Tuesday, July 03, 2007

query: should checks be made out to non-borrowing spouse

In my opinion, no. If there is a cash back check coming out of a refinance, I make it payable to the borrower(s).

This raises the issue, too, of spouses selling property. I only make seller proceeds checks payable to vested owners. I do NOT include a non-vested spouse as a payee.

8 comments:

Dave Wirsching said...

What about if the spouse is on title in a refinance?

Diane Cipa, The Closing Specialists® said...

I have the spouse sign the mortgzge to validate the lien but the check for cash back proceeds, if any, is only made payable to the borrower.

Most mortgage lenders will want the non-borrowing spopuse to sign the TIL and right to cancel. In that case you must be sure to give the required minimum number of copies to the non-borrowing spouse since they have the right to rescind. Each person with the right to rescind gets one copy of the TIL and two copies of the right to cancel.

Diane Cipa, The Closing Specialists® said...

oops - sorry about typo - it's late. ;)

John Povejsil said...

I think Diane is techically right. However, being technically right and honoring other legitimate considerations leads to inconsistent industry practices. Dave - can you explain where you would differ?

Diane Cipa, The Closing Specialists® said...

Hmmmm....

Just curious, John, what other considerations do you have in mind? Please share your thoughts.

John Povejsil said...

There are two. First, our title program basically forces all title holders to be treated as borrowers (although there is a manual override). The lender generally only informs us who the borrower(s)is/are at the last minute via instruction, 1003, or a note. This forces somebody to make a manual edit to the HUD, and if 1) either someone is not totally familiar with the software; or 2) unfamiliar with the technical nuances of "borrower," then I'd rather the change on the HUD not be made.

Furthermore, if the lender approves the HUD this way, I say "no harm, no foul."

Now, the only times I've ever seen this as a problem, was when one spouse was keeping the other in the dark. We've done it both ways - and I'd rather not get into the middle of this mess, but we did catch a forgery once this way, where I'd be happy to get into the middle of it, if it prevents a much worse issue down the road.

Diane Cipa, The Closing Specialists® said...

Well, I'd hate to see correct technical procedure ignored simply because software won't address the problem automatically or because staff isn't trained to deal with manual overrides.

I am of the opinion that whatever the technical issue is - no matter how far into the transaction it is discovered, the documents or checks should be drawn to fit the details of the transaction and if that requires manual override, I think you have to do it.

John Povejsil said...

I look at the correct technical procedures as those things we do to protect the transaction, first for our purposes, second for the lender when given as little information as the lender deems necessary, at the last minute. I agree how it should be done: but that also includes getting documents from lenders in a timely manner, having the mortgage match our commitment, etc. Given the imperfectness of this world, I don't get too worked up about a HUD that has been approved by the lender not matching its note.

I'm still interested in David's view on this.