Attorney to look at refi docs?

[Wish-I-Were-Fishn]

We are signing the papers for refinancing our home tonight. Was wondering if we should have an attorney review the docs. We never did this in the past, but we are using a different broker this time (BNC Bank) that is licensed here, but is out of state.

[Tom7227]

Absolutely have someone look at the docs. I went through this with my daughter about 3 years ago. Ended up kicking the first guy out of the house when he wouldn't let me look at the entire package. Second time there were still errors. Third time I finally got my own closing firm and they went back and forth for a couple of days before things were done correctly. It was US Bank and the absolute fool they sent the first time looked like someone from skid row. Numerous errors of significance in the docs.

Demand copies of the docs at least 24 hours prior to signing. Find a real estate closer that will handle it for you and pay their fee yourself. You will save tons of hassles in the future.

BTW I am a retired lawyer and while this was going on I was taking a refresher course in real estate law so I knew what was supposed to be going on at closing.

[Jackpine Rob]

As a consumer, you have the right under something called the Real Estate Settlement Practices Act (RESPA) to choose your own title company in a residential real estate transaction - either purchase/sale or refinance. You will most likely be signing a disclosure at closing acknowledging this - but it gets lost in the avalanche of paperwork, and by that time it is too late to switch horses without massive disruption and delay.

As a practical matter, few consumers know enough about the process to help themselves, and rely on the loan officer to choose someone for them. I would urge anyone getting involved in a real estate transaction to discuss the closing company with their loan officer, realtor, etc. Is the closing company owned/controlled by the loan/realty company? If so, there is potential for a conflict-of-interest. Are there cost differences? Nowadays you get a Good Faith Estimate of costs from your loan officer - but there is NO comparison of the title fees among the various title companies anywhere in the process.

This is where a sharp consumer can help themselves out by contacting several title insurance companies and talking to them about price, the closing process, etc. I get quite a few calls like that, and always end the call with urging the prospective customer to get at least 3 quotes, and suggest they look at both affiliated and independent shops before choosing their title company.

The loan package itself is pretty much non-negotiable. You cannot refuse any document in the package, or the deal won't close. The vast, vast majority of the loan package is what we call "garbage docs", things don't really don't matter a whit. The documents you really need to understand are the Note (where you actually borrow the money and promise to repay, including the terms of repayment), and the HUD-1 Settlement Statement (which shows how much money is being spent on what).

If you have any questions about the process or are unsure about things, feel free to PM me. I've been doing this stuff for 20 years, and don't mind taking a few minutes out of my day to help out a fellow FM'er.

[Wish-I-Were-Fishn]

Thanks Rob!

To late to find our own closer, but they are not employed by the mortgage company, which is good. I know about the three days. We did have them send us a copy of the docs when they were ready and the numbers all match our expectations.

[Tom7227]

It's too late for you but the numbers aren't the only issue. For example on my daughter's they didn't have the legal description in a place that required it. The paper that gave the right to rescind didn't have any contact info that was useful - it just said contact US Bank. It was a refi and they didn't list my wife who was an original co-signor on the note.

The closer told my daughter that she was luck to have someone like me go over the stuff because 95% of the people just blindly sign where told. If you read some of the stories about the mortgage foreclosure stuff you see that huge numbers of the foreclosures are screwed up because of bad paperwork. You need to have someone who knows what's going on check out all the paperwork - even the pages that seem to be "garbage docs". If it was garbage they wouldn't put it in there.

[Jackpine Rob]

If you read some of the stories about the mortgage foreclosure stuff you see that huge numbers of the foreclosures are screwed up because of bad paperwork.

The "bad paperwork" in the foreclosure mess is by and large post-closing, having to do with proper assignments of the security instruments, and the authority of the people signing the foreclosure documents themselves.

In the case of a missing/bad/defective legal description as you described, the lender has a title insurance policy which in a nutshell insures them against such things. If the title company records a bad document at the County and then issues a policy, the odds are pretty strong that a claim will be made against the policy.

As for my comment about the "garbage docs", I would like to note that when you reach the third document acknowledging that you are entitled to receive a copy of the appraisal, perhaps the mania for more and more documents has gotten just a little out of hand. Or perhaps the disclosures about lead paint, private wells, working septic systems...... Or my personal favorite - the Affidavit which acknowledges that you really are who you say you are (properly notarized and stamped, of course!) Of course, the wheels of commerce would grind to a screeching halt if you weren't informed on at least 2 other documents that the lender has checked your credit report as part of the loan approval process. Who knew?!

With any refinance, the 3 day right of recission does give the consumer the ability to review what they have signed before the deal gets cast in stone, and it is not unusual to have a customer call during the recission period with a question or concern.

[Double D]

Trust me Jackpine, as a bank loan officer, we would love to get rid of many of those forms. They are repetitive and hard to understand. New regulations are being added all the time. The papers have to be perfect, people don't realize how much behind the scenes work there is.

Please feel free to contact your people in Washington and tell them about the over-zealous paperwork.

As for the original post, it can't hurt. You are the only one who has the feel with that lender if it's right or not. Truth be told, you don't need to talk to an attorney: you need to talk to their legal assistant who does their real estate closings.

DD

[Jackpine Rob]

So DD - how would you rate the "newer" Good Faith Disclosure rules? Or the bundled pricing? What we really had trouble with was the different interpretations from the various lenders. Everyone was scrambling last year to comply, but no one knew for sure what compliance really was!

I heartily agree with you on the need to simplify the process. One thing that amuses me is that I can sit down and close a multi-million dollar commercial transaction with everyone lawyered up, and have maybe 10 documents total. An hour later, I'm doing a residential refinance (secondary market product) and the package runs over 100 pages.

When you look at your products - do you feel any less secure with the documentation on a portfolio loan? Typically, that is a much smaller package!

Even the title company documents have evolved to the point that now it is not uncommon to have a 4 page Hold Harmless agreement, 2-3 pages worth of Affidavit, Arbitration Agreements and heaven help us all if there is new construction involved!! It seems just a bit unreasonable to expect that your average consumer is going to have a shot at reading and digesting things in the relatively short time devoted to closing.

Tom's advice about getting the package for inpsection ahead of time is a good one, but unfortunately we don't always have the packages until the day of closing. That's where the recission period can come in very handy.

The very first closing I did many years ago was at a credit union. I had prepared the deed, and at the table we had the buyer, the seller, the banker and myself. We sipped coffee as the loan agreement, mortgage, borrower's and seller's affidavits and deed were signed and notarized. I initialed my Attorney's Opinion of Title for the loan officer, and we marched out 15 minutes later. 5 documents and we got the job done. Ah, things have changed!