12/8/10

Megan G. Mayer

Though the Wall Street Journal reports today that mortgage interest rates are on the rise,[1] they remain lower than most of us have known in our lifetimes.  Thus, people continue to refinance their loans to take advantage of great terms.  To those of you who intend to refinance, or if you are in the middle of a refinance and have not yet closed your loan, PLEASE READ THIS ALERT to protect yourself from pressure to sign inaccurate or unnecessary documents.

The Nature of The Problem

Title companies have been using a growing practice of sending a mobile notary to your home to execute all of your closing documents.  Generally, your lending officer will prepare drafts of the closing documents and email them to you for review.  Then, the title company prepares the final documents and delivers them to a mobile notary, who prints them all in duplicate and brings them to your home for signing and notarizing.  It is convenient to have a notary come to your home and to sign documents at your leisure.  However, often the result is that borrowers feel pressured and even panicked to sign every document presented, even if they conflict with each other or your agreed upon terms, and even if they are inaccurate.  Documents are presented for signature close to funding as a final step in the loan closing process, so if you ask for documents to be reprinted or corrected, you will often receive the response that delaying the execution of documents will threaten your loan since it “must fund by ______” (usually “tomorrow”).   Moreover, scheduling a meeting with the notary public in the evening or after work, while seemingly convenient for you, will make your title officer, loan officer, and attorney unreachable if you have any questions about the documents presented for your signature.

I recommend you not take advantage of this apparent perk and, instead, go to your title company’s office directly.  Make the appointment at your title officer’s workplace or at a local office of your title company that will provide access to your officer by telephone, fax, and email.  This method will spare you the concerns that arise due to the limitations of using a mobile notary.

Mobile Notary Limitations

Here is what a mobile notary CAN do:

1. Instruct you to sign all the documents the title company provided;
2. Explain the basic purpose of a document;
3. Notarize your signature as needed; and,
4. Witness your signature as needed.

Here is what a mobile notary ALMOST CAN NEVER do:

1. Advise you as to how a document agrees or conflicts with the agreed upon terms of your loan;
2. Correct errors in the documents (except, perhaps, for very simple and obvious typographical errors);
3. Act as an employee of the title company or lender that drafted the documents; and,
4. Obtain corrected documents while with you at this signature meeting.

This last item is very important.  Since the notary is usually an independently contracted service provider, they are not an employee of the title company and thus have little to no responsibility over the documents, their accuracy, or their consistency with your agreed upon terms.  This means that if you read the documents in detail and notice an error (e.g., the interest rate is variable instead of fixed), your options to correct the error are very limited while sitting with the notary – and usually there is no time for the title company to print out corrected documents and make another appointment with a notary public because these signature meetings are generally so close to the loan’s funding date.

How The Game Plays Out

Consider the example of Melissa Hexter and Warren Bidmead, a married couple living in Laguna Beach, California.[2]  They recently refinanced their primary residence, which they had placed in a family trust.  Their loan officer sent them documents in advance to review, which they thoroughly did, resolving any questions they had with the loan officer.  But when the notary public arrived at their home, he presented them with a new document that asked for their trust number, which none of the previously reviewed documents had required.  They called me to ask what the trust number was and quickly resolved the issue.  However, “to say it was anxiety producing is an understatement,” says Ms. Hexter, of their reaction to being presented the new document, “You think you are prepared coming to sign, but then a new document or change is presented at the last minute and you don’t know what to think.”  And yes, their loan was funding the next day so the pressure to sign the new document was quite strong.  Even so, the notary could not explain what the document was for or why it asked for their trust number.

Another Orange County couple experienced a similar moment of panic when a mobile notary presented a surprise document at closing.  The couple refinanced to improve their financial circumstances, but they are constantly on the lookout for a bargain purchase for which they would be willing to sell their home immediately.  However, their mobile notary presented a document binding them to a 2.34% premium payable to their broker if they refinanced or paid off the loan within 5 months of closing.  This restriction had not been disclosed previously.  Signing at their home in the evening, they could not reach their title or loan officers, and ended up signing the document because their loan was to fund the next morning.  Rather than jeopardize closing their loan, they decided to sign the document presented and just keep their fingers crossed that the five-month period would pass before they found their dream home.

The Solution – Easier Than It Sounds

The way to avoid this precarious position is to arrange for a time, method, and place for signing documents that permits you access to your title officer and loan officer, even if only by phone, AND allows the title officer to provide corrected documents immediately.  I recommend meeting at your title officer’s workplace for signature.  If they tell you that they have no notary available, you can request to have their mobile notary meet you at their office rather than your home.  Even signing in a local branch office of your title company could work, so long as you had access to your title and loan officers by phone, and a contact in the local branch office who could print corrected documents as needed.  This method will permit the title officer to pull out any standard documents the lender doesn’t need, and to reprint any erroneous documents.

My last piece of advice?  Have your attorney’s telephpone number logged in your cell phone – just in case.

© 2010 Megan G. Mayer