Describing Loan Documents and Answering Borrower’s Questions as a Notary Loan Signing Agent: What You Can and Can’t Say

By Mark Wills - Course Instructor of the Loan Signing System and Forbes Real Estate Council Member

One of the most common questions I’m asked is, “what can I say during a signing agent appointment... can I answer the borrower’s questions and how much detail can I go into?”

This is one of the most debated topics for notary signing agents.

The reason this is such a hot topic is, first and foremost, most state laws prohibit notary publics from giving advice or performing any duties that may be construed as the practice of law, particularly as it relates to legal documents such as a set of loan documents.

And federal regulations do not want people crossing the line into giving financial advice as a mortgage originator unless they are licensed as such.

So many people try to abide by those laws by never describing anything in a set of loan documents ever.

That’s why you may frequently see well-intentioned people say things like, “by law an NSA should not be providing a description of any closing documents other than where they should be signing.”

But is that comment really true? This blog will help shed some light.  

The Notary Signing Agent Code of Conduct Can Provide Guidance on What You Can and Can’t Say

To find the answer, we should start by looking at the Notary Signing Agent Code of Conduct (herein known as the Code of Conduct), which is currently the generally accepted guidelines the industry uses for signing agents.

The 10 guiding principles found within the Code Of Conduct was created by the Signing Professionals Workgroup (under the advisement of the National Notary Association) and have been distilled based on the interaction of the NNA, thousands of certified signing agents from every state, lenders, and companies that employ notary signing agents. 

The Code of Conduct is Not “the Law,” But it Does Provide Guidance for Notary Signing Agents to Operate at the Highest Standards and Professionalism

It’s important to understand that the Code of Conduct is not in and of itself the notary law. The Code of Conduct was created because there are frequently no clear laws related to many of the signing agent activities.**

In fact, here is an excerpt directly from the Code of Conduct supporting this statement:

While many occupations pose professional and ethical norms for their practitioners, the need for guidelines for Certified Signing Specialists is necessary given the fact that the vocation of Certified Signing Specialist is largely an unregulated profession. 

While state Notary Public laws and regulations apply to the notarial acts performed by Specialists, these laws offer no guidance to the non-notarial services rendered by Specialists.

So the authors of the Code of Conduct seem to understand that notary laws are typically specific to the act of notarizing the handful of documents that need stamped within a set of loan documents; however, those same laws may not provide guidance to the significant amount of other documents and activities you would go through in a loan signing. 

The self-stated purpose of the Code of Conduct is to “enable Certified Signing Specialists to operate according to the highest standards of practice expected of like professionals in the settlement services industry.” 

And because it is a widely accepted document, we’ll use it as the basis of our discussion.

Let’s dive into what the Code of Conduct says about what a signing agent can say at a loan signing. 

Does the Code of Conduct Recommend that Notary Signing Agents Describe Documents to a Borrower?

First, let’s talk about how you can present the loan documents to a borrower.

Section 4 of the Code of Conduct lists details of its guiding principle related to presenting loan docs. 

I’ve listed them below with emphasis added to highlight what you can do (we’ll discuss what you can’t do by referencing actual laws later in this blog):

4.4. Presentation of Documents  
The Notary Signing Agent will present each closing document to a signer in conformance with a signing presentation guidelines authorized by the contracting company, and by naming and stating the general purpose of the document, specifying the number of pages and indicating where signatures, dates or initials are to be placed.

4.5. Loan Terms  
The Notary Signing Agent may identify and provide a general description of a loan or payment amount, interest rate, annual percentage rate, finance charge, payment schedule, assumption option, prepayment penalty or any other loan term to a borrower in the closing documents, but may not explain, interpret or provide legal advice about the loan terms.

4.6. Settlement Fees  
The Notary Signing Agent may identify and provide a general description of a fee or charge appearing on a signer’s HUD-1, Closing Disclosure or other closing statement, as applicable, but may not explain, interpret or provide legal advice about the fee or charge.

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To summarize, the Code of Conduct clearly states a signing agent can present the borrower the loan document AND can state the general purpose of the document.

The Code of Conduct also clearly states a signing agent can give a general description of any loan term to a borrower in the closing documents, including loan amount, interest rate, annual percentage rate, etc.

So remember the example comment found in many forums I mentioned earlier?

“By law an NSA should not be providing a description of any closing documents other than where they should be signing.”

Well the Code of Conduct clearly states otherwise. Providing a general description is actually allowed.

But remember the Code of Conduct isn’t actually the law.

So let’s dig a little deeper to see what underlying laws we’re hoping to abide by...

Part of the underlying laws that many agents are trying to abide by is to
1) avoid crossing into activities of a mortgage originator providing financial advice, and/or
2) avoid crossing into activities of a lawyer providing legal advice.

First, let’s talk about crossing the line into a mortgage originator.

Does Providing Explanations Such as Loan Terminology and Verifying Terms Already Agreed Upon Constitute a Licensed Mortgage Originator Activity?

Luckily for us, the U.S. Government has provided us clarification on which activities constitute mortgage originator activities that require a license vs activities that do not with the Code of Federal Regulations (CFR). 

The CFR are the laws that govern many agencies, including the Consumer Financial Protection Bureau, and is implemented through the Nationwide Mortgage Licensing System (NMLS)  so borrowers are protected.**

This excerpt is directly from the CFR stating what activities do not constitute offering or negotiating terms of a loan (which would require a license and would cross into dangerous territory as a signing agent): ​

2) Offering or negotiating terms of a loan does not include any of the following activities:

(i) Providing general explanations or descriptions in response to consumer queries, such as explaining loan terminology (e.g., debt-to-income ratio) or lending policies (e.g., the loan-to-value ratio policy of the lender), or describing product-related services;

(ii) Arranging the loan closing or other aspects of the loan process, including by communicating with a borrower or prospective borrower about those arrangements, provided that any communication that includes a discussion about loan terms only verifies terms already agreed to by the borrower or prospective borrower;

Source: https://www.law.cornell.edu/cfr/text/12/appendix-A_to_part_1008

This seems to further confirm that providing general descriptions of the loan documents do not cross the line and can be performed by a notary signing agent. 

So we’ve covered the concern of crossing the line from a mortgage professional perspective, but what about from a legal perspective?

Does Describing Loan Documents Cross the Line into Unauthorized Practice of Law (UPL)?

The other concern one may have when they say a statement like “by law an NSA should not be providing a description of any closing documents other than where they should be signing” is that you may be crossing into the territory of a lawyer or legal professional. 

It’s a valid concern because that could put you into the territory of Unauthorized Practice of Law (UPL).

Additionally, most states address that a notary cannot practice law unless an active member of the state bar. 

Here’s an example notary public law from the state of California:

A notary public applicant or commissioned notary public, who is not an active member of
the State Bar of California shall not practice law.

If a commissioned notary public has been engaged in the practice of law in violation of
Business and Professions Code section 6125, the recommended action is:

Revocation of the commission. ​

The last thing you want to do is to get your notary commission revoked… because then you wouldn’t be able to make $75 to $200 per appointment as a notary signing agent!

To see your state’s specific notary laws as it relates to practicing law, click the link below:

https://www.nationalnotary.org/knowledge-center/reference-library/state-law-summaries (Source: NNA)
​
So this begs the question, what does “Practice of Law” constitute? Does describing a loan term in a set of loan docs fall under the practice of law category?

Unfortunately there isn’t a list of all activities that constitutes “Practice of Law,” however, using the same state of California (arguably the most regulated state in the US), practice of law has been determined in courts to include the following main activities:

• Performing services in court cases/litigation,
• Providing legal advice and counsel, and
• Preparing [write or create] legal instruments and contracts that secure legal rights

Source: https://www.shouselaw.com/unauthorized-law.html#1

Of course, each state varies when it comes to unauthorized practice of law and if you’re in an attorney state (click here to see a list of attorney states - Source: First American Title), it can be more limiting as to what you can say and it’s probably safest to not describe the documents at all… just point to where they sign.

This is exactly why the Code of Conduct correctly states in their guiding principle that a notary signing agent may not “provide legal advice about the loan terms.”

So providing general descriptions of the loan documents, as long as you’re not giving legal advice, seems to fall well within the scope of a notary signing agent.

This is great news because escrow officers, mortgage professionals, and signing services expect a notary signing agent to have a certain level of education and ability to describe loan documents so the borrower feels comfortable signing them.

How Do We Avoid Crossing the Line into Unauthorized Practice of Law or Activities of a Mortgage Originator?

Generally describing loan documents is not only okay, in my opinion it should be encouraged to create a comfortable signing environment for the borrower during what can be a stressful time during their home buying process.

However, there will be many questions a borrower asks that, if answered by you, could cross the line into giving legal advice or constitute a licensed mortgage originator activity.

Generally, if you give a description of the document and the borrower has a questions digging deeper, there are two things you can do to protect yourself from crossing into dangerous territory.

1. You can direct the borrower to the section within the loan document that answers their question, or
2. you can politely recommend that they call their loan officer. Anything more than a description can turn into a longer explanation… and that’s a gray area better not to cross into.

In fact, the Code of Conduct has a guideline that outlines how to respond to questions that follows these solutions. This is to protect you from ever crossing into legal or financial advice territory.

4.3. Response to Questions  
The Notary Signing Agent may respond to a signer’s specific question by directing the individual to read the provisions in the critical or other closing documents identified by the NSA that may answer the question or by referring the individual to the lender’s representative or closing agent associated with the transaction.

Let’s summarize this... if a borrower asks a question, let’s say for instance, “do I have a prepayment penalty?” Based on what we’ve learned so far, you can point to Page 1 of the Closing Disclosure that state yes or no.

Anything that needs greater explanation because you can not point to it in the loan docs would most safely be answered by having them call their Loan Officer. 

Keep in mind, if it is not a question that has to do with something that is specifically in their loan documents (for instance, if they ask, “what is an impound account?), you can answer by saying “generally speaking that is savings account for your taxes and insurance.”

However, if they start asking the specific financial and legal implications of their impound account, the safest action is to refer them back to their Loan Officer.

So What Have We Learned? Conclusion and Parting Thoughts

Based on the information in the Code of Conduct produced by the Signing Professionals Workgroup (NNA), Code of Federal Regulations produced by the US Government, and other resources above, it seems clear that we can give general descriptions of loan documents and answer general questions. 

This article is meant to assist you to have a better understanding of the industry (it is not intended to be legal advice nor is it notary public training). And you should always follow your state’s notary laws and best practices and consult your own legal advisor for specific legal advice. 

And if you are educated enough and provide a concise enough description of the document upfront, very rarely will the Loan Officer or Escrow Officer ever need to be called. 

In my experience 90% of questions can be answered effectively by pointing to information in the loan documents.

The key is knowing exactly what every loan document means and where the information exists. 

Your goal should be to be so educated that your general descriptions don't promote follow up question that could place you in the realm of providing legal advice or financial activities requiring a specific license. 

And that is exactly what the the Loan Signing System is known for. The Loan Signing System will provide you with most detailed education about the loan documents so you can decide what you use in your business and give you the best give general descriptions while abiding with your local laws and best practices. 

No other course comes close to providing this level of detail. However, at the end of the day, it's up to you to determine what you're allowed to do in your jurisdiction to abide by the laws of your state. 

At its foundation, the Loan Signing System teaches that an educated signing agent is a busy signing agent. 

The more educated you are, the more potential you have to build a successful notary signing agent business. 

Click on the link below to learn more about the course and I’m looking forward to seeing you become a successful notary loan signing agent!

Get The Loan Signing System Course Today!

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**Sources and Disclaimer:

The Loan Signing System is a comprehensive step-by-step course created to help notary publics become expert loan signing agents. Sources for the article are provided below:

https://spswg.files.wordpress.com/2016/02/spw-code-of-conduct-2016.pdf

https://signingprofessionalsworkgroup.org/code-of-conduct/

https://www.law.cornell.edu/cfr/text/12/appendix-A_to_part_1008

https://www.law.cornell.edu/cfr/text/12/1008.103#c_2

https://www.nationalnotary.org/knowledge-center/reference-library/state-law-summaries

https://www.shouselaw.com/unauthorized-law.html#1

https://mortgage.nationwidelicensingsystem.org/licensees/resources/LicenseeResources/NMLS%20Guidebook%20for%20Licensees.pdf

https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/code-federal-regulations/

https://www.consumerfinance.gov/privacy/system-records-notices/nationwide-mortgage-licensing-system-registry/

The Loan Signing System seeks to provide relevant training to help loan signing agents learn how to complete a loan signing. This training is not intended as legal/financial advice or notary public training. ​Check with your state to be sure that loan signing agents are utilized in the closing process. Always follow your state's notary laws and best practices. While the NNA and other companies are referenced in this blog, Loan Signing System is not endorsed by, affiliated with, nor makes money from the NNA by recommending any courses or training. No guarantees, promises or warranties of any kind are being made or should be understood to be made. Loan Signing System courses come with a 100% money-back guarantee.

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