A typical Borrower at Closing:
I’m being charged $100 for a “document preparation fee.” What the @#%^!$ is a “document preparation fee.” I was never told about that!
One can easily imagine such statements being made at many real estate closings. I myself remember my first closing on a mortgage and being bewildered by the fees and costs that suddenly appeared. A case from the Second Department last week illustrates that some intrepid borrowers are not willing to sit back and take it. They did something about it, and actually raised an interesting argument. They were unsuccessful, but they should be applauded.
The case was Fuchs v Wachovia Mtge. Corp., 2007 NY Slip Op 04784. The plaintiffs obtained a mortgage loan from the defendant in July 2003. The settlement charges paid by the plaintiffs included a $100 document preparation fee. Thereafter, the plaintiffs commenced a class action on behalf of themselves, and all others similarly situated, alleging that the defendant’s receipt of the “document preparation fee” essentially constituted an unauthorized practice of law in violation of Judiciary Law § 478, § 484, and § 495(3), and constituted a deceptive practice under General Business Law § 349. Those provisions provide in relevant part:
§ 484 – No natural person shall ask or receive, directly or indirectly, compensation . . . for preparing deeds, mortgages, assignments, discharges, leases or any other instruments affecting real estate . . .
§ 495(3) – No voluntary association or corporation shall ask or receive directly or indirectly, compensation for preparing deeds, mortgages, assignments, discharges, leases, or any other instruments affecting real estate . . .
Interesting argument right? Well the Second Department quite didn’t buy it essentially because of the nature of the document prepared. As was indicated by the Court, in connection with their business of making loans secured by mortgages, the defendant’s employees only completed certain blank lines contained in a standard “Fannie Mae/Freddie Mac Uniform Instrument.” It was acknowledged in the appeal that the factual information written into the form by the defendant’s employees was limited to the name and address of the borrower, the date of the loan, and the terms of the loan, including the principal amount loaned, the interest rate, and the monthly payment. In addition, the plaintiffs, who were represented at the closing by their own attorney, did not allege that they sought or received any advice or opinion from the defendant regarding the mortgage transaction. Based on these factors, the Second Department affirmed the award of a motion to dismiss for failure to state a cause of action (CPLR 3211[a]).
There is only one appropriate comment to make: Being charged $100 for filling in the blanks for name, address, and terms of a loan on a standard form? Why didn’t I become a banker?