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                                         115 N.J.L.J. 613
May 23, 1985


Appointed by the New Jersey Supreme Court


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.

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