Connecticut Real Estate Attorney Law Blog

While the topic of this blog post is titled "Do I need an Attorney for my Connecticut Mortgage Refinance?"  the better question is not if you NEED an attorney for your mortgage refinance in Connecticut, but SHOULD an attorney do your mortgage refinance closing?  Of course as a CT attorney performing many mortgage refinance closings, you may consider my answer biased, but I say why would you NOT want an attorney to do your closing?

Answers people may give are expense and/or convenience.

Based on my own experience, the answer to both questions is that the attorney is usually no more expensive and just as convenient.  I know in my own practice, my legal fee is very reasonable and is equivalent to that charged by non-attorney closing or escrow companies.

For every refinance someone or some company needs to do the closing.  This includes handling the funds, explaining the terms of your new mortgage, explaining the closing process, paying off your prior mortgage, overseeing the proper execution of the closing documents, recording the new mortgage, verifying the proper release of your prior mortgage, etc.  In Connecticut, refinance closings are currently handled by attorneys and by closing or escrow companies, which typically do not use an attorney to explaining or oversee the process.  As an initial matter, the only person legally able to perform all those functions is an attorney, since a non-attorney cannot legally explain the legal impact of mortgage documents, which is the practice of law.  So by not using an attorney you are losing the benefit of having an explanation fo what you are signing.  The escrow or closing company are also typically chosen by the lender, are unlicensed, and have no legal obligation to the borrower.  And after the closing, who do you ask if there is a question or a problem?  With a local attorney you have a knowledgeable individual, licensed by the State of Connecticut, subject to ethical guidelines, and whose bank accounts are subject to audit by the State of Connecticut.  Escrow and closing companies do not provide any of those protections.

But for many people, it is simply cost and convenience.  So I would urge potential borrowers to find out what the non-attorney is charging, and then find out what an experienced real estate lawyer, naturally such as myself, will charge.  I think you will be not only pleasantly surprised at the competitiveness of the attorney fees but their willingness to work with you and explain the closing process.  In my case, I personally provide all answers and advice, and I am glad to speak to people about the closing process and what to expect.

With the new RESPA guidelines applicable in 2010 and the new Good Faith Estimate forms, shopping for settlement services (closing services) which are now called title related services should be easier.  Rather than facing what is sometimes a variety of different charges, the new GFE is supposed to have all title related services as one charge plus the title insurance.

Along with the GFE the lender may supply you with a name or names of a company who can close your loan.  However, except in limited circumstances where a lender has a closed list, any licensed Connecticut real estate attorney can close the loan.  The new HUD GFE requires a list of provider(s) be given to the borrower, but for settlement services, closing services or title related charges, the borrower can and should still shop around (which the new GFE is designed to encourage!).

If you are considering a refinance, or other closing, in Connecticut, I encourage you to contact me directly for a specific quote on your closing costs and title insurance.

As I have written before, contract contingencies are very important elements of a real estate purchase agreement.  They are especially significant for the buyer, since a properly drafted and implemented contingency provision can provide significant legal protections for the buyer.

One of the most important and basic contingency provisions in the real estate purchase agreement is the mortgage contingency.  In basic terms the mortgage contingency provides that the buyer (who we assume has signed a binding purchase and sale agreement) is not obligated to complete the purchase if the buyer cannot obtain written mortgage approval.  This is a basic protection for the buyer, that if she cannot get financing for the purchase, the contract is canceled and she gets her earnest money deposit back. However as with the real of the purchase agreement,  the details of the contingency are very important.

The basic elements of the mortgage contingency are the mortgage amount, the interest rate, the term of the mortgage, and the date by which the mortgage must be obtained.  Connecticut actually has a statute which states the minimum requirements for a mortgage contingency (See Section 49-5b).  But the issue for the buyer is not usually satisfying the minimum requirements for a valid contingency, but protecting himself against unforeseen circumstances that interfere with obtaining a mortgage approval, but are not covered by the contingency language.

For instance, what if you obtain an approval but that approval has significant conditions, such as verification of income or credit, or sale of an existing property?  Is that a sufficient approval to allow the seller to force performance of the contract of sale?  What if it is a condo and the lender approves the mortgage but denies approval of the condo complex?  Is the buyer required to simply not be approved for financing by the mortgage contingency date, or is the buyer required to actually prove a denial or adverse action notice was issued?  What if the buyer does not actively pursue the mortgage approval?  What if the buyer does not get an approval, but the time set for the contingency provision passes and the seller is not notified?

These are all valid questions that should be addressed by a properly worded mortgage contingency provision.  In the event of a dispute, it is the language of the written contract that will control the obligations of the parties.  The typical mortgage contingency provision in a residential purchase agreement is a fill in the blank proposition, in which the operative terms of the contingency are part of the form contract being used (typically supplied by one of the real estate agents).  However, that form may or may not deal with the issues described above.  The best course of action is to review the proposed contract language with your real estate agent and mortgage provider as well as an experienced real estate attorney prior to signing the contract.

If you have any questions on a real estate contract in Connecticut or the proper terms of a mortgage contingency, please contact me.

With mortgage rates at new lows, people all across Connecticut are once again applying for and closing on refinance loans.  Even with the drop in real estate values and the changes in the types of mortgages that are available, many people can and are refinancing.  With rates this low, now is the time to refinance your CT mortgage if you can!  But along with the rate and the other parts of your mortgage approval, a borrower should also consider their closing costs. 

Who does refinance mortgage loan closings in Connecticut?  Do I have to use an Attorney?

Historically in Connecticut, mortgage loans have been closed by a Connecticut real estate attorney.  Connecticut is considered an 'attorney state' meaning that real estate closings are performed by Connecticut licensed attorneys.  However, for better or worse, closings are also increasingly done by title companies.  These closings are usually not done by or under the supervision of an attorney, and are usually performed by a company that the lender chooses, and may even have a financial relationship with.  The actual loan closing is commonly performed by a notary, who is prohibitedfrom actually explaining the loan documents.  While frequently the borrower is told this is a cost saving measure, it has been my experience that the services of an attorney frequently cost no more, and sometimes are even less expensive than paying for a notary and title company to do the closing.  There is really no reason not to insist on having an experienced real estate attorney do your loan closing.

What are the common refinance loan closing costs?

The typical charges include the cost of a title search to verify ownership of the property and what mortgages or liens are on it; a settlement fee or an attorney fee (the charge for actually performing the closing); the title insurance that the new lender requires; FedEx or overnight mail charges; copy costs; rundown or bring to date service; recording service; wire fees; title examination; and title binder.  These are in the 1100 series line in the HUD-1 Closing Statement.  These fees are in addition to whatever the lender charges, such as prepaid interest, escrows, points, etc.  As you can see, the list seems endless!

How do I compare my loan closing costs on a refinance loan?

It can sometimes be difficult to compare different closing costs since not all closing agents, be they attorneys or title companies, charge in the same manner.  Sometimes a low settlement fee will be quoted, but there will be numerous additional charges.  Sometimes the settlement or attorney fee will seem high, but there will not be many other fees.  Bottom line, you have to ask all the fees being charged before you can make an apples to apples comparison.  And do not assume an attorney is going to charge more than a title company.  As a borrower, I would not agree to close without a firm estimate and understanding of the total loan closing costs.

How much are the closing fees?

Unfortunately the fees range greatly.  Title insurance in Connecticut is one thing that you should be able to get a direct quote on, since each company sets its rates in a rate filing with the State of Connecticut Insurance Department and then is required to follow the rate it has filed.  The only discount is for a refinance, and that discount is a 40% reduction in the premium for a refinance of an institutional mortgage within the past ten years, up to the amount of the existing mortgage.  So be sure you are getting the refinance or reissue rate!  As very general estimates, I will provide the following information: a title search can be from $75 to $200, depending on what type of search is required; loan settlement or attorney fee from $450 to $800; title examination $50; rundown and record or bring to date or recording service $50 to $75; FedEx/copies from $8 to 45.  These are just estimates.

Can I get a fee quote?

I willingly provide fee quotes for my services, and I think all providers should do the same.  All I need is some basic information about the closing and I will provide an estimate of the fees required for me to perform the closing.  You may contact me by email at attybegemann@comcast.net and I will provide a prompt and accurate response to your inquiry.  You will receive the services of an experienced, dedicated real estate attorney, and you will have the peace of mind knowing that the loan was properly closed.  I can provide loan closing services throughout Connecticut.

Here is a link to a page on my web site that provides more information about mortgage refinances in Connecticut and the role of the real estate attorney.

There has been much discussion about recent changes in FHA approvals for condos.  By way of background, when an FHA loan is made for a condo unit, the complex must be 'approved' by HUD before the FHA loan can be made.  In the past (or more accurately until November) this could be done by a formal approval by HUD itself or by a 'spot approval' whereby the lender would review certain aspects of the condo complex for the purposes of making that one loan.  HUD has now abolished the spot approval, and generally made the pprocess more complex, while at the same time loosening some of the requirements.  See the blog post below as well as the links in this post for a good explanation of the changes and their potential impact.  In addition to the blog post below, here is a link to a blog from a Massachusetts attorney that also explains the changes.  The National Association of Realtors and other organizations have requested modifications to the changes, so this may still be a work in progress.  Personally, I am not quite as pessimistic as to the effect of these changes.  Some of them will make the approval process easier in substance, although the paperwork required is more significant.  Plus once a complex is approved using this new process, it will not need to be reviewed again (unlike the spot process which was loan specific).  I will keep an eye on this issue to see what happens as November 2 approaches.

Here is a blog post from an experienced FHA lender in Connecticut that explains the recent delay in the changes and provides a good explanation of what we can expect.