As mentioned in last months issue of this publication, "witness" or "courtesy" closings have been a hot topic among North Carolina real estate attorneys and the Bar this year. Responses to our request for feedback ranged from no knowledge of the problem to a complete refusal to accommodate these transactions. While opinions were all across the spectrum, it appeared that most attorneys were appreciative to have an opportunity to discuss the problem and attempt to find a solution.
As we discussed, a witness closing is where a party is asked to perform what is a basically a notary function of "witnessing" the execution of loan documents prepared by the lender or an associated party. Witness closings have evolved and become more prevalent as the number of out of state lenders conducting transactions in North Carolina has risen. While attending an American Land Title Associations "Title Agents Seminar on Strategic Alliances" in Chicago earlier this month, the keynote speaker (Robert Porter Lynch, President of the Warren Company) said that "lenders and borrowers drive the train, and the title industry is the caboose" when it comes to the real estate lending process.
He went on to say that title companies have little control over the transaction process and are considered a necessary evil that slows down the real estate transaction process. Being an attorney state, our real estate attorneys are considered a part of that slow down. Lenders are forming strategic alliances in order to create a networked enterprise. As a result, the trend will be for prices and profit margins in the title and legal industry to decrease as transaction speed and accuracy increase. We will address this issue in depth in a subsequent issue of this publication. The point is, however, that the lenders are going to find ways to speed up the transaction process whether we like it or not. Witness closings are a part of this process. The question is, can we find an acceptable way to accommodate transactions involving witness closings in a way consistent with our state law and ethical considerations?
Listed below are the main concerns voiced by those attorneys who responded. Respondents were real estate attorneys throughout the state, including several associated with the Real Property section of the Bar.
After soliciting your feedback, we contacted legal representatives of several of the major national underwriters. We expressed the concerns of the North Carolina attorneys, and asked for input on drafting a disclosure form that would accommodate the transaction requirements of the lenders, the legal and ethical concerns of the attorneys, and the interests of the borrowers. The following "Disclosure Concerning Role of the Closing Agent" form is an attempt to resolve the issues and questions concerning the Real Property Bar. As we have stated repeatedly, Statewide stands by the rules and regulations set forth in our attorney state system, but realize that we must collectively find ways to accommodate the constantly changing demands of regionally and nationally driven real estate transactions. For additional feedback contact Harry at (800)821-5414.
DISCLOSURE CONCERNING ROLE OF CLOSING AGENT
SETTLEMENT DATE: _____________________ LOAN AMOUNT: _______________
This Disclosure contains important information concerning the role of the Closing Agent in the settlement of the loan transaction between the Lender and Borrowers as identified above. If less than one Borrower is named above, the term "Borrowers" refers to the one borrower.
The undersigned Borrowers have read the following disclosure and understand that:
The Closing Agents involvement in this transaction has been to (1) review title issues for the Lender concerning the property securing the loan (the Closing Agents representation of the Lender does not extend beyond this review) and (2) to witness and notarize documents involved in this transaction. The Lender has prepared all loan documents in this transaction. The Closing Agent is not responsible for errors included in the loan documents.
The Closing Agent does not represent the Borrowers, and the Borrowers have received prior notice that the Closing Agent does not represent them. The Borrowers have had the right and adequate time to obtain an attorney of their choosing to represent their interests.
The Closing Agent has given no advice to the Borrowers or Lender regarding usury, homestead rights, marital interest rights, creditors rights, including ownership and title to the land, compliance with any federal or state laws, requirements relating to home equity loans, the rights of any third parties regarding this transaction, or any other matter.
This the ________ day of _____________, ___________.