ANDREA NUCIFORO Jr.
Ensuring ‘consequences’
As the legislative season wraps up, the Real Estate Bar Association for Massachusetts is working with the Massachusetts Bankers Association on a bill to restructure mortgage discharges, while at the same time REBA is fighting another piece of legislation intended to allow non-lawyers to conduct title searches and other mortgage closing work.
Filed by the conveyancing attorneys group, the mortgage discharge bill, S. 2386, would require a mortgage company or bank to provide a written payoff statement within five business days of the date of request and establish a pre-paid single recording fee that would include both the recording and the discharge fees.
If a mortgage company or bank does not record a discharge within 45 days, it could face civil penalties of $2,500 plus attorney fees.
“It is a critical bill,” said E. Christopher Kehoe, a partner at Boston-based Robinson & Cole and president of REBA. “The real consensus on this was that something has to be done.”
James Dougherty, executive director of the Massachusetts Mortgage Association, said the mortgage industry was in favor of the bill and would like to see discharges made in a timely fashion.
Kehoe recently testified before the state Legislature’s Joint Committee on Banks and Banking, which currently is considering the bill, saying that, in 2003, he closed 500 residential transactions and one out of five had a missing discharge problem.
“Missing discharges can prevent consumers from closing loans within their rate-lock period, prevent sellers from selling their homes and prevent lenders from booking loans on a timely basis,” Kehoe said in his statement.
Rep. John F. Quinn, D-New Bedford, co-chairman of the bank committee, said missing discharges have been a major headache for many people in the commonwealth.
“There is extreme frustration from consumers, as well as people involved in the lending industry,” said Quinn.
He said he hopes the penalties will act as a deterrent.
“Having deadlines will make them [lenders] comply,” Quinn said.
Quinn echoed Kehoe’s words, saying holding a loan even a few extra days can cost borrowers more money.
Sen. Andrea Nuciforo Jr., D-Pittsfield, was a lead sponsor on the bill, which has been in the drafting phase for several years, and said the problem with missing discharges has been acute for a decade. Part of the problem, Nuciforo said, is the lack of substantial penalties for failure to record discharges properly.
Nuciforo noted that in Delaware, mortgage holders who don’t provide a discharge are fined $1,000. In Washington, D.C., lenders and mortgage servicers are fined $50 each day the discharge is not issued. A $100-per-day penalty exists in Kentucky.
But Paul Comerford, vice president of Mt. Washington Bank in South Boston and a member of the MBA’s Real Estate Finance Committee, said there are concerns within the lending community about the penalties.
Comerford said there are instances when the lender sends the discharges to an attorney to record. He said there is no provision in the bill to penalize an attorney who fails to carry out the assignment.
There are also lenders that, as a courtesy to the borrower, will record the discharge on behalf of the borrowers who at the end of the loan term. Comerford points out that lenders receive no confirmation from the registry of deeds once the discharge is recorded and is concerned the onus will still be put on the lender even if the discharge is sent to the homeowner.
Kehoe said the problem with missing discharges was exacerbated as rates spiraled downward and homeowners were frequently refinancing. He said lenders were simply not paying attention to releasing mortgages. But now, with interest rates increasing and the refi boom slowing to a crawl, Kehoe said mortgage companies have more time to determine how the problem of missing discharges should be solved.
Nuciforo said he has heard a lot of support for the bill from attorneys, primarily because they are the ones who have to “chase down the [missing] discharges.” However, Nuciforo said he understands the concerns raised by the MBA.
Close Call
As the MBA and REBA work with legislators to fine-tune and garner support for the mortgage discharge bill, the attorneys’ group is battling a more controversial proposal in the Legislature.
That bill, H. 180, sponsored by Rep. Paul Kujawski, D-Webster, would allow non-lawyers and title corporations to conduct title and mortgage work.
The Title/Appraisal Vendor Management Association, which is based in Pennsylvania, approached the Massachusetts Legislature 16 months ago after a court ruled that Foxboro-based Colonial Title could not do title work in the state without an attorney.
“It was a very unusual situation,” said Tom Lammert, chairman of government affairs for TAVMA.
Lammert said Massachusetts is the only state that has limitations against title companies working without an attorney agent.
Lammert said he believes attorneys have cornered a powerful position in Massachusetts and they have less incentive to price their services during real estate closings competitively. If the title industry were allowed into the arena, Lammert said, consumers – homebuyers and sellers – would gain more choices and flexibility. He said non-lawyers often make arrangements to conduct closing transactions during weekend and evening hours, something attorneys may not do.
But REBA and other Massachusetts lawyers disagree. Kehoe said the bill is simply an attempt by big businesses to come to Massachusetts to make money.
“They want to get into the business for nothing but profit,” said Kehoe. “It has nothing to do with protecting consumers. It would change the way things are done in Massachusetts.”
Lammert said the “big guy vs. little guy” theory is “irrelevant” to consumers, for whom cost and quality of service are the primary concerns.
Kehoe said despite what title companies may say about high attorney closing costs, there is so much competition for closing business in the state that fees stay down.
The average attorney fee for a closing in Massachusetts is $500, Kehoe said.
However, according to Jeff Schurman, executive director of TAVMA, the average attorney fee and title search costs between $650 and $800. He said with an additional $150 for non-discretionary fees, such as recording fees and municipal lien certificates, the transaction can cost between $800 to $950 per transaction.
“Then add $2.50 per $1,000 for title insurance,” he noted.
Schurman said title companies in Rhode Island and New Hampshire charge between $150 to $200 less than Massachusetts attorneys.
Peter Norden, regional vice president for New England at First American Title Insurance Co., said the Massachusetts branch of First American is standing by its local attorney agents.
“In my personal opinion, the system is not broken,” said Norden. “The attorney agents are doing a fantastic job. Consumers are better served by attorneys.”
John Davis, an attorney and owner of Stanton & Davis in Marshfield, said the out-of-state companies that are looking to take over have a weak defense. He said there has been an idea that if a lawyer is involved, the cost goes up.
But Davis said that is not true.
“I charge the same amount that I did in 1970,” said Davis. “It’s just so easy to throw it out there Â… [to] lawyer-bash.”
Davis typical charges $475 for a closing fee and charges a lower rate of $350 for first-time homebuyers.
Lammert, however, said that greater choice and competition would benefit consumers.
Davis said there are 6,000 attorneys that currently do title and other mortgage work in the commonwealth, providing a high degree of competition.
Kehoe and Davis argued that conveyancing attorneys are licensed and any wrongdoing can be reported to the Board of Bar Overseers, while consumers would have no recourse other than a court process if a dispute arose with a title company.
Kujawski did not return phone calls regarding H. 180, which is currently being considered by the House Ways and Means Committee.
