The Attorney Exemption in HUD’s Final Rule is a Clear Win for Lawyers, Consumers
WASHINGTON, D.C. – August 15, 2011 – (RealEstateRama) — The Department of Housing and Urban Development’s final mortgage loan originator rule, which exempts licensed attorneys when they are providing legal services to their clients and are in compliance with all applicable state court ethical rules and standards, is not just a win for the already well-regulated legal profession, but also for their homeowner clients.
The American Bar Association is pleased with the broad exemption for practicing lawyers included in the HUD’s final rule that sets standards for state compliance with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.
The SAFE Act was designed to enhance consumer protections and reduce fraud in mortgage lending. While the ABA wholeheartedly supports these timely and worthwhile goals, HUD’s original proposed rule to implement the SAFE Act contained overly broad language that would have imposed excessive new federal regulations on lawyers engaged in the practice of law.
Lawyers already are subject to extensive state court regulations that impose stringent duties of competency, diligence, confidentiality and undivided loyalty on them, and ensure that they provide the best possible legal representation for their clients. Creating a new overlapping federal layer of regulation on practicing lawyers is unnecessary and the conflicting standards would ultimately hurt their consumer clients.
The ABA—working in cooperation with many state and local bars—expressed the legal profession’s concerns that the sweeping regulatory powers given to HUD and individual state agencies under the proposed rule would have undermined the confidential attorney-client relationship, the long standing regulatory authority of state courts, and the ability of consumers to obtain the quality legal advice and services they need when obtaining mortgages.