A Call For Low-Cost Closings
|June 10, 2002|
FTC Staff Members Say North Carolina Closing Policy Requiring Lawyers Costly, Meaningless
Inman News Features
Two members of the Federal Trade Commission's Office of Policy Planning testified today before the North Carolina State Bar's ad hoc committee on residential real estate closings urging that the Bar reconsider two recently adopted opinions that prevent non-lawyers from competing with lawyers in performing real estate closings in the state.
Issued last year, the two opinions, together with previous North Carolina Bar decisions, require the physical presence of a lawyer at all residential real estate purchase closings and refinancings.
The meeting was set up to help the committee assess how to respond to a Dec. 14 joint letter from the FTC and U.S. Department of Justice that similarly suggested the state bar reconsider the two ethics opinions.
OPP Deputy Director Dr. Jerry Ellig and staff attorney Maureen Ohlhausen explained how the opinions likely would harm North Carolina consumers.
Ellig said that the restrictions likely would harm consumers and diminish competition from national, Internet-based lenders.
"North Carolina consumers would be much better off if they could choose whether or not to hire a lawyer -- the Bar shouldn't force them to hire a lawyer for every real estate closing and refinancing," said Ellig.
"Internet-based lenders would have to hire North Carolina attorneys or duplicate the local lenders' network of bricks-and-mortar offices, which might negate many of the cost savings that e-lending makes possible," said Ellig.
Ohlhausen said that there is no significant consumer protection rationale for forcing all borrowers to pay for an attorney to be present at closing.
"The FTC has prosecuted numerous deceptive lending cases, and the deception often involves oral misrepresentations that occurred prior to closing," she said. Ohlhausen also doubted that the opinions would provide much consumer protection. "The opinions just say that an attorney has to be present; there's no requirement that the attorney represent the buyer or borrower."
The December 14 letter, signed by FTC Chairman Timothy J. Muris and DOJ's Assistant Attorney General for Antitrust Charles A. James, cited evidence from other states showing that non-lawyer closings save consumers significant amounts of money.
A 1996 study found that in Virginia, median costs for non-lawyer closings were $150 less than closings handled by a lawyer. In 1995, an investigation conducted for the New Jersey Supreme Court found that in parts of New Jersey where non-lawyer closings are prevalent, buyers on average paid $350 less and sellers paid $400 less.
Copyright: Inman News Service