The Starbucks Signing
Marcy hadn’t completed her certification test yet. After all, why should she. A little test couldn’t be that important, right? But, she was anxious to get started. She completed her notes section on her 123notary profile. She wrote:
I am reliable, prompt, punctual and professional. Call me for any mobile notary job!
She got her first call a few days after signing up. She answered the phone as her infant was screaming. The screaming was so loud that the person on the other end of the line couldn’t hear what she was talking about. The client decided that Marcy wasn’t very professional.
Then, another call came in. She answered it and got the job. She was to notarize a Grant Deed. She had never seen a Grant Deed, but how hard could it be to notarize. She knew how to fill in an Acknowledgment form. Her baby started screaming right when she was leaving. She left the baby with her husband and went out to do her job. She arrived 20 minutes late as a result of her baby having a fit. The customer said, “Your profile claims that you are punctual, but you are 20 minutes late!” Marcy said, “But, I am punctual, it was just this one time!”
Then a third call came in. They needed a loan signing done. Their house was under repair, so they agreed to meet at a local Starbucks. Marcy’s husband wasn’t around, so she decided to take her baby with her. Luckily for her, the signers loved children, particularly infants. The signing started off okay. Marcy had received a FedEx package of the documents. Everything was in order. She put the documents on the table, and kept the borrower copies in the FedEx. She didn’t know how to introduce the documents because she had never studied loan signing. Her course book was sitting on her desk collecting dust. She would soon learn that book knowledge would help her out of a very serious bind that was about to happen. Ooops!
The couple was signing away, when the toddler spilled Marcy’s mocha all over the Right to Cancel. All Marcy could say was, “I’m so sorry, I’m so sorry.” Marcy decided she had the Right to Cancel and obligation to cancel the appointment and have them start all over another day with another notary. She went home feeling mortified and devastated. But, she didn’t have to. Marcy made several simple mistakes. What were they?
(1) No drinks on the table. Drinks spill all the time. If you have drinks on the same table as documents, you are going to have a problem, it is just a matter of time. Drinks go on a separate table or a chair as a matter of policy. If Marcy had obeyed this signing policy, she would not have gotten in trouble.
(2) Don’t bring your three year old to a signing no matter what. It is not reliable or professional to do so, not to mention the trouble they could cause.
(3) The Right to Cancel was damaged, but there was a borrower’s copy of that document in the FedEx which Marcy could have used to substitute for the damaged one. An easy fix to a common problem. It is also common that borrowers sign in the wrong place on the Right to Cancel. You need to swap that document out if that happens as well.
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Point (3) The Right to Cancel
The Right to Cancel (Right to Rescission) gives the borrower in a non-commercial / non-investment refinance three calendar days not including Sundays or Federal holidays to read over the documents and consider their options. If borrowers want to spend three hours reading every page of the document, the Notary is encouraged to inform them that this is a signing appointment, and that they can review their borrower copies over the next three days and cancel within that time period if they have any dissatisfaction with the documents.
Dating: (Chaperone Not Included)
In addition to having the borrowers sign this document, it is often the Notary’s responsibility to make sure it is dated correctly. On the top of the document there should be a section that reads: “The date of the transaction, which is ____________________”. This is where the Signing Agent places the current date; this is known as the “transaction date”. Towards the bottom of the document it states: “no later than midnight of________.” This date is called the “rescission date”, and it states when the Right to Cancel period is finished. In this blank you would write the last day for the borrower to cancel, which is three days past the current date (excluding Sunday and major holidays). If it is Saturday the 20th, and Monday is a holiday, the last day to cancel would be Thursday the 25th.
What if the lender dated the document incorrectly? Cross out the incorrect date, write the new date, and have the borrower(s) initial the change. Never use white-out.
What if the transaction date is correct, but the lender is giving them too many days to cancel? Sometimes lenders are generous and give one or two extra days. Don’t correct that because it’s not an error; it is an act of generosity.
If the borrower carelessly signs where it says, “I wish to cancel”, the best way to remedy this situation is by using the borrower’s copy of the document (by the way, this question is on the exam); doing this will save everyone a great deal of trouble. If that is not possible, cross out the signature and have the borrower initial it. Then have them sign in the correct location.
Cancellation by Fax. The borrower always may cancel their loan by fax with all lenders by law within the (3) day right to cancel period.
Here is a list of all Federal holidays:
New Year’s Day
Martin Luther King Day
Washington’s birthday AKA and observed on Presidents day
Memorial Day
Independence Day
Labor Day
Columbus Day
Veteran’s Day
Thanksgiving Day ( the Friday after is a regular day unless the lender states otherwise )
Christmas Day
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Point (4) The Closing Disclosure (formerly The Truth in Lending)
The Truth in Lending is now antiquated.
Notaries have become moderately familiar with the new Closing Disclosure. I want to stress some important points about this document that you should memorize.
1. The Closing Estimate
Previously there was a document called the Good Faith Estimate whose current replacement would be the Closing Estimate. Although these two documents are not even close to being identical, they go over the estimated costs of the loan among other information.
2. The Truth in Lending
This is now an antiquated document. The Truth in Lending had some bizarre and unhelpful verbiage about the prepayment penalty. It said you, “will, won’t or may” have a prepayment penalty. The Closing Disclosure states if you will or won’t but omits the ambiguous word, “may” from the document.
3. The APR
In addition to going over the APR, there will be a new figure discussed on the Closing disclosure called the TIP which is the total interest percentage.
4. Taxes, Insurance, Escrow Fees
Estimated escrow costs, insurance, taxes, servicing, assumption, and appraisal costs will also be covered in this new and exciting document.
5. The property address
Many loan signing courses claim you should look for the property address on the Deed of Trust or Mortgage. You can, but it is also on the Closing Disclosure on the upper left corner.
6. The Loan Amount & Rate
This is also covered on the upper half of page one.
7. Fees associated with the loan
The Closing Disclosure replaces the TIL and the HUD-1 Settlement Statement. So, items from the Settlement Statement such as fees or costs associated with the loan will be covered on this document.
8. Calculating Cash to Close
This is a very practical section that covers total closing costs, closing costs financeed, down payment, deposit, funds for borrower, seller credits, and adjustments. The bottom line in this section is the cash to close total amount.
9. Summary of Transactions
The sale price of the property, closing costs, HOA dues, deposits, loan amount, sellers credit, rebates, and local taxes are all part of the accounting spreadsheet in this section.
10. The additional information section about the loan
This section covers other specifications about the loan such as whether or not assumption is allowed, if there is a demand feature, negative amortization, late payments, partial payments, escrow accounts, and more…
11. Next, there is a basic loan calculation similar to what the TIL had with the total payments, finance charge, amount financed, APR, and the new figure which is the TIP.
12. There is a section listing other disclosures which will list the appraisal, contract details, liability after foreclosure (keeping it positive), refinance, and tax deductions.
13. And last there is contact information of the Lender, the Real Estate Brokers, and the Settlement Agents.
Sign below.
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Applicant Signature Date
Eventually I will create some test questions out of this material. I already have one, but I will derive some others as well.
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You might also like:
30 Point Course Table of Contents
http://blog.123notary.com/?p=14233
30 Point Course (5-7) HUD, Occupancy Affidavit & Deeds
http://blog.123notary.com/?p=14546
The Right to Cancel done Wrong!
http://blog.123notary.com/?p=10001
Notary information for beginners: Best Posts
http://blog.123notary.com/?p=10472
How do you explain the APR to a non-borrowing spouse?
http://blog.123notary.com/?p=4455
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How do you explain the APR to a non-borrowing spouse?
I was talking to a notary on the East Coast. I was going to ask him a loan signing question, but then he retorted back a question in my direction before I could ask my question.
How do you explain the APR to a non-borrowing spouse?, he asked.
I gave him my routine mathematical definition of the APR and he was impressed. When he asked the question, I was thinking that this is a great question. It sounded like a trick question, but it actually is a very reasonable question. It suddenly occurred to me that the non-borrowing spouse is the epitome of a lay-person, and doesn’t understand complicated terms such as “amortized” or “finance charges”. If you have an MBA in Finance, you might not be the best person to explain an APR to someone’s wife. So, part of the genius of this question is that it tells you to use layperson language without telling you directly.
The other great aspect of this question is that it gives the opportunity to tangent goers to go off on a tangent — and they take this opportunity. I ask this question to many people, and 20% of the people go off on a very long explanation of what documents the non-borrowing spouse has to sign. But, that has nothing to do with the question. They didn’t LISTEN. This is a good listening and tangent going question. You learn very quickly who listens, and who can talk as well.
People notoriously leave out 90% of the meat of the answer when describing this confusing and diabolical term.
“It includes the fees”
Trust me, it includes a lot more than the fees.
“It reflects the cost of the loan”
Trust me, it also includes your interest as well as whatever the cost is.
“It’s usually higher than the rate”
Boy, are we being vague.
“It includes interest and fees”
Better, but very uneducated sounding.
Most answers to this question are either missing the target, or miss the main point of the APR.
The APR is a RATIO that is based on the payments relative to the total amount financed after: some of the finance charges, perhaps points, perhaps loan origination fees, PMI, and perhaps other fees have been deducted — and is reflected on a compounded annual rate.
I am not a lender and don’t know the “Real” definition. But, how the APR is calculated can vary from state to state, and from lender to lender. So, there is no absolute definition, but only definitions that are approximate. Unfortunately, the definitions I am hearing from the notaries are overly simplistic and generally just plain wrong!
You might also like:
What traits do escrow officers look for in Notaries?
http://blog.123notary.com/?p=21050
The Right to Cancel Done Wrong
http://blog.123notary.com/?p=10001
The 30 point course guide to the APR
http://blog.123notary.com/?p=14483
Common mistakes with the APR
http://blog.123notary.com/?p=4553