February 1, 2002
Bruce B. MacDonald, Esq.
1940 Commerce Street
Yorktown Heights, NY 10598
Re: Attorney Assisted Mortgage Applications
Dear Mr. MacDonald:
Your November 21, 2001 letter to the Superintendent of Banks, which requests, an opinion as to whether a residential mortgage origination process program ("Program") offered by an attorney in connection with Attorney Mortgage Services ("AMS") would be permissible under New York Banking Law, has been referred to me for response.
Enclosed with your letter was a newspaper article describing the Program as well as an AMS marketing brochure. AMS, which currently only provides this service in Florida, offers mortgage loans with wholesale interest rates to borrowers that retain attorneys enrolled in the Program. By bypassing traditional retail mortgage lending outlets to obtain mortgage loans with the lower wholesale interest rate, borrowers achieve significant savings over the life of the mortgage loan as a result of the lower monthly payments. While AMS does not mark-up the wholesale interest rate, it does charge the borrower a fee for processing the mortgage transaction.
Under the Program, enrolled attorneys do not charge their clients a separate fee for providing access to these mortgages but rather provide this service as part of their representation of the borrower in connection with the entire mortgage transaction.
Section 590(2)(b) of the Banking Law provides that a person must be registered as a mortgage broker if he engages in the business of soliciting, processing, placing or negotiating a mortgage loan, or offering to do the same. However, Banking Law §590(2)(b) also provides that an attorney-at-law who solicits, processes, places or negotiates a mortgage loan "incidental to his legal practice" shall not be deemed to be engaged in the business of a mortgage broker. Since this service is part of the attorney's overall representation of the client in the mortgage loan transaction and the borrower is not charged a separate fee in addition to an attorney fee for representation in the transaction, an attorney would not be required to become a registered mortgage broker to provide his client with access to a mortgage loan through AMS.
Thank you for your attention to the above.
Very truly yours,
Alvin A. Narin