July 27, 2017
On July 19, 2017, the South Carolina Supreme Court issued a declaratory judgment finding that an online mortgage lender and a settlement services and title insurance provider did not engage in the unauthorized practice of law when they refinanced home mortgage loans.
Quicken Loans, Inc., a nationwide online mortgage lender, provides borrowers residential mortgage loan refinancing. Under the refinance procedure in question, the borrowers have already purchased the property and are merely seeking a new mortgage loan. Upon contacting Quicken Loans, each borrower is informed that they have the right to legal counsel. If the borrower does not retain legal counsel, Quicken Loans engages TitleSource, Inc. to provide the necessary settlement services. TitleSource then subcontracts with various individuals and entities to perform those services in compliance with state law.
In South Carolina, a refinance process does not constitute the unauthorized practice of law as long as: (1) a licensed South Carolina attorney is involved in each critical stage of the process; and (2) the attorney exercises independent professional judgment, including making corrections if necessary, throughout the process. The critical stages of a residential real estate purchase transaction are: (1) the preparation of deeds, notes, and other instruments of real property; (2) title examination and the preparation of title abstracts for non-attorneys; (3) overseeing real estate and mortgage loan closings and instructing borrowers how to execute legal documents; (4) the recording of these documents; and (5) the disbursement of the loan proceeds. See State v. Buyers Serv. Co., 292 S.C. 426, 430-34, 357 S.E.2d 15, 17-19 (1987); Doe Law Firm v. Richardson, 371 S.C. 14, 18, 636 S.E.2d 866, 868 (2006).
The court found that Quicken Loans and Title Source had sufficiently utilized a licensed South Carolina attorney at each critical stage and that the attorney had remained independent in their judgment. The court reached this conclusion even though non-attorneys prepared the mortgage instruments and title abstracts, because the attorney in each instance carefully reviewed the documents with independent professional judgment.