Mortgage Company Charging Fees for
Preparation of Legal Instruments.

Inquiry: A mortgage company prepares instruments used in first and second trust lending and charges the borrower the reasonable costs of preparing those instruments. It makes those charges in accordance with Virginia Code §6.1-330.70, which permits a lender to “require the borrower to pay the reasonable and necessary charges in connection with making the loan, including the cost of title examination, title insurance, recording and filing fees, taxes, insurance, including mortgage guaranty insurance, appraisals, credit reports, surveys, drawing of papers and closing the loan.”

The inquiry requests a reconciliation of Virginia Code §6.1-330.70 with Unauthorized Practice Rule 6-103(A)(4), which indicates that “[a] lending institution may in the regular course of conducting its business prepare a deed of trust or mortgage on real estate securing the payments of its loan, for which no separate charge shall be made.”

Opinion: The Committee believes the Unauthorized practice Rule cited is totally consistent with the language of the statute. A lender may require the borrower to pay these “charges” or it may pay them itself as is the case in many equity loans today. However, in either case, the parties receiving payment would be restricted to those legally entitled to make such charges.

Therefore, the lender or borrower would pay survey charges to the surveyor, title examination charges to the lawyer, title insurance premiums and binder fees to the title company, recording and filing fees to the Clerk, credit report and appraisal fees to the lender, etc.

Thus, in the case of legal instruments as defined in UPC 6-4, if the lender is going to prepare them, then it must do so without a separate charge. Otherwise, it is a “non-lawyer” practicing law outside the exceptions to the unauthorized practice prohibition of UPR 6-103(A). [See UPL Op. No. 94]

Summary: It is the unauthorized practice of law for a mortgage company to make a separate charge for the preparation of instruments affecting title to real estate in connection with a real estate mortgage closing. The committee notes that the Virginia Code §6.1-330.70 directs that the company may require the borrower to pay expenses reasonably related to the transaction; however, the parties receiving payment must be restricted to those who are legally entitled to make such charges. In the case of title instruments as defined in UPC 6-4, if the lender prepares them, it must do so without a separate charge. To the extent that this opinion, UPL Opinion No. 94 and UPL Opinion No. 109 are inconsistence with UPL Opinion No. 69, UPL Opinion No. 69 is hereby overruled. [UPR 6-103(A); UPL Op. 94]

Approved by the Supreme Court of Virginia
September 21, 1989
Effective January 1, 1990