120 N.J.L.J. 1112
December 10, 1987
Attorney for Mortgage Lender
Performing Services for Borrower
The inquirer, as attorney for a lending institution
representing it in a mortgage loan transaction, proposes to perform
the title search, provide for insuring the title and presumably
prepare the note, mortgage, and other closing papers. The attorney
will bill the lender for such services. The lender, in turn, will
bill the borrower for that work and advise the borrower that the
attorney will close the mortgage loan at the attorney's offices and
that the borrower may secure his own attorney to represent him if
he chooses. The inquirer asks whether this procedure is in
violation of the Rules of Professional Conduct.
Our answer is a clear "yes." We regard the proposed plan as a scheme to avoid the provisions of N.J.S.A. 46:10A-6, which prohibits a lending institution from requiring a borrower of a loan to be secured by a mortgage to employ the services of the lender's counsel or an attorney specified by the lender. The statute provides that:
No banking institution or other financial institution authorized to engage in the business of making loans secured by mortgage, hereinafter referred to as a "lender," shall require a borrower of a loan to be secured by a mortgage on real estate, to employ the services of the lender's counsel or an attorney specified by the lender but the borrower shall have the right to be represented in the transaction by an attorney at law of New Jersey of his own selection.