115 N.J.L.J. 613
May 23, 1985
OPINION 557
Mortgage Broker Extending Preferred
Placement Fees to Selected Attorneys
This inquiry deals with a proposal on behalf of a group of
attorneys who seek to place a series of advertisements offering to
obtain loan commitments from a particular lender at lower than
market placement fees. Although the lender makes the arrangement
with attorneys of its own choosing and will pay for a portion of
the advertising, the attorneys are not to be affiliated with one
another. An advertising agency is to bill the attorneys and lender
as may be determined from time to time. The advertisements are on
behalf of all of the attorneys available under the plan, and
identify where they may be reached. We are asked whether or not
payment of part or all of the advertising cost by the lender
affects the propriety of the arrangement. There is no arrangement
with the lender as to attorney's fees.
What we have here may be described as a "power broker" set up.
The lender selects or invites a particular group of attorneys to do
the advertising and pay all or part of that expense. The inducement
in the advertisement is that the attorneys selected have access to
the below market fees. The attorneys in turn seek to perform the
closings so generated.
A proposal of the above nature is to be judged by reference to
its capacity to fairly advertise availability for legal services
without in any way misleading readers interested in obtaining legal
services. See RPC 7.1(a).
This project sets up an exclusive group of lawyers who
publicly assert their ability to place loans at rates which by
inspection appear below market. The advertisements say nothing
about special expertise or legal skill and omit mention of legal
fees and closing costs other than the "points". As to the lender,
the advertisements say nothing about specific interest rates.
Except for the inclusion of the attorneys' names and addresses, the
proposed advertisement is strictly about and for the lender named.
In effect, the lender is saying that the particular attorneys named
are able to offer better loan commitment terms than attorneys not
so named. We believe that for these reasons the material tends to
mislead the average interested person (if not the sophisticated
developer) as to the legal expertise of the advertisers.
We also are of the opinion that the arrangement between the
lender and each attorney on the list affects the independence of
such participating attorneys. Even though no money is paid by the
lender, the fact that an attorney is permitted to use the lender's
name in this fashion is of value to that attorney.
A lawyer undertaking a real estate matter owes the client a
duty to exercise independent judgment. RPC 2.1. The above proposal
will compromise that independence. We also disapprove of the
proposal for the reasons that each attorney participating is giving
value to the lender who in turn appears to the public reader to be
recommending the services of the attorneys listed. This is
objectionable under RPC 7.2(c). See also, In re Kamp, 40 N.J. 588
(1963).
In view of the above, the question whether the lender pays all
or a part of the advertising expense has no bearing on the result.