While this topic continues to generate a wide variety of lively discussion, we seem to have found some common ground on which these transactions can be accommodated within the parameters of North Carolina state law and ethical considerations. By providing a forum for discussion of this issue, Statewide has taken some criticism. However, it is our opinion that collectively we must address this issue and work with the lenders to find a way to provide the services required without the circumvention of the attorney state process. We stand firmly behind our attorneys and the North Carolina attorney state system.

Both at our seminars and through direct feedback, it seems that the number one concern from North Carolina attorneys on this issue regarding witness closings is the erosion of the attorney process. In this case, primarily pertaining to equity line transactions. We have all seen or heard of lenders and others who are attempting to use abstractors, paralegals and legal secretaries to prepare title opinions. These opinions are then used to prepare the closing documents. At this point, lenders without a physical presence in North Carolina are forced to find a local attorney to perform the witness closing. This is the wrong way to accept a witness closing order. Anyone having knowledge or even suspicion that the title opinion and associated loan documents were prepared by a non-attorney (or a person not under the direct supervision of a North Carolina attorney) should contact either Statewide or the NC Real Property Bar for investigation.

On the other hand, there can be a right way for these transactions to work. Both Statewide Title and it’s subsidiary, Statewide Mortgage Services, Inc. (SMSI), have been working with members of the Real Property Bar and lenders to educate lenders on the way our legal process works. Many out of state lenders, particularly the smaller lenders, simply are ignorant of our state real property laws. The attorney state system is very foreign to them and it takes a lot of explanation (and patience at times) to make them aware of the way these transactions must be conducted to satisfy the law. Their number one goal is to get the loan closed as quickly and inexpensively as possible. It is our challenge to provide them with the legal assistance they need, while at the same time satisfying our professional responsibility and reasonable fee structures.

There are well over 100 out of state lenders who are licensed to do business in our state who do not have a physical presence here. That number continues to grow. A large majority of their lending is for equity line purposes. Statewide has taken the position that this is a substantial business opportunity for North Carolina attorneys. However, we must be willing to stand by our system and to accept the national fee schedules associated with these limited transactions. As a result, we have established the following guidelines by which we will accept the placement of witness closings with our StateNet™ attorneys.

• The preliminary title opinion must have been prepared by a licensed North Carolina attorney. SMSI was created to take these orders and distribute them to North Carolina attorneys participating in StateNet™.
• In the vast majority of cases, the witness closing will be performed by the same attorney who prepared the preliminary opinion of title. We will make every effort possible to have the same attorney conduct both sides of the transaction. In some circumstances, such as a vacation or timing problem with the certifying attorney, we may be forced to place the closing with a different attorney in the same area. In any case, however, the closing attorney will be assured that the title examination was prepared legally and ethically.
• Lender clients will be instructed to notify the borrowers in advance that the attorney is performing in a limited professional capacity and does not represent them. With your feedback and that of some members of the Real Property Bar, we have developed a disclosure form to further clarify your position with the borrower.
• Your function will be strictly to witness execution of the loan documents. With the relatively low fee structures associated with these types of transactions it is important that this is clearly understood by the lenders and borrowers. Any additional duties will require increased fees.
• Work performed is work paid. Due to the high number of cancellations on these transactions, a number of attorneys have had bad experiences attempting to collect payment for services rendered. While we have every intention of placing both the title examination and closing with our StateNet™ attorneys, the reality is that a large number of them will never make it to closing. SMSI contractually obligates it’s lender clients to pay for work performed by our attorneys whether it cancels or not. We will guarantee payment to our attorneys.

We hope that this statement of our position will clarify the issue and help you to determine whether your firm can accommodate these types of transactions. As stated before, Statewide has chosen to address this issue and take a stand to both support and clarify our attorney state system while at the same time accommodate the transaction needs of lending institutions from around the country.