Link to original WordPerfect Document
90 N.J.L.J. 297
May 11, 1967
ADVISORY COMMITTEE ON PROFESSIONAL ETHICS
Appointed by the New Jersey Supreme Court
OPINION 110
Mortgagee's Attorney Closing Fees
Question: Is it proper for an attorney to represent a lending
institution in closing a mortgage loan where a reasonable
attorney's fee (approximately $275) for title search and
examination, preparation of papers, and attendance at closing is to
be paid by the mortgagor-purchaser to the attorney, by agreement
between the attorney, the lending institution, and the mortgagor,
with no portion of the attorney's fee to be retained by the lending
institution, but a reasonable fee (approximately $100) to be paid
by the attorney to a title company for the search and preparation
of the title binder?
The attorney states that the mortgagor will have full access
to his best opinion as to the estimated costs of the legal fees and
other closing costs, if any, that the mortgagor will be advised
further that his interests would best be protected by his retention
of independent counsel and his right to an owner's title policy,
and that the mortgagor is required to sign a letter on the day of
settlement setting forth the following points:
1. That the attorney has advised the mortgagor that he
represents the lending institution;
2. That the attorney has given no opinion, and made no
representation with respect to title to the premises
involved;
3. That the attorney is about to obtain mortgagee title
insurance which affords no protection to the mortgagor;
4. That the attorney has offered to obtain an owner's policy
but unless the mortgagor orders an owner's policy, the
attorney is directed not to obtain such a policy;
5. That the mortgagor acknowledges he has been notified
prior to closing or knew and understood prior to closing
that the mortgagor's interest might be better protected
by the engagement of independent counsel.
There appears to be nothing improper with the basic facts set
forth in the question and in the manner of representing the lending
institution. The fact that banks have for many years required
borrowers to pay for the costs of settlement, including a
reasonable attorney's fee to the bank's attorney, is well
recognized. See N.J. Advisory Committee on Professional Ethics,
Opinion 27, 87 N.J.L.J. 97 (1964).
However, the attorney should, upon receipt of notification
from the lending institution of the mortgage application,
immediately notify the borrower in writing, in clear language, that
he represents the lending institution only, that his charges will
be $175 for attorney's fees and $100 for procuring a mortgagee's
title policy; that the attorney will procure an owner's policy (at
additional cost to the borrower) if requested, but not otherwise,
and that his interests would better be protected if he engaged an
attorney of his own choice.
In N.J. Advisory Committee on Professional Ethics, Opinion 7,
86 N.J.L.J. 405 (1963), we indicated it was the duty of the
attorney for the lending institution to advise the purchaser well
in advance of settlement to engage independent counsel.
Most purchasers do not understand that the attorney for the
lender does not represent the borrower. It is true that the
interests of the mortgagee and of the purchaser are as to title, in
most cases, the same. But any notification which is not clear and
unequivocal and given well in advance of settlement is not in
accordance with the ethical standards set forth In re Kamp, 40 N.J.
588 (1963). See also this Committee's Opinion 51, 87 N.J.L.J. 705
(1964).
* * *
This archive is a service of
Rutgers University School of Law - Camden