Question: I have just refinanced my one-bedroom condominium. The settlement attorney had two other settlements waiting, and rushed me through the process. I had to sign a large number of documents, none of which were explained. Is it really necessary to have all of these papers thrown at you during the settlement?

Answer: When Chief Justice Warren Burger retired from the Supreme Court, he also sold his house in Virginia. Addressing an annual meeting of the American Bar Association shortly thereafter, he lamented that it was unfortunate that one could sell a multi-billion dollar jumbo jet with less pieces of paper than one could sell a house in Virginia.

Unfortunately, if the Chief Justice were to sell or refinance his house now -- many years later -- he would find that there are even more papers that have to be signed at settlement.

You are correct. There are too many papers that lenders, title insurers, and other real estate participants require you to sign when you buy, sell or refinance your house.

It is not possible in one column to catalog all the documents used at settlement. However, here are some of my favorites:

• Three Day Cooling Off Period. Under the Federal Truth-in-Lending Law, in many instances when a borrower refinances, he has three business days in which to "cool off" and decide whether in fact he wants to pursue this particular loan. Lenders usually require borrowers to sign a statement that (1) they have received the notice of cancellation rights, and (2) three business days have now elapsed and the borrowers still want to go forward with the transaction.

  However, many lenders require that each borrower sign three (and sometimes four) copies of this notice. Thus, when you have a husband and wife who are refinancing, the lender has added six to eight additional documents to be signed at settlement.

• Name Affidavit. Many lenders now require that the borrower sign an affidavit -- which has to be notarized -- stating under oath that if the borrower has used any other names or initials, the borrower is really the same person. For example, if Sally Jones sometimes also uses her middle initial "R," Sally will be asked to sign that Sally R. Jones is the same as Sally Jones. However, in a recent settlement that I conducted, the following name affidavit was required: "Sally R. Jones is the same as Sally R. Jones."

• The Truth-in-Lending Statement. Many years ago, Congress enacted the Federal Truth-in-Lending Law, that is designed to allow a prospective borrower to shop and compare the true cost of the loan. This is referred to as the annual percentage rate (APR).

  Unfortunately, most lenders give the truth-in-lending statement only at settlement, when it is next to impossible for a borrower to effectively shop and compare rates. More importantly, at least in the mortgage field, the annual percentage rate is often higher than the actual rate of interest, since points and other lender charges have to be included in the total computation. Lenders must comply with this law, but Congress should give serious thought to amending the law so as to make the disclosures more meaningful -- and to require that these disclosures be given on a more timely basis.

• Escrow Analysis. Many lenders will require a borrower to include one twelfth of their real estate taxes and insurance premiums with their monthly mortgage payment. Thus, the initials "PITI" -- standing for Principal, Interest, Taxes and Insurance. The lender keeps these funds in escrow (earning no interest for the borrower), and when the real estate tax and the insurance premium becomes due, the lender will pay these items from the escrow account. Lenders now require a borrower to sign a statement confirming the amount of real estate taxes and insurance that will paid by the lender on a yearly basis.

  This is another piece of paper which the borrower has to sign, so that the lender has a written statement on file justifying the monthly escrow for taxes and insurance.

• Certificate of Compliance. Borrowers are often asked to sign a statement that in the event the lender is audited by a Federal agency, or if there are clerical or typographical errors contained in the loan documents, the borrower agrees to work with the lender so as to make any necessary changes or cooperate with the Federal agencies. While I recognize that this is an important document, it is recommended that many of these single function documents could be combined into one overall disclosure form.

• Flood Hazard Insurance. Borrowers often have to sign a statement that in the event the area in which their house is located becomes a flood hazard area, the borrower authorizes the lender to immediately pick up flood hazard insurance, and pay the lender appropriately for the annual premium. Again, this is a useful document, but certainly could be consolidated into a master form.

• Notice of Assignment of Loans. Under a recently enacted Federal law, lenders are required to disclose to a borrower the approximate percentage of loans that the lender sells to other lenders during the course of one year. There are significant consumer protections built into the law in addition to the disclosure requirements, but here is an example of another piece of paper generated as a result of further Congressional involvement. The disclosures themselves -- while interesting -- are, in this author's opinion, less than useful.

In addition to these forms, the borrower signs at least one settlement sheet (the HUD-1), a Note and Deed of Trust, and the loan application form which the lender had previously filled out.

Justice Burger was correct -- there are just too many pieces of paper being signed by borrowers when they buy or refinance their homes. A careful settlement attorney will spend considerable amount of time explaining each and every document that the borrower signs at settlement. However, most borrowers -- after signing a dozen or two papers -- generally throw up their hands and say "Let's get this over with."

The lending and the title industry must take steps to curtail this proliferation of paperwork. And next time you go to a settlement, do not let the attorney rush you through the process. You are the client and have the absolute right to ask as many questions as you feel are necessary to help you understand what you are signing. After all, in many cases, this is perhaps the largest investment you will ever make.

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