A number of clients have recently contacted my office to review closing documents which they received from a Lender in connection with the refinance of their existing adjustable rate mortgage. In most cases these borrowers or clients are desperate to close these loans because they have seen their monthly mortgage payment skyrocket over the past several months as a result of their interest rate adjustment. Generally, the process began with some unsolicited literature they may have received in the mail from a number of lenders or mortgage brokers. By providing some necessary personal and credit information the borrower is convinced that the lender can process their loan application and provide a lower fixed rate loan, pay off the existing mortgage and maybe some additional debt in the process. Because the borrower is assured that their monthly payment will be reduced and the rate will be fixed for thirty (30) years, they agree to move forward with the refinance.
In most cases the borrower need only pay for the appraisal of the property up-front. They are told that all of the closing costs will be included in the new mortgage, they don't have to worry. Here comes the catch. More often than not the borrower is not provided up-front with the full details of what are closing costs and how much they add to the new loan amount. We have seen closing costs on these refinances which increased the loan amount by as much as twelve ($12,000) thousand dollars, as recent as October 2008, with no additional debts being paid off other than the mortgage, which was not in default. The lender simply sent a notary to the borrowers' home with a large stack of closing documents to be signed and notarized by the Notary. The Notary performs the function of witnessing the borrowers' sign the documents without providing any explanation to the borrowers of documents they are asked to sign or answering any of their questions.
So, here's the Tip For Today:
Before you sign any documents to close your loan, whether for a refinance or a purchase, consult with an attorney. If the attorney is not immediately available, schedule an appointment or call another attorney. Tell the notary and the lender you need to take the documents to your attorney for review. If the loan closing documents are legitimate then the lender should have no objections. If you sense some hesitation from either the lender or the notary, step back and ask yourself why. Always remember, haste makes waste. Understand what you are signing and agreeing to before you conclude the closing of your new loan. I know my clients are glad they did.
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