Good morning,

Could someone with mortgage lending expertise provide some guidaance on how to cure the following:

What happens when it has been discovered that a closed mortgage loan has an incorrect date on the closing documents? The investor to whom we sold the loan is requesting that (a)
we execute new documents with the correct date and borrower signature or (b)call the borrower in to sign and initial and change the dates on the documents. This would cover the closing documents such as the Note, Mortgage/Deed of Trust, final HUD Settlement/Closing Statement and final TIL. I am not sure what happens when the Mortgage/Deed of Trust has already been recorded. Also, what happens if there are other documents in the file that are dated incorrectly prior to settlement, e.g. a Notice of Right to Cancel? Once again, I am looking for guidance on this issue. I am not sure whether this even falls under the scope of a Compliance Officer's responsibilities, but nevertheless, I've been told to take care of this issue and provide a cure. Any assistance would be greatly appreciated.

Regards,

From the bottom up, if this isn't compliance, what is? I get this stuff all too often.

What state are the docs recorded in? Some sates like WI and Iowa have moved away from rerecording docs. Affidavits of Correction are prepared to make corrections. I've got one that has a line on it that says Of course you'd have to tweak that because it's your date that's wrong.

As for the ROR, it's not correctable. Unless you fall into one of the other two catagories listed on it, the borrowers have three years to rescind.

Truffle Royale,

Unfortunately they did not list a state. I wasn't aware that some states were not re-recording. I thought that this was still the case particularly as it relates to the Deed of Trust/Mortgage, because that is considered to a document of public records. Do you have any regulatory guidance or resources where I can look into this matter? I thought perhaps the online AllRegs would have something pertinent to the subject matter.

I've been told to take care of this issue and provide a cure.

The is a legal matter and not a job for the bank's compliance officer. If I was charged to fix this, my first call would be to the bank's attorney.

I agree. I would discuss the best way to fix it with legal counsel.

Randy and Kathleen, talking to the attorney is the LAST avenue that most of our banks will allow us. It ain't free, ya' know.

We handle corrections to documents on a daily basis so it's our job to know how to do this.

Affidavits of Correction are legal documents that are signed by the appropriate parties and recorded. They are becoming the preferred method of correction in a number of states because they are cleaner and clearer in documenting and correcting the error. No more white-out, xxxxxx, etc. Additionally, they are less costly to record than an entire mortgage. I know of a number of Midwestern states that use them.

I would suggest that the original poster start by contacting the title company and asking them what the preferred method of correction is for the county/state the affected property is located in. If the title company did the closing, they would be liable for the error and should be able to facilitate the necessary corrections.

eta: Under NO circumstances would I do NEW documents. That effectively puts another mortgage out there for the full amount. I have come across instances in the past where there would be two identically dated mortgages for the same amount on the same property because nobody thought to release the incorrect original. That shows up as a double ding on the borrowers' credit etc. and it's the ultimate pita to try and set straight years after the fact.

Hi All,

Thanks so much for the replies. They've all been helpful. I do agree with rlcarey that this should not be handled by a compliance officer. That was my initial response. However, we end getting saddled with such requests and are at times often required to chime in when the in-house attorney is unavailable or simply do not have the time to address such matters.

You must be one of the lucky ones to have an in-house attorney. Most of the community banks I deal with don't have that luxury anymore. Guess I don't see that it's such a big deal to correct the docs. As I said, if you hired a closing agent, ie, title company and paid for an insured closing, hand them the problem and make them fix it and pay all costs associated with the error. That's what you paid for. Having cut my teeth as a closing officer for a title company, I can tell you we were admonished to review docs and make sure this never happened because it would be our company's problem to fix.

Yes, but if the bank does not have a process (which is why they are posting here after all) the bank should have legal counsel set up or approve the process the develop for future situations.

Otherwise they can pay at the back end when they get in court.

Developing bank processes solely by asking questions at BOL is not exactly a safe and sound process.

You're absolutely correct, Kathleen. However, to reiterate my first statement in this thread, going to counsel is often the LAST option that will be allowed in the current financial envioronment at many community banks.

If the original poster paid for an insured closing, then the title company's attorney is responsible for making sure the proper legal corrections are done. Title companies are a wealth of information beyond just title policies.

The original poster said he's never encountered this before so a process may not need to be implemented at this stage. If it happens again, then the idea of a policy and procedure for addressing these situations should be looked into.

jmho based on years of dealing with post closing problems.

"However, to reiterate my first statement in this thread, going to counsel is often the LAST option that will be allowed in the current financial envioronment at many community banks."

As the olde saying goes: A bank acting as their own attorney has a fool for a client.

This is especially important in these times, as a mistake could cost you the bank rather than just having to cut a check at the end of the month. Management's failure to properly consult legal counsel when necessary (not saying that your idea in this case is a bad option ) shows a definite lack of management.

Don't get me wrong, Randy. I definitely believe there are times when the bank's attorney should be the first one contacted. Correcting closing documents is just not one of those times, and that's the ONLY situation I'm speaking to here. IMHO, if you're doing closings, you've hit mistakes and you best know how to correct them.

The problem is that what is acceptable from jurisdiction to jurisdiction differs.

I currently am involved in eleven states and may soon be increasing that number significantly. I maintain states manuals that outline how these situations should be addressed in each state and even if there are further county differentiations. My number one source of information is the title company. In a close second is the Register of Deeds office. They deal with correcting errors on closing docs on a daily basis and can usually get you through any situation far better than most attorneys I've dealt with, even real estate attorneys. That is why I opined that the original poster should start with his closing company on this loan rather than go to the in-house attorney who, as I've all too often encountered, has no clue how to correct because they used to working from scratch and drafting originals.

And with that, I'll bow out of this thread.

FWIW, I agree with Truff on this. If there is an error where we are unsure of the proper way to correct it, we go to the closing attorney first. They have some skin in the game, and they are (or should be) familiar with the required steps to take to correct the error in that jurisdiction to ensure the lien is on record properly.