going on, but we've seen considerably more small claims come through against notary signing agents than what we've seen in the past. The last couple have been demands for around $2,000 or $3,000 for something title has said the notary missed.

In the latest case, a notary performed an "Electronic Signoff" on 12/7 and evidently neglected to complete a couple fields. For some reason, they were not sent back immediately to correct the alleged oversight. The rate lock expired on 12/18. The notary completed the next ESign on 12/20. (Again, I don't know why this wasn't caught earlier.) The file funded and closed on 12/21. The title company then demanded that the notary (or their EO carrier) pay nearly $2,000 to the mortgage broker for the alleged loss they took on "extending" the rate lock.

Does that seem reasonable? With interest rates and trends being what they are, I guess I'm not understanding A) How two weeks (or even a couple months if going back to an application) could equate to two thousand dollars, and B) Why title is making the demand on behalf of the mortgage broker. Would it have to be the case that the rate increased in the meantime and the broker had to buy it back down?

We had a very similar case last month. While not an exact account, it went something like this: a recordable document was turned back because A) the notary did not collect complete signatures, and B) the notary did not provide complete, clear dates. The signing date was something like December 11th and the date fields were completed as 121112. Because the document was rejected, everything had to be re-drawn, the notary was asked to go out something like 20+ days later to resign (their first contact with the SS or title), and they were subsequently asked to fork over a few grand.

In both cases, I'm asking myself why someone's quality control didn't catch the alleged mistakes. In the second case, there was a rescission window, yet the notary wasn't given the opportunity to fix anything until about three weeks later? What level of due diligence should rest with each party in a transaction like this?

Harry
Notary Rotary

Reply by Linda_H/FL on 1/4/13 7:55pm
Msg #448955

I can take a shot at some of it..from my experience

"A) How two weeks (or even a couple months if going back to an application) could equate to two thousand dollars"

An eighth of a point (1/8 of 1% of the loan) to extend the rate lock; redraw fees; additional accrued interest on the payoff of the old loan; recalculation of prepaid interest on the redrawn loan; possible additional title bringdown fees; I can see where it can possibly add up to $2-3K.

Why title is collecting on behalf of broker? To keep the borrowers happy? They covered it so borrower didn't get charged - now they're out of pocket and wanting to recoup their loss - though why title would have any standing on behalf of the mortgage broker is beyond me.

Gap in time? Keep in mind - remote closings; 3 days rescission then they have to send security instruments to recorder - not all places are e-filing. Maybe your 121112 incident was one - recorder rejected and title didn't get it back for say 7-10 days after funding...redraw and go back out less than 3 weeks later - probably not unheard of. Perhaps recorder is backed up and they didn't get it back for almost 2. Possible title didn't think anything OF the 121112 date - but recorder balked.

Guess these incidents explain why we see so many Notary 101 instructions in the packages.

Hope this is some help, Harry. I'm hoping some of our really experienced title people and loan originators see this and chime in.

Reply by Jessica Ward on 1/4/13 8:03pm
Msg #448957

No pro here, but....

I'm not super experienced in the area of insurance, but I used to see a lot of what I considered frivolous claims when I was in the construction business.

We had a phrase... "opportunity to cure." And some companies began including "opportunity to cure" language in their contracts--that before anything went to a claim, an "opportunity to cure" must be provided (essentially "warranty work"). (For example, a $2,000 claim to re-install windows when flashing wasn't installed properly. Rather than having an outside contractor come in, the original contractor should be provided the opportunity to fix the problem--if it's not done to the customer's liking, a claim shall be made. This works well for removing bad actors from the business too.)

I do wonder why internal controls didn't discover these "mistakes." (As I've never seen written instructions for how dates shall be noted, I'm very surprised at the date "error.")

Also, just because I'm curious, when there are claims on the insurance, does the client or the insurance company notify the notary in question that there's been a claim?

I ask this because I wonder if it isn't just a "fishing expedition." I've noticed more and more companies including forms that ask for all insurance information with every transaction (for mortgage loans) rather than just using the annual copy they've got on file. Seems like an annual copy ought to be good enough--if they run into a real problem their legal department should get into the files, and take it up with the notary and their insurance.

Also, I'm curious, are the kinds of claims you mention here claimed on the standard E&O or the Signing Agent insurance?

Reply by LKT/CA on 1/4/13 8:09pm
Msg #448958

It's their own fault!! Hiring lowball, $65 notaries <or working with SSs that hire lowball, $65 notaries> is finally coming back to bite the TCs/Lenders. When they hire professionals and pay a professional fee, they get stellar work. When they only care about the bottom line, hiring the cheapest notaries, this is the result. They got what they paid for and you'll see a lot more of these claims until TCs wise up and hires true experienced professionals or only works with the SSs that do.

Reply by MikeC/TX on 1/4/13 8:10pm
Msg #448960

Is it possible that you're seeing more small claims come through because the TCs and mortgage brokers are aware that there is insurance available to the NSA?

Their QC should definitely have caught the problem right away, and it would have been corrected at the notary's expense - that's the way it was always done in the past. It's not reasonable for them to come back 2 or 3 weeks later (or more) and claim that the notary screwed up without giving him or her a chance to correct the problem; the BO lost the rate lock so the insurance company now owes the mortgage broker money.

This just smells like someone taking advantage of the system.

Reply by CinOH on 1/5/13 9:43am
Msg #449022

MikeC, these are my thoughts exactly. It's just a way for them to take advantage of the system.

I, and borrowers, catch so many TC errors it's not even funny. Everything from wrong marital status, wrong vesting, misspelled names, wrong property address, wrong property STATE, wrong HUD, etc., etc. I could ignore a lot of errors and close anyway, knowing that it's going to cause a redraw and a lot of headaches for everyone. I don't do that, of course. I let the TC know ASAP of any errors on their part as a professional courtesy and give them the opportunity to correct them.

So, there is no earthly reason why the TC does not QC packages immediately upon receipt and get the notary back out there ASAP to correct any errors. Days and weeks later is unacceptable.

I know Harry can't say but I do wonder the caliber of the TC's these claims are coming from.

The day may be here for SAs to ask the companies they work for to sign reciprocal agreements requiring the TC to notify the notary within 48 hours of receipt of packages of any documents needing correcting. Otherwise, the TC should agree to eat the cost of not getting the error corrected in a timely manner in order to prevent or mitigate any damages or losses. If they don't want to sign it then don't work for them.

The bottom line is be very careful what you do and be very careful of who you work for.

Reply by Art_PA on 1/4/13 8:17pm
Msg #448961

Are you the claims underwriter? What does your counsel say? What are the actual damages? Why haven't you joined the title company which had the opportunity to detect errors and failed to do so? There seems to be a lot missing with respect to what appear to be nuisance claims which are too small to investigate or to defend.

Reply by CarolF/NC on 1/4/13 8:36pm
Msg #448965

No expert but something stinks

In A appears notary made an error but someone should have caught it. Maybe to easy to make a claim than do quality control. In B, I have never seen anything about proper date format and once having dealt with many legal docs I have seen that date format often. I don't understand how the notary would be responsible unless there were instructions to the contrary. I be interested to know the outcome of these claims.

Reply by Lee/AR on 1/4/13 9:00pm
Msg #448971

What has always bothered me about E&O is that the supposed 'offending party' is not consulted about a claim and it's the Insurance co. who decides whether to pay or fight. Some 'smart' lawyers--and, I guess other 'smart' people--know that a smallish claim is likely to be paid and not fought--court is expensive. The date issue could have been corrected via the typo/clerical errors POA--no need to re-sign.
This is bogus. (And a good reason for NOT doing E-signs--if I'm understanding this at all). While I'm telling stories on myself, many years ago while a r.e. broker, I discovered that a 'smart' lawyer will call with some supposedly grievious mistake you made and he can make it all go away---just give him your E&O carrier's name and all is well. In a snit, I said "Send me your claim because I don't carry E&O". Never heard another thing...just a lawyer trying to rake some bucks out of someone because they can.

Reply by jojo_MN on 1/4/13 9:10pm
Msg #448974

Is it true that the notary isn't contacted when there is a claim made? I am having issues with the SS and TCs asking for copies of our E & O's in advance. I was asked again this week for copies of mine. I told her that I don't give out copies but if there ever is a claim I would be more than happy to comply. She said there has never been an issue but they are now requiring them on notaries that they use for signings.

Maybe I am just a little paranoid, but could some companies be looking at this as another means of potential income ? Illegal, of course.

Reply by Shan/CA on 1/4/13 10:34pm
Msg #448988

Please don't scare me! As a newbie, some companies ask for a copy of my E&O, should I send it? Oh no, now I'm worried!

Reply by Lee/AR on 1/4/13 10:40pm
Msg #448989

Be afraid; be very afraid.

Keeps you on your toes. More years ago than I care to state, when I got my very first commission, the lady at my bank who notarized my application told me a horror story about how she very nearly lost her home over a notarization gone bad. Yep, she did something she shouldn't have done--as a favor to someone she'd known for years--and it came back and bit her real hard. Just be careful out there--as they used to say on Hill Street Blues.

Reply by MikeC/TX on 1/4/13 10:58pm
Msg #448994

Not trying to increase your anxiety level, but you should understand that there is a huge difference between the E&O as a notary and the E&O as a signing agent.

The basic E&O insurance for a notary covers dumb things you might do as a notary.

E&O for a signing agent covers dumb things you might do while signing a loan, such as causing the BO to lose their rate lock because you neglected to get some crucial document signed.

Reply by CH2inCA on 1/4/13 10:10pm
Msg #448986

I wonder if it would be beneficial for Notaries to know the names of companies, that might have a pattern of filing claims.
Is there a pattern?

Reply by CarolF/NC on 1/4/13 10:27pm
Msg #448987

How About a List of Companies Taking Advantage of the E&O n/m

Reply by CinOH on 1/5/13 10:02am
Msg #449032

Re: How About a List of Companies Taking Advantage of the E&O

Agree. I know Harry can't say, but I would love to know the names of the companies doing this. Perhaps the notaries involved would be willing to share the names? A PM would be okay too.

Reply by Lee/AR on 1/4/13 10:44pm
Msg #448990

Would be nice, but I doubt Harry will even consider a list,

but I would sure hope he's looking for a pattern. And, if there is one, something really smells bad and I'd sure like to see the word get out somehow.

Reply by Simone E. Lewis on 1/4/13 11:12pm
Msg #448995

Harry, on the last month's signing, it may have passed the Title Company’s judgment but the court did not accept it, the reason for it to be rejected so long after the signing. Legalities are important to follow with any document you want to stand up in court. You should write all contracts, in a manner that makes them binding. The date on legal documents is very important, and you need to write it properly so there isn't any chance that the document won't survive legal scrutiny. The date should appear with the month, day and year style, order to get rid of any confusion regarding dates, you should first write the date in numbers, such as Dec. 11th, 2012. P.S. 121112 are not a date but a series on number

Reply by CopperheadVA on 1/5/13 6:07am
Msg #449014

121112 is a type of military dating

except I think it would be correctly written as 20121112, which would mean November 12, 2012. The format is YEAR/MONTH/DAY but is written as a series of numbers with no dashes or slashes. If the example Harry gave meant Dec 11, 2012, then I agree that is a confusing date format. I think the military example I gave is confusing too, but it is indeed an established military dating format.

I run into this date version on occasion since Virginia has such a large military presence. If someone wants to date that way, I ask them not to and I ask them to date in a reglar MO/DAY/YR format, or in the more popular military format "12 NOV 2012". Only one time did I have a signer reuse to alter his dating style, and it was for a USAA loan. He said that USAA is a military company and should be familiar with this dating style. The loan funded.

Reply by Budman on 1/5/13 12:57am
Msg #449006

Harry,

I think someone is fishing also.
In the first case:
a.) require proof of the mistake
b.) Require documentation of their efforts to correct the mistake during the 11 days before rate lock expiration.
I don't think their request is reasonable because of the 11 days they had to correct the mistake.

In the second case you are asking yourself why quality control didn't catch the alleged mistakes. The notary wasn't given the opportunity to fix anything untill about three weeks later. In my opinion too much time has elapsed ( three weeks is too long and probably reason enough to deny the claim )

Disclaimer: I am not an attorney and I am not giving advise, just some suggestions and thoughts.

Buddy

Reply by CentralNY on 1/5/13 9:38am
Msg #449020

Harry, I know nothing about E&O claims

but what is your recourse on refusing to pay these claims. Do you need to retain an attorney? They sent the 1st notary out again to do the resign and then file a claim against him/her? Did they even make him/her aware of the error. Can you file against someone that is not even aware of the error. I think we all do the date thing right but like Red says it could be a regional/military thing. Is it a notary's responsibility to know that a county recorder won't record an instrument for a date formatting issue.
The above seem like really weak claims. I hope you fight them.

Reply by MW/VA on 1/5/13 9:59am
Msg #449028

I'm curious here. Was the notary informed that a claim was

being made on their E&O insurance? I also don't understand why the notary wasn't notified & the situation corrected. I'm smelling something here. This was an e-sign, apparently, and I've heard that the tc is fined if the e-sign doesn't go through. It sounds to me like they're trying to pass this cost onto the notary. Something just doesn't seem right here. Lenders will often extend a rate-lock in extenuating circumstances. I'd be wary of cos. filing claims for E&O. What proof of loss are they required to submit?

Reply by CentralNY on 1/5/13 10:11am
Msg #449033

Right MW, banks can extend a rate, please, I agree

someone is testing the E&O waters, it's like the deep pocket theory in law suits. It just seems plain stupid to have used the same notary that they filed a claim on. So it seems they didn't decide to file until the 2nd one was completed. Oh, ya, go after the big dumb notary.

Reply by MW/VA on 1/5/13 10:23am
Msg #449037

I agree, too, that it sounds like someone is testing the

E&O waters.

Reply by ArtG/KS on 1/5/13 10:13am
Msg #449034

Re: I'm curious here. Was the notary informed that a claim was

Im curious too, when will the presidential auto-pen be used for loan signings? (Sorry, I could not resist asking that).

My answer on this is, DUE PROCESS. I monitor for claims to see if they are false or frivolous. In twelve and a half years of business Ive not had one claim. Maybe because of this monitoring. If I do ever get one, then I will demand written claim document, the copy of the alleged error and then it will go to the E & O and to my attorney for review.

If it turns out to be false, the merits will be the factor on what my Attorney does with that.

Reply by CentralNY on 1/5/13 10:28am
Msg #449039

I am avoiding housecleaning, so......

Art, great post. Just because they file a claim doesn't mean it is going to be honored. A point about rate locks. The past 6 months my bos from all walks of life and all lenders complain, sometimes bitterly, that the stupid refi took from 3 to 6 mos. They complain about clueless los and processors and being asked for the same info numerous times, appraisals being done on wrong props, it goes on and on and the banks don't care, it's biz as usual. My point or question to all you former los out there is during this lengthy period to refi rates must have expired, so tell me who is penalized for this. The bank must just extend with no fee.

Reply by Julie/MI on 1/5/13 11:35am
Msg #449054

Suprised this cash cow didn't happen sooner.

First of all, as a former county recorder, I knew which banks and title companies had suckie documents, loaded with reasons to reject. I put them at that bottom of the stack because it generates more work so it takes a while for a document that gets mailed in to the recorder's to go on public record and my state's law has a provision that notary errors do not invalidate a document.

The filling in a couple of fields does not negate that a note was executed by the borrowers, PERIOD! Why are the E & O insurance companies NOT fighting this??????

As for the second case, a the borrowers agree to cooperate to fix mistakes, so the original notary could have had the mortgage overnighted back to them (hold your toungue CA notaries, I don't care about your handbook), put little lines between the numerals and had the borrowers "complete" their signatures.

Bet this doesn't happen with Provident loans and the lazy notary that couldn't put lines in the date it guilty only of laziness and I wouldn't use them again, but it does not WARRANT a claim on E & O.

I just think someone finally got smart and sees an untapped source of revenue! these small $2000-$3000 claim are chump change so they will probably just pay out as the attorney fees are probably higher than the payout.

Reminds me of my friend's sister. It was Dec. 26 and and she was returning a toy to toys r us. There were a lot of other people in their cars waiting for the store to open as well. So the store opened and there the sister wanted to be first and she and this other lady began to run so they could out run each other and be first in line....so my friend's sister slipped and fell as she tripped on the sidewalk and she fell and was so obese she couldn't get up and she had twisted her ankle. And she sued toys r us and the insurance company offered her $10,000 and she took it!!! If that had been a jury case, I would have said it was not the fault of toys R us.

If these two notaries did NOT have E & O Insurance, I bet $100 they would have not sued the notary for a rate lock or the other notary for the incomplete signatures. But it's easy money because the insurance companies will not shell out $$$ or time to fight in court.

Reply by CentralNY on 1/5/13 2:00pm
Msg #449067

Right On Julie

a neighbor was on a car trip and was walking her dog near, not on McDonalds property. She fell and broke her ankle. She hobbled in Mc to make a call. They gave her $10,000 to go away. She never intended to sue them. Crazy.

Reply by LKT/CA on 1/5/13 3:25pm
Msg #449081

Doesn't matter what state the Notary is from

Dates should ALWAYS be written as: Jan. 5, 2013...January 5, 2013...5 Jan. 13 for the very reason that 121112 could either be Dec. 11, 2012 or Nov. 12, 2012. The month should always be written as a word.

Reply by Linda_H/FL on 1/5/13 4:00pm
Msg #449090

"The month should always be written as a word."..really?? n/m

Reply by MikeC/TX on 1/5/13 5:29pm
Msg #449100

I think she's right...

Even though there is no such requirement to do so, writing out the month eliminates any possible confusion. Is 1/12/12 January 12th or December 1st? Depends on whether you use MM/DD/YY or DD/MM/YY format.

Reply by BrendaTx on 1/5/13 6:48pm
Msg #449112

Best practice, I think.

No doubt about the date when the words are written.

Probably not a law, but it is my preferred method...probably because I became a notary while working for an old school lawyer...thought I had really become modern when I went from "5th day of January, 2013" to "Jan. 5, 2013."

Reply by BrendaTx on 1/5/13 7:33pm
Msg #449118

Oops...I was thinking about a notary cert...

not a notice. So, just ignore me.

Reply by JanetK_CA on 1/6/13 12:26am
Msg #449129

Re: I think she's right...

Right. And most of the rest of the world uses a different format than we tend to use here in the US.

Reply by Yoli/CA on 1/5/13 5:42pm
Msg #449101

Re: Doesn't matter what state the Notary is from

Lisa:

That is your opinion. And, we all have one.

Although I personally employ your stated method, IMO, other formats are also viable.

Most lenders will accept whatever format borrower chooses provided that borrower is consistent throughout package.

Again, JMPO.

Reply by 101livescan on 1/5/13 7:31pm
Msg #449117

Re: Doesn't matter what state the Notary is from

Wells Fargo is very specific:

02/12/2013 in completing the RTC on their HELOCS.

Some lenders specify the way they want the date to be written in their instructions.

How many of us read the Lenders Instructions to escrow? You'll be amazed what's contained in that little document. We as NSA's are required to comply on behalf of escrow company.

I always write the date as 1 September 2013 when writing my commission expiration date.