Presigning - rescindable purchase transaction

Posted By: Carter'sMom

Presigning - rescindable purchase transaction - 11/01/16 07:43 PM

This week we have had 2 TRID transactions for the purpose of purchasing a residence also secured by the borrower's current residence. Our lenders are wanting to sign the docs (note/mortgage) three days prior to the settlement (closing company/title transfer) so that the rescission will be up and funds can be disbursed at the closing table. When we rolled out TRID we made the business decision not to allow presigning because of the definition of consummation= the date they become contractually liable. The only compliance risk I see is that we must place in the borrower's hands three days before that presigning occurs, an accurate closing disclosure. When I take off my compliance hat, can the borrower pledge a security interest in a property that they do not legally own? The mortgage would be dated and signed an notarized three days before the deed. That just doesn't smell right to me but maybe I am overthinking. How are other banks handling this?
Posted By: John Burnett

Re: Presigning - rescindable purchase transaction - 11/01/16 08:07 PM

I also detect a dead fish in this basket. And the idea that anyone could legitimately sign a mortgage secured by something he doesn't yet have a deed to sticks in my craw, too.
Posted By: Beachbum, CRCM

Re: Presigning - rescindable purchase transaction - 11/01/16 08:16 PM

Is there a "bona fide personal financial emergency.” the applicant can use to waive the right to rescind?
Posted By: MScarn6942

Re: Presigning - rescindable purchase transaction - 11/01/16 08:36 PM

I may be wrong here, but I can't see an examiner saying that purchasing a house using one you already own as collateral as a personal emergency, unfortunately...
Posted By: Kathleen O. Blanchard

Re: Presigning - rescindable purchase transaction - 11/01/16 10:20 PM

Presigning is usually done simply for convenience, the actual effective date does not change. You cannot pre-pledge collateral you do not own.
Posted By: Kathleen O. Blanchard

Re: Presigning - rescindable purchase transaction - 11/01/16 10:20 PM

I meant to add that it sounds like lenders at this institution think they have found a fun new way to do things. Make it stop.
Posted By: RR Joker

Re: Presigning - rescindable purchase transaction - 11/02/16 12:21 PM

Or from my experience...you have a realtor dictating [whining] and/or poor communication up front as to how this deal works. If you go in knowing there will be a wait, there is no problem...

Believe it or not I actually had this happen with an ATTORNEY who should have KNOWN there would be ROR [his own bridge loan purchase] After that episode I remind the parties handling the deal to make certain all interested parties are aware of the delay.

Communication is your friend.
Posted By: Kathleen O. Blanchard

Re: Presigning - rescindable purchase transaction - 11/02/16 12:33 PM

Communication is your friend......how very true!
Posted By: Truffle Royale

Re: Presigning - rescindable purchase transaction - 11/02/16 03:12 PM

Quote:
... also secured by the borrower's current residence.
Why? Isn't the new property sufficient collateral for the loan? ABC causes lots of trouble. If you don't need it, don't take it and just close these loans as the purchases they are.
Posted By: Carter'sMom

Re: Presigning - rescindable purchase transaction - 11/02/16 06:38 PM

Truffle - I think it has to do with not having adequate down payment until the current residence is sold.

Our title company says title insurance does not find an issue with this practice because of the "after-acquired property" clause. Wiki for "after acquired property" states:

The term "after-acquired property" also arises in the context of bankruptcy, secured transactions, and the law of wills. In this context, "after-acquired property" is simply property which is acquired by a borrower after a security agreement is signed, by a debtor after a bankruptcy case is commenced, or by a testator after a will is made.

In the case of secured transactions, whether the after acquired property becomes part of the collateral pledged by the borrower is dependent upon both the language of the security agreement and § 9-204 of the Uniform Commercial Code.

Section of 9-204 of the UCC deals with "personal property" and not real property based on what I am reading. I am still not comfortable with this.