May 18, 2016
Texas Lender Clients,
Re: “Texas unauthorized practice of law violation” aka “Plaintiff’s free ticket to the court house for a TRID violation”
We have many new clients because of the new TRID complexities. Welcome!
If you are a new Texas lender client, you may not be very familiar Texas unauthorized practice of law ("UPL") requirements.
Independent Bankers Association of Texas (IBAT) recently answered the following questions in their “May Bankers Prepare Loan Documents on Real Estate Secured Loans? Unauthorized Practice of Law?” Legal Ease Q&As:
It has come to our attention that Chapter 83 of the Texas Government Code requires Texas attorneys to prepare the documents on real estate transactions within the State of Texas.
- If we do not charge a fee for document preparation, are we exempt from Chapter 83 requirements?
- By having a Texas attorney on staff, who has approved the documentation we utilize for residential borrowers, are we absolved from utilizing a Texas attorney for each single-family transaction that we close?
IBAT answered NO and NO. Please read the actual Q&A:
Our law firm is of the opinion that a "legal review" of the referenced "documents affecting title to real property" produced by a lender also meets the 83.001 Texas UPL requirements.
The damages for violation of 83.001 are in 83.005 (emphasis added):
Historically, the danger of a Texas UPL violation to a lender has been minimal. To date class action efforts have been unsuccessful.
However, post TRID there may be a new risk. If a disgruntled borrower can prove a lender did not have a Texas attorney involved in their loan document process---a pretty simple task, no attorney invoice in the file---that gets them $200+/- (approximate attorney fee for a simple loan transaction whether charged directly or not), plus “court costs and reasonable and necessary litigation attorney's fees” PLUS A FREE SHOT AT A POSSIBLE TRID VIOLATION…the “actual damages” provision now in TRID!!! It is the free shot. Even if they lose their TRID claim, their homerun, they still get their “court costs and reasonable and necessary attorney's fees” for litigation paid for the UPL violation …bummer.
If you need us to “review” your "documents affecting title to real property" in a Texas loan transaction rather than prepare them for you, we can help you with that too.
For $100 (paid by the borrower) we can review the loan documents you produce so you can be compliant with Texas Government Code 83.001. You simply upload those documents to us with either a title commitment or title report and we will:
- review the loan documents for title insurability and Texas Government Code 83.001 purposes, and
- return a Texas attorney review certificate and attorney invoice for $100 to be paid by the borrower at closing
Typical turnaround time for this service is 2 hours. This service and pricing does not include any other audit or review service. Additional review services like survey, POA, trust and land lease reviews are not included for that price, but are available from us upon request for an additional fee.
Contact us if we can help you with your “legal review” of Texas loan documents that you prepare.
Here is a link to a sample package and video: Sample Review