Attorney requesting permission to represent lender too

First-time homeowner question: we’re in-contract on a house and our attorney just requested permission to also represent our lender. Would love to learn if this is normal and okay? The lender is a big bank and the legal firm is a fairly large/respected outfit.

Here’s the copy of the letter they’d like my wife and I to sign:

“Please be advised that XXXXX (“XXXXXLawyer”) represents XXXXXBank (the “Lender”) and as such, at your closing XXXXXLawyer will provide the
appropriate banking documents from the Lender for your review and execution including,
but not limited to the mortgage and the note. Prior to the closing you will be advised by
the Lender of the amount approved for financing as well as the terms, such as the interest
rate and maturity date. XXXXXLawyer will answer all your questions regarding those documents.
Nevertheless, this letter informs you of the potential conflict and your right to retain other
bank counsel if you wish. If after reading this let ter you consent to XXXXXLawyer representing
you and the Lender, please indicate by signing below in the lower right-hand corner.”

true

in General Discussion 5 years and 9 months ago

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BKALLDAY | 5 years and 9 months ago

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Take a HARD pass on that… Good luck.

hkapstein | 5 years and 9 months ago

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1 in 1000 times it goes wrong with the one attorney, but 1 in 50 times it goes wrong with 2 attorneys.

slopefarm | 5 years and 9 months ago

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I was not a first timer. And no, it wasn’t the attorney for closing that botched the calculations, but the bank. I would, and have, closed on a refi without counsel. But with real property changing hands, I want my own counsel, no divided loyalty. Something goes wrong maybe 1 in 1000 times. For that very rare occurrence, I just don’t see it worth taking the chance.

hkapstein | 5 years and 9 months ago

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I think it’s one of those things where if you’ve done a couple transactions, you’d probably realize that separate attorneys is a formality you can do without, but for the first timer it may seem scary to waive any sort of rights.

Guest User | 5 years and 9 months ago

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So, in conclusion, we have several people that used the same attorney and never had any issues. On the other side, we have people who used different attorneys and keep having issues with “botched numbers”. The most hilarious quote is that you would need an attorney to catch a $5,000 mistake, as if for some reason lawyers are better than anyone else at basic math.
Maybe people in this forum are going into very complex lending structures. If you are getting a fixed rate loan I really don’t see how you need a lawyer to find an error and, beyond that, why a lawyer representing only you would find the error but one that represents also the lender wouldn’t.
I am curious to know what the OP ended up doing.

hkapstein | 5 years and 9 months ago

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Wouldn’t your attorney be more likely to make sure the paperwork didn’t get botched than the bank attorney? Bank attorney doesn’t really care that much if the deal closes. I don’t see why you think your attorney would not check for errors if also representing the bank. The bigger hazard would seem to be for the bank’s interest.

slopefarm | 5 years and 9 months ago

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I agree with my neighbor So Slope here. At one closing, the lender botched the paperwork and calculations, leaving us short on certified checks needed to satisfy the bank at closing. The seller sought to default us. Our attorney had to negotiate aggressively for the bank to accept personal checks against normal policy. I would not have wanted our attorney to be conflicted in that situation.

SoSlope | 5 years and 9 months ago

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One more point: if this is really a large lender, it is bizarre that they do not have a go-to bank attorney (or several) in a city as large as New York.

SoSlope | 5 years and 9 months ago

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This is not a positive. I would not agree to it.

You are paying an attorney to represent your interests in two transactions: a purchase (facing off against the seller) and a mortgage (facing off against the bank). It is true that you will not be able to negotiate the form of mortgage with the bank, but in 1 of my three mortgages, the bank made a material error (that would have cost me $5,000 cash). It is that type of error that you will need an attorney to catch unless you are extremely familiar with loan docs and terms and intend to sit at the closing table reading each page before you sign in (as I did).

If you are comfortable representing yourself in the mortgage transaction (as most people do in a refi), then you should cut your attorney’s fee in half since he or she will be compensated by the bank for the mortgage transaction. I don’t advise this, but it is up to you.

Finally, I agree with @brokelin and would have serious questions about an attorney who even proposed this to his or her client. A normal request to waive conflicts involves a situation where a firm represented one party on a previous matter and now wants to represent an adverse party on a current matter (usually by a different attorney at the firm). This is very different and a far more direct conflict. There are ethical questions about why an attorney would be comfortable doing this.

panda10 | 5 years and 9 months ago

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This happened to me 2x and I view this as a positive. More people involved in closing means more can go wrong. Really nothing because the lender’s interest and your interest is aligned. You both want to close and have adequate security for the loan.

hkapstein | 5 years and 9 months ago

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Few people, if any, would even bother to have an attorney even review the same type of mortgage agreement for a refinance, or home equity loan. But here you are worried that your attorney might conspire with the bank to perpetuate an unintentional error in the terms at the closing that he/she might have contested if not representing the bank? The likelihood seems vanishingly small, but even if it happened, you’d be covered by the lawyer’s malpractice insurance.

Also, I doubt the bank would change the docs at the closing. They would probably have to reschedule the closing to remake the docs and go through their compliance process.

brokelin | 5 years and 9 months ago

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Yes, you have the terms before closing. But you need to be sure that those terms are correct in the mortgage, and you need to make sure there is nothing else that contradicts them, or something else in there that should not be there.

If you found something in error, or that you would not agree to, your only option would not be to stop the closing – after all, the bank wants to make the loan to you, too, that’s how they make a profit. If you find an error, the bank will likely correct it, and if you find a clause that should not be in there, you can ask the bank to remove it. People make mistakes all the time – even bank attorneys.

Guest User | 5 years and 9 months ago

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I reiterate and agree with Urbandad, you can talk about a lawyer “representing your interests” all you want, but the reality is that, unless you are a developer getting a mortgage for tens of millions of dollars, you will negotiate your mortgage terms with a salesperson and not a lawyer, and you really don’t need to read the contract because it’s standard. You really only need to make sure you can pre-pay and you can re-cast whenever you want. Again, things you will discuss with the bank salesperson.
For the record, my wife did not know or have a relationship with that lawyer and she still thought it was not an issue. Good luck!

hkapstein | 5 years and 9 months ago

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Imagine you are refinancing your house in a couple years. Do you hire a lawyer to review the mortgage? Would you have an attorney review a student loan, or a credit card application? I don’t speak for everyone, but I don’t know anybody who did that.

For this deal, are you gonna change your bank at the closing because of something in mortgage contract? In theory you could refuse to close, but from a practical perspective that’s not the time to decide you don’t like the loan. In my opinion, a more realistic possibility is the independent bank attorney is late, or doesn’t show up so the closing is delayed, and your attorney bills you extra.

Now I wouldn’t say that would apply if it’s a hard money loan for a vc deal or something, but in that case the lender would definitely have their own attorney.

So there you have it, not everyone is comfortable with this, and you can see the reasons.

brokelin | 5 years and 9 months ago

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There are not “three sides” in this deal. There are TWO SEPARATE DEALS going on when the buyer takes a mortgage. One is the purchase of the property by the buyer from the seller. The other is the taking of the loan by the buyer from the mortgage bank. (If the buyer doesn’t take a mortgage, this second deal isn’t happening in that particular sale.) When the buyer takes a mortgage, it is a completely separate agreement from the purchase and sale agreement – the seller is not a party to the mortgage agreement deal at all.

Yes, mortgages are somewhat standard agreements. But can have many differences, depending on who the lender is, and a lender can always add or change clauses, and an attorney can make mistakes, etc.

Yes, your wife who is a lawyer was comfortable with the same law firm representing the bank. In that case, each lawyer owed a duty to their particular client, and did not owe a conflicting duty to the other party – which would be the case whether they work for the same law firm or not – completely different situation. I bet your lawyer wife was com fortable because she read the mortgage contract herself (and you likely didn’t, as most non-attorney buyers don’t), and/or she also had a previous relationship with the lawyer representing you which meant she trusted that lawyer.

If you can have someone who represents only your interest in a transaction, and doesn’t also represent the large institution from which you are taking the largest loan you likely have ever taken, why would you NOT have an attorney who represents only you? It is common sense, and good legal sense, too.

Guest User | 5 years and 9 months ago

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This is not a case of a lawyer wanting to represent “both sides of a transaction”. The transaction is between buyer and seller, and in this case the lawyer also represents the lender.
We had this happen to us in the recent purchase of our house. The bank was Wells Fargo and the same law firm (not the same lawyer) represented both us and them.
My wife is a lawyer and she was absolutely not worried about this and said it’s common. If it was buyer and seller it would be weird, but the lender lawyer in a transaction like this only fills forms and makes sure all the paperwork is there. It’s not like you are going to negotiate a mortgage contract with the bank. These are all standard contracts.
It actually makes things simpler because there’s 1 less party you need to coordinate with for the closing.
I would go ahead and not worry about it.

hkapstein | 5 years and 9 months ago

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There are three sides in this deal. The buyer, the seller, and the bank. I can see why the bank may not want your attorney to represent them at the closing, but if it’s ok with the bank, what’s the problem? With this kind of transaction there usually isn’t any negotiating with the bank at the closing. Perhaps the buyer’s attorney would be less likely to stop the closing for a technical issue than would an attorney solely working for the bank, but that’s the bank’s problem, not yours. Perhaps if the bank was not on the up and up there could be an issue, but even then I doubt a decent attorney would try to get you to agree to something inapropriate in the mortgage.

If you’ve ever been no showed at the closing by a bank attorney, you might even see a real advantage to this setup. Keep in mind this is not professional advice, just my opinion.

brokelin | 5 years and 9 months ago

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An attorney cannot properly represent both sides to a transaction like this (which is likely why the bank mentioned in the previous comment turned down the request.)

You need to drop this lawyer and get a new one ASAP – I would say “shame on you” to any attorney who made this request of me after I engaged him or her for my closing.

sixyearsandcounting | 5 years and 9 months ago

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Our lawyer made a similar inquiry when the bank couldn’t find anyone (not sure why), but it was turned down by the bank.