What the hey? You say?
Yes, and I mean it.
Realtors, mortgage lenders, and title insurers earn commissions or other types of income from a transaction that are NOT simple fees for services rendered.
Realtors earn the largest percentage commission on a single transaction and so they risk all costs in exchange for the bigger payout if the transaction closes.
Mortgage lenders usually earn more than title insurers but less than Realtors on a single transaction and so prudent mortgage lenders will cover certain third party costs in advance. They may collect an application deposit which would cover the appraisal and credit report, for instance.
Neither the prudent Realtor or mortgage lender would order a survey or home inspection directly because they wouldn’t want to assume the risk of payment in the event of a cancellation.
Appraisers earn a fee for a specific service which is not contingent upon a transaction closing.
Home inspectors earn a fee for a specific service which is not contingent upon a transaction closing.
Surveyors earn a fee for a specific service which is not contingent upon a transaction closing.
Everybody seems to understand this but WHY IS IT SO HARD TO UNDERSTAND that an abstractor earns a fee for a specific service which is not contingent upon a transaction closing or that an independent notary closing agent also earns a fee for a specific service which is not contingent upon a transaction closing??? Why???
Where is the money to come from to pay these people for their hard work?
An abstractor may spend hours researching a case and preparing/typing a report for the title company. In my market, I pay an abstractor between $100 and $150 for a full search. In addition, my office must advance funds for lien letters that may cost between $5 and $200 depending on the municipality. Don’t you think these expenses should be paid by the borrower/buyer if the transaction falls through? If not, why not? I’d like to hear why you would think a consumer should not pay for work that was performed on their behalf.
An independent notary signing agent must download and print enormous document packages. They must review the documents before closing, get dressed up, then drive to the consumer’s location. They must then explain documents, procure signatures, perhaps fax documents back to the lender, and organize document deliveries back to the lender or title company. For that service, most are paid $75 to $200.
Both abstractors and independent notary signing agents are expected by all parties to efficiently and expertly perform their portion of the transaction YET there is an expectation that they will work FOR NOTHING if the transaction does not close.
There is not OFFSETTING BIG PAYOUT to balance the equation. They won’t get MORE on the next transaction. They simply get THREATENED that if they don’t eat their measly fees they won’t get future business!
Folks, that stinks, big time.
Would you stiff a waiter or waitress? I doubt it. Most people aren’t cads.
So, think about this. Let’s put our collective heads together and consider disclosing to consumers that there are other people in the transaction who will perform services and deserve to be paid.
I suggest either a deposit with the title company paid at the time of the order or disclosure that an invoice will follow a cancellation.
For the independent notary closer, frankly, I’d like to see the consumer give them a check at the door and have the fee noted on the HUD as POC.
And now you know why I am considered Radical. heh heh
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{ 35 comments… read them below or add one }
I see you’re not afraid to stir the Lenderama pot.
Diane, you have brought up some valid points.
Hey, Paul, no doubt. I trust Todd read my blogs before he invited me here.
Diane,
Great article. It is time for the Notary to be duly compensated.
http://www.notarydocxpert.com
Thanks, Cynthia.
Appraisers
Abstractors
Notaries
These are the fee for services people who must be paid. Their services are not contingency based.
It certainly presents an interesting set of logistics and another round of RESPA discussions. Being a mobile closer myself, hey – I’m all for being paid, but I’m just not following a clear path through my own understanding of RESPA.
If I’m as objective as I can be in looking at this, I think the fee to procure a PART of the closing process is clearly distinguishable from any other part. I don’t think any part of the closing process can be lumped in with pre-closing parts (appraisals & abstracts, credit reports, flood certs, any fee paid for a tangible servive necessary to obtain a clear-to-close – which puts it into a processing stage, not a closing/settlement stage).
I have long believed that if the contributing factors to a ‘table-tanking’ or rescinding loan were dealt with, the issue of non-pymt for mobile closings would be a non-issue.
This makes me want to pound my head against something really hard – WHY do I not have pymt issues, if I’m just another mobile closer?
Is it that I don’t work cheap – and that elliminates a lot of questionable relationships to begin with?
Is it that I provide an invoice, like all businesses do, at the time of service? (I know a lot of folks don’t routinely send invoices, and I’ll read “does this company require an invoice? I haven’t been paid!” or “Does anyone have an invoice form they can send me?”)
I had 3 no-signs in 2005 (quit closing that broker). 1 NSF check in ‘06, 1 no-sign for 07, but was paid w/o asking to be.
Is there any other small business that can claim that high of a pymt rate? I just think this is a pot that gets stirred with the wrong spoon (or some other convoluted metaphor of your choice!).
For all the noise made about this ‘issue’ – I would love to see a reasonable survey done to figure out what the real issue is.
Hey, Renee: Great comment and I partially agree with you. Frankly, in the world before subprime, I think actual rescissions were fairly rare. Also, as you know, in my opinion, in the world before subprime, independent closers or notary signing agents were also fairly rare if they existed in some states at all.
So, I have a few thoughts on the notary signing agent issue – aside from licensure.
First, and I intend to take a look at all of the state laws, I believe the “disinterested” status of a notary signing agent, particularly when it’s an independent contractor who is not salaried in any way or has any other source of income in the transaction, prohibits them from working on a contingency fee basis. If the successful closing and funding equals payment for services rendered then you have an “interest”.
Secondly, back to the subprime issue, since that craze brought with it expansive mortgage fraud and predatory lending, the NSA at the table sometimes – you decide how often – became the tool of the mortgage loan officer and a partner enabling fraud or coercion either due to inexperience or an inadequately defined role. The “disinterested party” role of a notary in some cases also gave cover to the act of enabling and therefore the conflict – the desire for remuneration – could be satiated.
As we listened in on the MBA Uniform Closing Instructions meeting yesterday, I had two thoughts along this line. The requirement for lender production of documents and instructions 48 hours in advance of signing in conjunction with the Settlement Agent production of a HUD and document package in the hands of the consumer 24 hours in advance of signing will likely eliminate MOST rescissions and go a long way towards eliminating coercion by the mortgage loan officer at the table if there is any kind of bait and switch lending taking place. That’s a huge step forward.
BUT, and make that a big BUT, the proposed UCI also formally expand the role of the NSA, now “closing employee” to a policeman at the table – the eyes and ears of the lender and an official mortgage fraud prevention device.
NSAs are human beings subject to frailities we all share. Conflicts of interest are just plain too hard to fight against and I believe that if the mortgage lending community truly expects the person at the table to actually stop a closing and not look the other way, they need to consider that the greater percentage of human beings will choose to be paid rather than not.
The person conducting the closing at the table IS the most effective tool in preventing mortgage fraud – these UCI are on the right track BUT keep it real. Mortgage lenders want that protection, they should find someway to pay for it.
Folks, it’s about the reality of services rendered and who should be paid on a contingency basis and who should not. Just because something has been a custom or tradition doesn’t make it right.
In N.J. puting a Notary on the HUD would make them an interested party to the transaction and violates the requirement to be a disinterested party.
As a mobile Notary I also work with PIs
Notarizingt affidavits. I get paid regardless of wheth or not they get the person to make a statement .
On the advise of counsel I never refer to myself as a “Notary Signing Agent.” When I am acting as a NOTARY I am not an agent of anyone.
I can act as a signing agent but would bring a Notary with me to Notarize the documents.
Wow, Jim:
THAT’S really interesting because frankly as I have been reading notary laws more closely lately, I’ve been thinking the same thing.
The reality is that in practice EVERYBODY on the planet practically, attorneys, title agents, signing agents sit at the table and “procure signatures” and then also notarize documents.
There is an allowance in most notary laws, I believe, and I have only read a few, that you may act as an agent, attorney, etc. and ALSO a notary on the transaction. I think the only conflict then is how you are paid. That’s the part that keeps getting me – the contingency issue on income beyond the notary fee.
My biggest beef though is still that a transaction moving to the closing table involves a considerable amount of work and the “closging employee” going to the table is expected to police for fraud and yet NOT be paid if they find a problem.
It’s like the appraiser who doesn’t bring in the value getting stiffed or the abstractor/title agent who finds a title problem which causes the transaction to fall thru.
What exactly are these people to do? Lie to maintain income? Come on, folks. Get real!
Diane
On non loan work I charge a service fee+a milage fee + $2.50 per notarization. If a party desides that they do not want to sign, I do not charge the $2.50 fee ( N.J. State max.)
I do telephone depositions
. I chage a fee which includes travel and puting the witnerss under oath. If the lawyers want me to stay I charge an hourly rate + $2.50 per notarization.
My mortgage fee is based on a time and travel + $25 ( N.J. State max. for mortgage docs). If necessary docss are not signed and notarized I deduct $25 from my quoted fee.
I feel this resolves conflict of interest issues.
In all cases I am operating as a mobile Notary and not as an “Agent”. I refer to myself as a mortgage signing specialist.
I will describe the nature of the docs being signed and know which docs to refer to, for the borrower to see the information. All questions regading meaning and interpretation are refered to title or lender.
In N.J. we also have Title Producers who can sell Titlt Ins. and close loans. Flexo-Notaries have several in our group. We
use them for purchases and on some refies if requsted by our client. They also do regular Notary work as Notaries and not as LTPs.
What is a “closing employee”?
Dosen’t sound like me.
Dosen’t sound like a disinterested party.
May not conform to N.J. law ?
Jim: There is so much in the proposed Uniform Closing Instructions. I’ll be writing a post on that tonight with lots more details. For now here’s the scoop on “closing employee”.
The Settlement Agent controls the closing and is responsible to the lender. The Settlement Agent MAY hire a Signing Agent to “procure signatures” as part of the “closing”.
[Quotes are being used because these words have meaning in the UCI.]
The person who actually “procures signatures” – in other words meets the borrowers – is called the “closing employee” and this person may be either the Settlement Agent or the Signing Agent or an employee of either.
Most folks who consider themselves NSAs are independent contractors. That will work in this scenario IF you are the SIGNING AGENT.
The folks I can’t quite see in the picture are the signing services. No one has been able to help me visualize their role, if any. It appears that they would either have to become fully operational Settlement Agents or operate as a Signing Agent company who has true employees meeting with the borrowers.
Diane
I agree the weak link is the “signing service”,
I belive lenders or settlement agents must contract directly with a Notary and not deal thru a middleman who is unlicenced, uncommissioned and needs no qualifications to act as a middleman..
There is NO control on these operations.
You may use the term “Signing Agent” for me but I use the term mobile Notary who is a signing specialist but I think we are are the same page.
Some title companies are using inhouse
“signing services” to increase their profits at the expense of the consumer(borrower).
I know, Jim. I’ve never been able to get my arms around the whole signing service issue at all. I’ve never seen a value added for the consumer but I see a big mark-up that I really think would be considered a violation under RESPA. That all may go away under these new guidelines.
Would being paid upfront, for third-party costs, lower the title premium, Diane?
Diane,
Escrow companies should get paid regardless of whether a transaction closes. Only being compensated if a transaction closes is one of the biggest conflicts of interest in our business. It flies in the face of escrow’s spirit of neutrality.
Many times the clients our office work with don’t understand that we are not in any way connected with the lender or others involved.
It is a complicated issue, particularly when the escrow office is also the title company or owned by a mortgage or real estate broker.
The RESPA regulations regarding the ability of the borrower to review their loan docs a day or so ahead of time is currently a farce. You know this and every escrow/title office employee that closes transactions for a living knows that THE PRIMARY reason consumers do not get a chance to review loan docs and settlement statement well ahead of the actual closing (in escrow states) is that lenders via the loan officers ROUTINELY get loan docs to escrow at the very last possible moment. Lenders need to be held accountable for this practice.
Brian: In PA our title premium is all-inclusive which means that it includes a title search for one chain. [One chain being normal, extra chains being extra work.] In our Choose & Save Program, the consumer puts up a $300 deposit which is credited back to them on the HUD if they close within 90 days. The $300 pays for abstract and lien letters, etc. and is not transferable. I can’t reduce the premium but they get the deposit back if they close and not if they don’t.
In the case of the closer, most transactions have a separate signing or settlement fee. [I don't, but for the sake of this discussion, let's deal with what most people do.]
So, you have the cost of an abstract and you have the cost of preparation for the table and a person who drives to closing, performs the closing and for some reason the transaction falls thru. These are fee for services rendered persons.
These fees and services are outside of the actual core premium for title insurance and the commission earned by the agent, if any. No one is suggesting that a premium for title insurance or any commission be paid if a deal does not close.
It’s the folks who, like the appraiser, are independents having no other potential source of income from the transaction that are being stiffed.
Tim: There are lots of big issues in play right now and I am expecting the state regulators to step in where HUD can’t and take a shot at shams.
In the meantime, the UCI do give me hope. I like them. They provide a reasonable structure that is an improvement over what we’ve had to deal with thus far.
I do hope you all will take some time to read the UCI and send your comments to the MBA or ALTA. This is a quiet revolution which will impact our daily lives in a big way.
Jim and Diane
Concerning NJ. You are actually allowed by statute to charge no more than $25 for a purchase or refi and no more than $15 for sellers docs. When acting as a signing agent, your cap is different. You will not find it in the handbook, but in codes. As for acting as an agent of the employer, not allowed in NJ. Our laws are way out of date. Lastly, the conflict of interest and being paid out of the transaction and listed on the HUD. Statutes allow for payment as part of the proper request. You should get paid for your services regardless of the outcome and this allows you to remain a neutral third party. This is an interesting issue that has come up a lot. But, Diane, i think that your points in the blog explain why it is important to be paid for our notary/signing agent services regardless of the outcome.
Just trying to clarify NJ a bit. I educate here in NJ and look to do more networking too. Great state, lousy laws for notaries.
Jenn
Thanks, Jenn.
I own a regional abstracting company and couldn’t agree more. If I call a repairman out to my house to fix my furnace, I have to pay him for a service call even if he doesn’t find anything wrong. Like Diane said, appraisers, surveyors and home inspectors get paid regardless of whether or not the deal closes. Why should the searcher be treated any differently than any other professional? I don’t know about anyone else, but I put out a substantial amount of money up-front to get a search to a client’s desktop, not to mention the tremendous liability I’m being asked to assume. Why am I the only one in the “food chain” expected to “eat” my fees? Personally, I’d like to see the abstractor’s fee listed as a separate line item on the HUD, rather than being buried in an “all-inclusive” title premium as is the case in PA.
HOOrah.
Just to add to my prior post, I really believe that many title agents just don’t understand the time and effort that goes into a properly prepared abstract report. I think the mindset among real estate professionals in general is that title searching is something that is primarily done part-time by retirees and housewives trying to make a few extra bucks on the side. If title agents are the “low men on the title totem pole” then abstractors are truly the “Rodney Dangerfields” of the title industry. We just don’t get no respect.
Professional abstractors – as opposed to chop shop property report flunkies – sorry but there IS a difference – support the entire land record system by combing and correcting and tying all the transactions together so that all of the rest of us can make a living. Gee, DUH, I think that’s an important function.
“Professional abstractors – as opposed to chop shop property report flunkies – sorry but there IS a difference…”
I agree, Diane, and I encounter them out here in the field all the time. They’re usually high school and college kids, hired by lenders and local agents, who have gotten MAYBE two weeks of training and are turned loose in the Recorder’s office, or else they’re interlopers who’ve just graduated from community college and come out and undercut the fees of the more experienced abstractors. I’ve actually seen a title abstracting course offered online by an outfit out of GA that promises to “teach you everything you need to know to perform a title search”. Frightening, but true.
I think that some type of licensing or certification would go a long way toward changing things. Our trade association, the National Association of Land Title Examiners and Abstractors (NALTEA) is offering an Abstractor Certification Test at its annual conference in New Orleans this year. It will be interesting to see how it will be received by the industry at large.
What do you think about doing a license or state certifcation modeled after appraiser guidelines?
Diane is a much needed voice in this area.
Well, aren’t you sweet, Cheryl. Thank you.
Diane,
You and I have gone round for round on this “issue and peripheral issues” in regards to NSA’S.
I am a CNSA, Mobile Notary or whatever other term you can or want to use. I am NOT however a settlement officer (agent) escrow officer or title producer. For me not to get paid depends on WHY the loan did not close. If I witnessed the “signing” by applying my seal, I expect to get paid. If a loan does not go through after I witness the docs it has nothing to do with me. If the loan collapses at the table and I have not applied my seal then I consider it a wash. It is simply that ……If we did our job we get paid, if we did not then we do not get paid. Our job is to notarize the documents. With this simple policy I have never had any issues with payment.
But the question whether to charge the consumer up front is not an issue for us on my end of the deal. Just remember …who hired us? Not the consumer but the settlement company. And this is where you may run into problems is with “signing services”. They are going to want paid regardless. That is an issue that needs to be discussed and in my view the use of them by agencies should be abolished. They are nothing but another layer of fees for both the consumer and agency.
Also we (notaries, signing agents etc.) should not be explaining docs or going over terms. We are the neutral party. If the consumer needs any info we direct them to the proper person to call or where to find the answers in the doc package (which is where the training comes in) as I have explained to you before. All of these simple policies and procedures any “neutral party” should follow. (in my opinion!!)
Hi, Barb: I’m sort of looking at this through new eyes – the proposed Uniform Closing Instructions. There’s a whole new game plan on the table and now seems like the right time to thrash out truth and justice moving forward.
I agree with you. If you’ve done your job, you should be paid.
Diane:
As to your question regarding state licensure/certification, I think it’s a good idea, but I have to profess some ignorance as far as guidelines in the area of appraiser certification. Personally, I’d like to see a PA licensing exam based on the standards set forth in the Abstractor’s Bible by Attorney William Hoffmeyer, who is a recognized expert in the field of conveyancing of interests in land.
I believe that without some sort of examination requirement, licensure will be nothing but another revenue stream for the state. As it stands now, only a handful of states require abstractors to be licensed and requirements vary widely. The state of Kansas, for example simply requires an applicant to 1) fill out a form, 2) pay an application fee, and 3) be able to fog a mirror when held under the nose.
Seems to me that in a state where even used car salesmen need to be licensed, the least we could do is require the same of the people who research and compile information on the biggest single investment most people will ever make.
I hear you.
As a UK business adviser a business obviously should not charge for a transaction that does not complete if there is not an enormous amount of work and costs involved. And the business should understand that to offer ‘no completion no fee’ increases the customer’s trust and confidence in the business. A customer can give a life time of renewal business and be a valuable lead generation source. These facts can offset overheads.
Well, we have several dynamics at work here in the US that support the position that these folks should be paid when the transaction does not close. Here are two very important considerations.
First, the independent notary signing agent is very often working under a state statute which prohibits them from receiving a fee that is contingent upon the completion of the transaction.
Secondly, the title abstract and examination represent almost the entirety of the work product produced by the title professional. It’s time consuming and demanding of a high level of expertise – if done properly. The initial work product, in the form of a title insurance commitment, is required by a mortgage lending underwriter, just like an appraisal, before making the lending decision. The work has value and therefore should not be provided for free in exchange for future referrals.
It would actually be cheaper for me to lease a BMW for some Realtors and lenders than it would be for me to absorb the costs of all the free title work they demand.
So, when considered in that light, we are looking at clear RESPA violations as well as violations of numerous state statutes that prohibit the giving of things of value in exchange for future referrals.
Of course, as a loan signing agent I totally agree. Once we’ve done our job it shouldn’t matter whether or not the loan closes because we still did our job.
Hi, MNR: On this issue, I think we’ll see two new dynamics. First, the quality of mortgage origination has been raised for lots of different reasons and so I have to believe there will be less rescissions. Let’s hope so, at least.
Secondly, I am very interested in how mortgage lenders will play out the new fraud prevention provisions of the Uniform Closing Instructions. As you know, the “closing employee” aka closer at the table is expected to assist in fraud prevention and to even stop a closing when they believe a fraudulent act is being perpetrated.
The reality of human nature is that without some guarantee of payment for services rendered I fail to see how most closers will willingly stop a closing and therefore go unpaid. It’s an unfair expectation because of the overriding conflict of interest. I am hopeful that mortgage lenders are serious about fraud prevention and will work out some form of payment to closers who assist them in this effort.
If they don’t, then I’d have to say that language in the UCI might just be cover and have no real expectations. I like the UCI and have hope that mortgage lenders WILL step up to the plate on this issue once they think about it.
Perhaps they don’t realize that the actual closer is only receiving a portion of the “signing service” or “settlement fee” they see on the HUD. By eliminating the markup, the cost of keeping the closer in the fraud prevention loop might not be that high.
Thanks for commenting and hang in there. Looks like we have a little refinance business coming in. YEA!
Diane,
Go for it! I appreciate the time and effort that you are putting into this. Someone has to get this thing rolling and I am glad that you are there.
Best,
Glena