Why Do Lenders Insist On Their Own Lawyer?

As the lawyer woke up after surgery, he said” “Why are all the blinds drawn?” The doctor answered: “There’s a big fire across the street, and we didn’t want you to think the operation was a failure.”

All lawyer jokes aside, paying for their own legal fees and those of the lender is no laughing matter for borrowers at closing.

With conventional mortgages, the same lawyer typically acts for both the lender and the borrower.  So why are there two sets of lawyers in non-bank mortgage transactions?

There are two reasons for this:

• The Law Societies want to see borrowers independently represented in private mortgage transactions.There are restrictions that are put on lawyers to prevent them from acting on the part of both the lender and borrower.
• Secondly, if a conflict presents itself and the mortgage goes to foreclosure and had the lawyer represented the lender and borrower, they may not be able to act on behalf of either party.

Since lenders choose their lawyers very carefully, they don’t want to have to retain someone else due to a conflict.

While the borrower may not like the extra cost, they will be getting legal advice at closing that is truly independent and free from conflict.  And when we think about what is at stake, this probably isn’t a bad idea after all.