A Note is a borrowers written promise to repay a debt. It is the key document in any closing. This key document has several components. You should have a working knowledge of these key components.
Amount of Loan
The loan amount is always listed on the first page of the Note and usually within the first couple of paragraphs. The amount is listed in both written language (one hundred and forty thousand dollars and no/100) and numerically $140,000.00). These number should match exactly.
Also, the loan amount should always match that amount stated on the HUD-1 Settlement Statement and the Deed of Trust. If it does not, the loan package will need to be re-drawn so the amounts match.
The client should be aware of the loan amount prior to closing. If the loan amount stated on the closing documents are different than what the client expected, then a call to the loan officer or your contact will have to be made.
I have very rarely seen this happen, but it does on occasion. This is an important issue and needs to be addressed at the beginning of the closing.
The interest rate being charged the client will also be listed on the first page in most Notes. This should be identified to the client so they can confirm it is correct.
Interest rates fluctuate daily. It is not uncommon for a rate to be quoted to a client and a different rate appear at closing. Most times, the loan officer has communicated this change in advance, but small changes have occurred and at closings, the client may be surprised to see a different rate.
Again, if this occurs a phone call to the loan officer is in order. This needs to be addressed before the rest of the package is signed.
One of the first questions you will get is about the monthly payment. This again will usually appear on the first page. The monthly payment is stated on the Note as the payment of principal and interest. This payment does not include extra payments for escrow or impound items such as taxes and insurance or mortgage insurance.
The client will want to confirm that the payment is correct. There will be another document in the loan closing package that shows the entire payment with escrow or impound items.
Right to Repay
In the event the borrower decides to pay off his or her loan early, this document contains a provision on this right to repay. There are 2 options. The borrower may be charged a penalty for paying off the loan early or they may not.
Under current law, a borrower can only be charged a pre-payment penalty under very specific conditions that you are unlikely to see. In other words, you probably will not see a pre-payment penalty on most consumer Notes. But the client should be aware of this provision.
Rest of the Note
The rest of the document contains provisions for non-payment. These include late payment fees, note acceleration clauses and other legalese that the clients are not really concerned about. There is a psychological reason for the client not being concerned. All clients go into the closing believing that they will pay the loan on time and in full. They simply do not want to discuss what will happen if they don't pay because in their mind they will always pay.
At any rate, the information is there if you get the one in a hundred client that wants to know about the ramifications of not paying.
The signature lines will be on the last page. It is very important on this document (on all documents really) that it be signed exactly as printed. Any deviation will likely result in having to re-close the loan (a real money loser for you and the lender).
So have it signed correctly the first time. Usually, the signatures will not have to be notarized on this document.
To leave the Note page and return to Mobile Notary page, click here.
To continue with the next document (Deed of Trust), click here.