Missouri Supreme Court Rules that Mortgage Companies Engaged in an Unauthorized Practice of Law
The Missouri Supreme Court has ruled that a practice of mortgage companies in charging borrowers document-preparation fees in connection with real estate financing transactions is illegal and constitutes the unauthorized practice of law by unlicensed bank employees. The defendants charged fees for the preparation of various mortgage loan documents, including promissory notes and deeds of trust. A statute that would have allowed lenders to provide such services for less than $200 had not become effective at the time the case was filed. In addition, the court ruled that it was immaterial that the plaintiffs had voluntarily paid the illegal fees.
As a result of the court’s opinion, thousands of borrowers may be entitled to three times the amount they paid for the fees, which averaged $125 per loan. More than 26 Missouri lenders have been defending the document-fee class actions most of which were brought by a St. Louis law firm. The firm has already reached settlements with American Equity Mortgage, U.S. Bank and Chase Manhattan Mortgage affecting 39,000 borrowers. Eisel, et al. v. Midwest Bankcentre, No. SC88167, 2007 Mo. LEXIS 134 (Mo. Sup. Ct. Aug. 21, 2007).
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