NSA Preventing Unauthorized Practice of Law 3 — Questions and Answers
Question 1: A borrower asks the NSA, 'Can I still cancel this loan after I sign today?' What is the correct response?
- 'Yes, you have three business days under federal law.'
- 'No, once you sign you are bound.'
- 'I cannot give legal advice; please call your lender for details about your cancellation rights.' (Correct answer)
- 'It depends on your state — I will look it up.'
Correct answer: 'I cannot give legal advice; please call your lender for details about your cancellation rights.'
Even though the Right of Rescission is a known rule, advising a specific borrower on their cancellation rights is a legal determination that should come from the lender.
Question 2: Which entity is the PRIMARY source of definitions and protections against unauthorized practice of law for notaries?
- The federal Consumer Financial Protection Bureau
- State statutes and state notary laws (Correct answer)
- The Mortgage Bankers Association
- The National Notary Association guidelines
Correct answer: State statutes and state notary laws
UPL is defined and prosecuted under state law; each state's statutes govern what constitutes the practice of law and who is authorized to provide it.
Question 3: An NSA is asked to draft an addendum that changes a loan condition before the borrower signs. This is:
- Acceptable if the lender verbally approves it
- Unauthorized practice of law regardless of lender permission (Correct answer)
- Permitted if the NSA is also a licensed real estate agent
- Required when a document error is discovered at the table
Correct answer: Unauthorized practice of law regardless of lender permission
Drafting, altering, or creating legal documents is the practice of law and is never within an NSA's scope, regardless of verbal instructions.
Question 4: A lender's loan officer calls the NSA during a signing and asks them to 'just explain the ARM caps to the borrower.' What should the NSA do?
- Follow the loan officer's instructions since they are the client
- Decline and ask the loan officer to speak directly with the borrower (Correct answer)
- Paraphrase the ARM section from the note
- End the signing and reschedule for a time the loan officer can attend
Correct answer: Decline and ask the loan officer to speak directly with the borrower
Client instructions do not override UPL prohibitions; the NSA should facilitate a direct conversation between the loan officer and the borrower instead.
Question 5: Reading a document aloud word-for-word to a borrower who cannot see well is:
- Unauthorized practice of law
- An acceptable accommodation that does not constitute legal advice (Correct answer)
- Prohibited under privacy regulations
- Allowed only if the borrower signs a waiver
Correct answer: An acceptable accommodation that does not constitute legal advice
Reading text verbatim is a ministerial act; UPL occurs when the NSA interprets, explains, or advises on the legal meaning of that text.
Question 6: A borrower presents a power of attorney and asks the NSA if it is 'valid enough' to use at the closing. The NSA should:
- Review the POA and confirm it looks official
- Refuse to proceed and contact the title company or closing attorney for a legal determination (Correct answer)
- Accept it if it has a notary stamp
- Perform the notarization and note the POA in the journal
Correct answer: Refuse to proceed and contact the title company or closing attorney for a legal determination
Determining whether a power of attorney meets legal requirements for a real estate transaction is a legal conclusion requiring attorney review.
Question 7: Why is it especially risky for an NSA to give legal advice even when they believe they know the correct answer?
- Because lenders will blacklist them for exceeding their role
- Because being correct does not eliminate UPL liability — the act of advising is itself the violation (Correct answer)
- Because borrowers might record the advice and use it against the lender
- Because the NSA's E&O insurance will not cover correct advice
Correct answer: Because being correct does not eliminate UPL liability — the act of advising is itself the violation
UPL is defined by the act of providing legal advice without a license, not by whether that advice was accurate.
NSA Preventing Unauthorized Practice of Law 3
A borrower asks the NSA, 'Can I still cancel this loan after I sign today?' What is the correct response?