Over the last several years, many Massachusetts homeowners may have experienced a real estate closing unlike those that they typically were party to in the past. These closings were conducted either at their home by an attorney or at a bank branch by non-attorney bank personnel. The agent for the lender simply witnessed the documents and notarized the homeowners' signatures.
While the closing process may have been convenient for the borrowers, the practice was challenged legally by organizations that supported real estate closing attorneys. In their view, conducting real estate closings involved the "practice of law" that could not be delegated to witnesses unfamiliar with the entire transaction.
The matter is still being litigated, but the real estate bar won a crucial victory with the recent decision of Real Estate Broker Association (REBA) v. National Real Estate Information Services (NREIS). The Massachusetts Supreme Judicial Court ruled that attorneys must be present for closings and take an active role throughout the entire transaction. The Court made no distinction between purchases and refinances.
While many of you may think that attorneys are simply fighting to protect their pocketbooks at the expense of borrower's convenience, I couldn't disagree more. I have conducted real estate closings for more than 25 years and can attest that the legal fee that a closing attorney gets from a lender today is less than what it was 25 years ago! The fierce national competition that exists in the mortgage financing industry has forced all lenders to reduce fees to compete. Lenders have required their closing attorneys to accept lower fees to keep working for that lender.
Consumers definitely benefit from attorneys handling real estate closings as opposed to "witness" closings. A witness closer will not answer any of your questions concerning the loan documents as he is paid minimally to witness only your signature. In addition, he comes to the closing without any knowledge of the title to the property and cannot answer any questions regarding those matters. Last, as a closing attorney, I frequently encounter undischarged mortgages that were paid off as part of a "witness" refinance. In those instances, I have no attorney that I can contact to obtain the discharge since the only information available is the notary's name on the current mortgage and that person's position is that he was simply a witness and not responsible for any other part of the process.
While the litigation is still on-going, I believe strongly that having attorneys handle all aspects of a real estate closing provides quality and accountability to the closing process. The lack of accountability associated with witness closings is a detriment to homeowners.