Refinancing is the process of replacing an existing loan with a new loan. The new loan pays off the current debt, so that debt is not eliminated when you refinance. However, the new loan should have better terms or features that improve your finances.
So that you better understand the process, your closing attorney will perform the following services on your behalf:
Supervision by North Carolina Licensed Attorney
A North Carolina licensed attorney shall ensure the following:
- Attorney shall at all times be ultimately responsible for the work product of the non-attorney.
- Attorney shall make all reasonable efforts to ensure that the non-attorney’s conduct is compatible with the professional and legal obligations of the attorney.
- The attorney shall ensure that the non-attorney assistants are competent, adequately trained, and knowledgeable about the specific aspect(s) of the closing on which they work, as well as the general closing process. Attorney should consider obtaining background references about the non-attorney’s previous work experiences and education; conducting reference checks; interviewing the non-attorney to ascertain their ability and suitability for aid in closings; and obtaining a work product sample.
- Attorney shall be reasonably available at all times to answer any questions or concerns that the non-attorney assistants may have regarding the closing. Attorney should confirm that appropriate channels of communication are present and understood by the non-attorneys to ensure supervision can be timely and is always available.
- Attorney shall ensure that the non-attorney assistant receives continuing training and education about legal and industry changes.
- Attorney shall delegate tasks associated with the closing to non-attorney assistants based upon the complexity of the transaction, the degree of difficulty of the task, and the ability of the non-attorney assistant.
- Attorney shall regularly review non-attorney’s work product to ensure non-attorney’s work product is accurate, reliable, and in compliance with the attorney’s legal and ethical obligations to his/her client.
- Attorney has an ongoing duty to exercise his/her professional judgment and skill to maintain the level of supervision necessary to advance and protect the client’s interest and ensure that the non-attorney is providing the best service and representation to the client.
- The non-attorney may not exercise independent legal judgment in making decisions on behalf of the client and the non-attorney may not give direct legal advice to the client, including the explanation of closing documents to the borrower as described in Section III.1 below.
- Attorney must ensure that non-attorney is aware that professional obligations require no breach of client confidentiality and attorney shall use reasonable care to use communication methods with non-attorney that best maintain and protect confidential information.
Malpractice Insurance Standards
- Coverage Limits– Our attorneys have in force and maintain professional malpractice insurance coverage in an amount sufficient for the value and complexity of the transaction which the attorney is handling with an insurance company licensed to sell insurance in North Carolina; however, in any event, attorney shall have in force and maintain professional malpractice insurance coverage with policy limits of no less than five hundred thousand dollars ($500,000.00) per incident and one million dollars ($1,000,000.00) aggregate. Attorney shall provide proof of insurance coverage to any interested party to the closing transaction in accordance with the rules adopted by the North Carolina State Bar.
- Minimum Financial Strength Rating of Insurer– Our attorneys shall obtain and have in force professional malpractice insurance coverage with an insurance company that shall have a “B+” Best’s Financial Strength Rating or better.
Professional Independence of Closing Attorney
To maintain his or her professional independence as required under North Carolina State Bar Rule of Professional Conduct 5.4, the North Carolina licensed closing attorney responsible for handling a real estate closing on behalf of one or more parties to the transaction shall not be employed by, affiliated with or an agent of any non-attorney settlement shop, title agency, or other third-party non-attorney providing closing related services whereby the closing attorney contracts document preparation, receipt and disbursement of closing funds, the closing conference, or other material elements of the closing transaction to such settlement shop, title agency, or other third-party non-attorney, unless the closing attorney adequately and directly supervises the provision of such services by any non-attorney contractor as set forth in Section I.1 herein and as required by the State Bar Ethics opinions outlining an attorney’s professional obligations with respect thereto.
Pre-Closing Stage – Collection of Information and Review
- Conflicts of Interest – Establish all conflicts of interest, including potential multiple representation, that must be disclosed, consented to, and/or waived, and obtain the informed written consent of such parties in accordance with the Rules of Professional Conduct.
- Engagement Letter – Send engagement/representation letter to the client(s)/parties to the transaction detailing scope of representation, fees, and general overview of process, and obtain confirmation that client(s)/parties to the transaction received the letter. Specifically delineate what the scope of representation includes for that specific transaction and include general reference that additional items beyond that scope shall require a new engagement letter. Attorney shall obtain informed written consent from client to perform an abbreviated title search/tack to a prior title policy by describing in the engagement letter the potential risks of policy tacking, performing an abbreviated search, and of the existence of uncancelled deed(s) of trust, lien(s) of records, easements, restrictions, and other items that will not be revealed by an abbreviated search period.
- Certify Title – North Carolina licensed attorney to perform and supervise detailed title search of the subject property and said licensed attorney shall personally review the title abstract/notes/title documents prior to personally certifying a preliminary title opinion, especially noting any curative measures that must be completed prior to closing. The general steps of the title search should include, but are not limited, the following:
- Search of the city and county tax offices for tax information(and any delinquent amounts).
- Search of the Register of Deeds– Attorney shall utilize the Grantor/Grantee index (and naming conventions to facilitate a complete and accurate search of the records) and search all of the ins and outs dealing with the subject property until reaching a valid Warranty Deed conveyance at least 30 years ago, in compliance with the North Carolina Marketable Title Act. However, if attorney is able to locate an existing policy of title insurance and attorney obtains informed written consent from the client(s) regarding the attorney tacking to that title insurance policy, attorney may either conduct a full title examination or may tack to the prior policy, whichever is in the best interests of the client. Note that attorney shall use his/her professional judgment in all cases to determine the sufficiency of the search period and whether a longer search period is necessary given the circumstances of the individual transaction, especially with respect to undeveloped property. If the attorney tacks to an existing title insurance policy, the attorney’s title examination would begin with the date and time of issuance of that existing title insurance policy. Attorney shall also identify which, if any, outstanding deeds of trust are equity lines of credit for which cancellation by the borrowers will be required pursuant to NCGS Section 45-81(c).
- Clerk of Court Record Searches– search the Administrative Office of the Courts’ (AOC) computer system for Judgments, Civil Actions, Estate & Devises (if applicable), Mechanics’ Liens, and Special Proceedings for all Grantors.
- Organizational/Entity Records– search the Secretary of State’s Corporations Database and potentially request organizational documents.
- Manufactured Homes –If a manufactured home is located on the property, the attorney will need to be separately retained to handle such matter.
- Order and Review Survey – Determine whether client wishes to have a survey performed, order survey if necessary, and review the survey upon receipt, noting any encroachments or other items disclosed.
- Legal Description – North Carolina licensed attorney to prepare and/or review legal description of the subject property, noting any inconsistencies in prior deeds or the contract and any curative measures that must be completed prior to closing.
- Payoff Information – Attorney shall obtain and review payoff information directly from the lender(s) for all liens affecting the subject property to facilitate the closing. If any such liens are equity lines of credit secured by a Deed of Trust, then attorney shall send a payoff request letter to the lender directing that all further transactions on the equity line be blocked to avoid changes in the payoff amount.
- Hazard Insurance – Determine hazard insurance carrier for purchaser, review declaration page to ensure policy dates, coverage amounts, and loss payee information are satisfactory to lender
- Covenants, Conditions, and Restrictions (CCRs) – Disclose existence of any covenants, conditions, and restrictions (CCRs) that run with the land and affect the use and enjoyment of the land in planned communities to client. Attorney’s scope of representation agreement with client shall determine the degree of review and explanation of restrictive covenants to client. However, should client have questions regarding the restrictive covenants, only a North Carolina licensed attorney shall answer those questions.
- Obtain Title Commitment – Utilizing title certification and attorney’s preliminary title opinion, obtain title commitment from a reputable title insurance company that is in the best interests of the client(s).
- Prepare and Review Settlement Statement – Prepare Settlement Statement according to closing instructions and any invoices provided, and review Settlement Statement to verify compliance with sales contract and the Real Estate Settlement Procedures Act (where applicable).
- Prepare, Review, Approve Loan Documents – Either prepare, review, and approve the Loan Documents, especially to certify compliance with closing instructions, to verify proper loan terms and parties to the loan, and to insure loan documents contain adequate and accurate legal descriptions.
- Review Title Commitment – Review title insurance company’s commitment for title insurance and verify compliance with the requirements and exceptions of that commitment, and obtain, prepare, review, and/or provide any documents required by the title insurance company to issue a final title policy, which may include, but are not limited to the following:
- NCLTA Form 1, NCLTA Form 2, and/or NCLTA Form 3
- Survey or Survey Waiver
- Privacy Disclosure
- Insured Closing Protection Letter
- Short Sale Approval Letters
- Power of Attorney – North Carolina licensed attorney shall prepare, review, and/or obtain lender’s approval of any power of attorney to be utilized in the transaction. In accordance with N.C.G.S. 32A-40, and unless there is actual knowledge that a writing is not valid or the action being taken is beyond the apparent power or authority of a named attorney in fact (AIF), where a closing attorney in good faith relies on a writing, and/or the validity and action of a named AIF as set forth in any such writing which is signed or duly acknowledged and otherwise appears regular and purports to confer the powers and authority that reasonably appear to be granted to the AIF designated in that writing, then said closing attorney dealing with that named AIF shall not be responsible for any breach of fiduciary duty by that AIF, including any breach of loyalty, any act of self-dealing, or any misapplication of money or other property paid or transferred as directed by that AIF. In addition, and in accordance with N.C.G.S. 36C-10-1013(f), a closing attorney who acts in reliance upon a certification of trust without knowledge that the representations contained in the certification are incorrect is not liable to any person for so acting and may assume without inquiry the existence of facts contained in the certification of trust, and mere knowledge of the terms of the trust may not be inferred solely from the fact that the closing attorney who is relying on the certification may hold a copy of all or part of the trust instrument.
- Prepare, Review, Approve other applicable closing documents – North Carolina licensed attorney shall prepare, review, and approve other applicable closing documents that may include, but are not limited to the following:
- Internal Revenue Service Forms
- Equity Line Loan Cancellation Authorizationpursuant to NCGS Section 45-81(c) executed by the borrowers (as applicable).
- Organizational and/or Corporate Documentsof any organization/entity that is a party to transaction.
Closing Stage – Explanation, Execution, Recordation, and Disbursement
- Explanation of Closing Documents to Borrower – North Carolina licensed attorney shall explain to the borrower the closing documents, which may include, but are not limited to:
- Disclosure and consent to multiple representation(if applicable).
- Survey, and any encroachments, easements, or other matters disclosed therein.
- Covenants, Conditions, Restrictions (CCRs), disclose to borrower existence of any restrictive covenants and explain restrictive covenants to borrower according to attorney’s scope of representation.
- Settlement Statement– explaining the fees and figures as disclosed by the Settlement Statement.
- Loan Documents, specifically noting the following provisions, as applicable:
- Annual Percentage Rate (vs. Interest Rate).
- Interest Rate – disclose/explain if the loan has an adjustable rate, which requires disclosing when the rate can adjust, how often the rate can adjust, and what affect the adjustment may have upon the borrower’s loan payment.
- Amount of Loan.
- Monthly Payment Amount – including breakdown of payment amount between principal and interest, and escrows and mortgage insurance, if applicable.
- Date the First Payment is Due.
- Payment Location.
- Term of Loan and Maturity Date of Loan.
- Late Payment Penalties.
- Due on Sale Clause.
- Events of Default.
- Foreclosure Proceedings.
- Transfer of Loan Servicing Rights.
- Supervise Execution – North Carolina licensed attorney shall supervise the proper execution and notarization of the closing documents that are signed at the closing table. In this section, “supervise” shall mean that the attorney shall be either physically present and presiding over the execution of the closing document or if execution of such documents occurs by mail, email, or other electronic means for client convenience purposes, where the attorney and parties are not physically together, then the attorney shall make himself/herself available to explain all closing documents (see III.1. above) and answer all questions related thereto and shall personally review the closing documents upon receipt from client to ensure proper execution and notarization of the closing documents. Attorney shall require verification of identity of signers in all closings, including electronic or mail away closings.
- Collection of Funds – North Carolina licensed attorney shall collect funds required to close from the respective parties and verify that closing funds are goods funds in accordance with the North Carolina Good Funds Settlement Act and any other internal bank regulations.
- Funding Approval – North Carolina licensed attorney shall forward required funding documents to Lender for Lender’s funding approval and obtain funding approval prior to recording.
- Perform Title Update – North Carolina licensed attorney shall supervise performance of title update prior to recording to verify no intervening matters (liens, judgments, out conveyances, etc.) appear on record since the attorney’s most recent title work. Attorney shall ensure that title update utilizes the most current title information available at the Register of Deeds office and Clerk’s office, which shall necessitate having the Attorney supervise a title update in the Register of Deeds office and Clerk’s office and not via online resources, until such time as technology allows instantaneous updating of all title and judgment records.
- Recording – North Carolina licensed attorney shall supervise the recording of the recordable closing documents in the proper order and with adequate and accurate legal descriptions attached (as applicable) as soon as reasonably possible after execution and delivery of the documents. Unless Attorney supervises a title update at the Register of Deeds and Clerk’s office concurrently and at the same time as an e-filing, Attorney shall refrain from e-filing, or otherwise remotely recording documents, until technology allows instantaneous updating of all title and judgment records to ensure no intervening matters appear on record.
- Disbursement – North Carolina licensed attorney shall disburse all of the closing funds in accordance with the settlement statement and lender’s closing instructions after confirmation of recording, pursuant to the North Carolina Good Funds Settlement Act. North Carolina licensed attorney shall make all reasonable efforts to be the party signing disbursement checks and initiating wire transfers. If circumstances prevent attorney from signing disbursement checks or initiating wire transfers for a given transaction, Attorney shall double check the disbursement as soon as reasonably possible.
- Note for Refinances with Same Lender – The only exception to this guideline is when a borrower is refinancing a loan with the same lender and that lender is paying off its previous loan to the borrower with proceeds of the new loan to the borrower, neither the portion of the loan proceeds required to pay off the lender’s prior loan to the borrower nor the lender’s fees in connection with the new loan have to be disbursed by the closing attorney in accordance with the settlement statement.
- Disburse Defined – means that the attorney shall make payment of all closing funds from the transaction to the persons or entities entitled to that payment.
- Notice of Recording to Parties – North Carolina licensed attorney shall inform all parties to the transaction once the recordable closing documents are recorded.
- Send Loan Package to Lender.
Post-Closing – Verification and Final Title Opinion
- Perform a final title review – North Carolina licensed attorney shall personally review the final title and recording information, which may include, but is not limited to the following items:
- Verify documents were recorded in the correct priority and were properly executed/acknowledged.
- Verify recorded documents were indexed properly.
- Verify correct vesting and legal description on recorded documents.
- Transmit that all liens, judgments, and deeds of trust that were paid in connection with the transaction.
- Issue a final title opinion – North Carolina licensed attorney shall personally draft, review, issue, and certify a final title opinion, which includes, but is not limited to the following items:
- Review of the information as listed above.
- Review and certification that the requirements of the title commitment were satisfied.
- Send Final Title Opinion to Title Insurance Company – North Carolina licensed attorney shall make reasonable efforts to submit the final title opinion to the title insurance company according to the following timelines:
- If the attorney waits for the appropriate cancellation(s)/satisfaction(s), releases, dismissals, etc. to be recorded prior to issuing his/her final title opinion, attorney shall take reasonable steps to submit his/her final title opinion to the title company within 2 weeks of obtaining the required cancellation(s)/satisfaction(s), releases, dismissals, etc.
- If the attorney prefers to issue his/her final title opinion prior to confirmation that the appropriate cancellation(s)/satisfaction(s), releases, dismissals, etc. are recorded, attorney shall take reasonable steps to submit his/her final title opinion to the title company within 3 weeks of the closing date. Attorney that operates under this option shall institute a tracking system to insure that the required cancellation(s)/satisfaction(s), releases, dismissals, etc. are properly recorded, if closing attorney’s scope of representation included such responsibilities.
- Obtain Final Title Policy from Title Insurance Company – North Carolina licensed attorney shall timely obtain a copy of the final title policy and perform a review of the policy to ensure policy contains the correct information, riders, exceptions, etc.
- Send all applicable documents to the appropriate parties.