NSA Preventing Unauthorized Practice of Law 2 — Questions and Answers
Question 1: A borrower asks the NSA to explain the difference between the interest rate and the APR on their loan documents. What should the NSA do?
- Explain using the definitions printed in the loan package
- Decline to explain and refer the borrower to their lender (Correct answer)
- Provide a general definition from memory
- Skip the question and ask the borrower to sign
Correct answer: Decline to explain and refer the borrower to their lender
Explaining loan terms goes beyond a notary's role and constitutes the unauthorized practice of law; the NSA should refer all such questions to the lender.
Question 2: Which of the following actions is WITHIN the scope of an NSA's duties during a loan signing?
- Advising the borrower whether the loan terms are favorable
- Identifying each document by its title before the borrower signs (Correct answer)
- Recommending whether the borrower should accept a prepayment penalty
- Explaining the legal effect of a deed of trust
Correct answer: Identifying each document by its title before the borrower signs
NSAs may identify documents by name so the borrower knows what they are signing, but they must not advise on terms or legal effects.
Question 3: During a closing, a borrower says, 'I don't understand why I need to sign a Right of Rescission notice.' What is the correct NSA response?
- Explain that federal law requires it for refinances
- Tell the borrower it is just a formality and to sign
- Instruct the borrower to contact the lender or attorney for an explanation (Correct answer)
- Read the document aloud and interpret its legal meaning
Correct answer: Instruct the borrower to contact the lender or attorney for an explanation
Although the ROR is a federally mandated disclosure, interpreting its legal significance for the borrower crosses into the practice of law.
Question 4: An NSA who repeatedly provides legal advice during signings may face which consequence?
- A warning letter from the signing service only
- Criminal or civil liability for unauthorized practice of law (Correct answer)
- Suspension of their loan-officer license
- A fine from the title company
Correct answer: Criminal or civil liability for unauthorized practice of law
Unauthorized practice of law (UPL) is a criminal offense in most states and can result in fines, injunctions, or prosecution.
Question 5: A borrower insists the NSA tell them whether a late-payment clause is enforceable in their state. The NSA should:
- Answer based on general knowledge of state law
- Decline and suggest the borrower consult an attorney (Correct answer)
- Look it up on the internet and relay the result
- Ask the title company representative for guidance
Correct answer: Decline and suggest the borrower consult an attorney
Assessing the enforceability of a contract clause is a legal determination that only a licensed attorney should provide.
Question 6: Which document in a loan package is MOST likely to prompt a borrower to ask an NSA for legal advice?
- The Closing Disclosure
- The deed of trust or mortgage (Correct answer)
- The hazard insurance binder
- The wire transfer confirmation
Correct answer: The deed of trust or mortgage
The deed of trust grants a security interest in the borrower's property and often raises questions about legal rights and remedies that require attorney guidance.
Question 7: What phrase can an NSA use to professionally redirect a borrower who asks legal questions without seeming dismissive?
- 'That's outside my area — I'll skip that page.'
- 'I'm not authorized to give legal advice; your lender or an attorney can best answer that.' (Correct answer)
- 'The document is self-explanatory, just sign here.'
- 'Legally speaking, it means you owe the money back.'
Correct answer: 'I'm not authorized to give legal advice; your lender or an attorney can best answer that.'
A polite, scripted referral to a lender or attorney keeps the signing moving while protecting the NSA from UPL exposure.
NSA Preventing Unauthorized Practice of Law 2
A borrower asks the NSA to explain the difference between the interest rate and the APR on their loan documents.
What should the NSA do?