The Loan Officer's Contingent Commission
Notary N works as a mortgage loan officer at Horizon Bank. Her compensation includes a 0.35% commission on every loan that funds. Her longtime friend, D, applies for a $340,000 refinance. At the closing table, D asks N to notarize two documents: a limited power of attorney appointing D's brother to sign if D travels, and the deed of trust. The brother is not present. D says, 'You're doing me a favor-just stamp it; the bank said it's fine.' N's branch manager confirms the bank has no policy against it. N knows the loan cannot fund unless the deed of trust is notarized, and her commission depends on funding. D is not related to N, but they have vacationed together and N is godparent to D's child. N's commission is not disclosed to D. The documents are in English; D reads English. N has a current commission and a journal.
1. May N notarize the deed of trust and the power of attorney? Analyze the disqualification issue and the effect of the bank's approval.
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No - N should decline both acts. A notary is a disinterested witness, not a participant in the transaction. The disqualifying fact is not the friendship alone; it is N's direct, contingent financial stake. Her 0.35% commission on a $340,000 loan is about $1,190, and the loan cannot fund without her notarizing the deed of trust. That makes her notarial act a condition of her own payment. A notary may not notarize an act in which she is a party or has a direct beneficial interest.
The power of attorney is part of the same loan transaction and could be used to sign loan documents if D travels, so the taint carries over. The brother's absence is a separate problem: N could not notarize his signature if that were requested. The personal relationship-vacations and godparenthood-independently raises impartiality concerns, even if it would not disqualify N in every context.
Bank policy cannot cure a notarial-law conflict. The branch manager's approval addresses employment risk, not the notary's statutory duty. If N proceeds, the notarization is vulnerable to challenge, and N faces discipline and civil liability. Employer approval is irrelevant to the commission's rules.
2. If N declines, what should she do to serve D and protect herself?
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N should separate her loan-officer role from her notarial role. She may continue processing the loan, but she should tell D plainly that another notary must perform the notarizations because N has a financial interest in the funding. She should not pre-sign, pre-date, or leave a blank certificate for someone else to complete.
Practical steps:
- Refer D to an independent notary or to the title company's notary.
- Make sure D personally appears before that notary and signs in the notary's presence.
- Do not disclose confidential loan details to the replacement notary beyond what is necessary.
- Record the refusal in the journal if state rules require a record of refused acts; otherwise document the conflict in a internal memo.
- Avoid any suggestion that the documents can be 'stamped' later without an appearance.
If no independent notary is available before closing, the closing should be rescheduled. N should not notarize merely because the parties are inconvenienced.
3. Suppose N notarizes only the power of attorney, reasoning that she has no interest in who holds D's power of attorney. Is that reasoning sound?
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No. The argument isolates the POA from its purpose, but the timing and context show it was requested as part of the closing. The POA could be used to sign the deed of trust or other loan documents if D travels. The relevant question is whether the notarial act is connected to a transaction in which the notary has a beneficial interest. It is.
A notary must avoid not only actual bias but also the appearance of benefiting from the act. Notarizing a document that facilitates the loan that pays her commission creates that appearance. The fact that the POA itself does not name N or pay N does not break the connection.
If the POA were genuinely unrelated-for example, a separate family matter with no connection to the loan-the analysis might differ. Here, N should decline and let an independent notary handle it. If D insists, N should explain that the notarization could be challenged later and that the safer course is a different notary.