10.2 Key Loan Documents

The "Big Three" in Every Package

A loan package may run 150 pages, but the exam keeps returning to three instruments. Knowing which is signed, which is notarized, and which is recorded answers most NSA document questions.

1. Promissory Note (the "Note")

The promissory note is the borrower's written promise to repay the debt. It is the personal IOU behind the loan.

• States the principal (amount borrowed), the interest rate (fixed or adjustable), the monthly payment, and the maturity date.
• Defines late-payment penalties and default terms.
• Is signed but typically NOT notarized.
• Is NOT recorded — it stays with the lender.

Because it is a personal obligation, the note can survive even a sale of the property. There is usually only one original note, so a signing error on it is high-stakes.

2. Deed of Trust / Mortgage (the Security Instrument)

The deed of trust (or mortgage, depending on the state) pledges the property as collateral and lets the lender foreclose on default.

• Requires notarization — almost always an acknowledgment.
• Is recorded with the county recorder, giving public notice of the lien and fixing the lender's priority.
• Deed-of-trust states use three parties: borrower (trustor), lender (beneficiary), and a neutral trustee who holds title until payoff.
• Mortgage states use two parties: borrower (mortgagor) and lender (mortgagee).

3. Closing Disclosure (CD)

The Closing Disclosure replaced the old HUD-1 Settlement Statement in 2015. It is a five-page itemized accounting of the deal.

• Lists every closing cost: lender fees, title fees, recording fees, and prepaid taxes/insurance.
• Shows cash to close and compares final figures to the original Loan Estimate.
• Under the TILA-RESPA Integrated Disclosure (TRID) rule it must reach the borrower at least 3 business days before closing.
• Is signed but NOT notarized.

Documents at a Glance

The Right to Cancel (Rescission)

On a refinance of a primary residence (and on HELOCs and home-equity loans), the Truth in Lending Act (TILA) gives the borrower a 3-business-day Right of Rescission to cancel without penalty. The clock runs from the latest of signing, receiving the disclosures, or receiving the notice. TILA business days include Saturdays but exclude Sundays and federal holidays, so each borrower must keep their own copy of the notice. Purchase money loans have no rescission right — a trap the exam loves to test.

Affidavits, Disclosures, and the NSA's Audit Duty

Beyond the Big Three, NSAs routinely notarize sworn statements and shepherd disclosures that are signed only. Knowing the notarial act each one needs prevents the single most common signing-table error: applying an acknowledgment where a jurat (sworn oath) is required, or vice versa.

Sworn Documents (Need a Jurat)

• Name/Signature Affidavit — the borrower swears to every spelling or variation of their name (e.g., "Robert J. Smith" and "Bob Smith" are the same person). This requires an oath or affirmation plus a jurat.
• Occupancy Affidavit — the borrower swears whether the property is a primary residence, second home, or investment. False statements here are federal mortgage fraud.

Acknowledged Documents

• Deed of Trust / Mortgage — acknowledgment, then recorded.
• Some riders (e.g., a planned-unit-development or condominium rider) may be acknowledged when they amend the security instrument.

Signed-Only Documents

• Closing Disclosure, Right to Cancel, Initial Escrow Account Disclosure, First Payment Letter, and IRS Form W-9 are signed and dated but not notarized.

Handling Errors Correctly

NSAs never alter, complete, or correct a loan document on their own authority. The drafter — the title company or lender — owns the document. The correct workflow:

1. Stop at the error (misspelled name, wrong date, blank field, wrong loan amount).
2. Contact the title company or signing service for instructions before changing anything.
3. If authorized, follow the exact correction method given (often a clean cross-out, the borrower's initials, or a fresh page printed and re-signed).
4. Document who authorized the change and when.

NSA Package Best Practices

• Never skip a page. Every signature, initial, and date line is there for a reason; a missing initial can force a redraw and delay funding.
• Point, don't explain. Name the document, route substantive questions to the lender.
• Check the date. On a refinance, the rescission notice dates and the Closing Disclosure dates must be consistent with the 3-day rule.
• Protect the data. The package is full of Social Security and account numbers; secure it in transit and shred any printed extras under a confidentiality obligation.
• Return promptly. Late return can blow the funding window or void a rescission timeline.

On the Exam

• Note = promise to repay; signed, not notarized, not recorded.
• Deed of Trust/Mortgage = security interest; acknowledged and recorded.
• Closing Disclosure = cost summary; signed only; delivered 3 business days before closing (TRID).
• Right to Cancel = 3 business days on refinances/HELOCs, never on purchases.
• Name and Occupancy Affidavits are sworn — they need a jurat, not an acknowledgment.