Have you ever conducted a loan closing and come across a term that you weren’t familiar with? For new and even experienced notaries, this can be a common occurrence. Let’s review 5 notary terms that you’re most likely to see during your next loan closing.
Recission Period
A rescission period is consumer protection under the federal Truth in Lending Act (TILA) in which a borrower may cancel certain types of loans within 3 business days, typically starting with the next business day after the loan documents are signed and ending at midnight on the third business day.
This rescission period is basically period of time in which the client or the signer has the chance to cancel their loan. Most commonly in refinances, the borrower will have a three day right to cancel. This means that they have a three day rescission period. If they sign on day one, they have three days to then let their loan officer know whether or not they want to continue with the loan.
Escrow
An Escrow company is a neutral third party who carries out the instructions of both the buyer and seller to handle all the paperwork of settlement or “closing”. Escrow may also refer to an account held by the lender into which the home buyer pays money for tax or insurance payments.
In relation to loan closings, an escrow account was an account that is set up by the title officer or the attorney where the borrower is going to pay funds into that account. The purpose of that account is so the money in there can be used to pay outside sources such as property insurance, homeowners insurance, property taxes, ect. This account is set up to ensure that if the borrower doesn’t pay their property taxes for example, the city or the county can take that property which in turn interferes with the lender and the agreement. With an escrow account, these funds are put in there, and they’re always available to pay those outside providers.
Closing Costs
Also known as settlement costs, these costs are for services that must be performed to process and close your loan application. Examples include title fees, recording fees, appraisal fees, credit report fees, pest inspections, attorney’s fees, taxes, and surveying fees.
Closing costs are the amount that the borrower is paying to close on that transaction. There are alot of things that go into closing costs such as origination fees, appraisal fees, and even notary closing fees. Each of these are apart of the the losing costs, and they’re always found on the Closing Disclosure at the very bottom.
The Deed
The deed is a legal document with which title to real property is transferred from one owner to another. The deed contains a description of the property, and is signed, witnessed, and delivered to the buyer at closing.
The deed shows who has an interest in the property. Typically, when you’re doing a refinance, you’re going to see the borrowers that are taking a loan out to purchase the property as well as the lender because they both have an interest in the property. The deed, when you do a deep transformation, is basically showing who the property is being conveyed to who has an interest in the property. What the deed really just tells you is that if anything happens, here are the terms as far as how the property gets handled.
The Note
The note is a type of promissory agreement between a borrower and a lender outlining the terms of the loan, such as the interest rate and due date.