Opinion ID: 1417990
Heading Depth: 2
Heading Rank: 2

Heading: Refinancing Matter

Text: Respondent represented clients who refinanced a mortgage. The closing documents indicated the existing mortgage was to be paid from the proceeds of the refinancing transaction. The new mortgage was recorded and forwarded to the new lender along with a final loan policy of title insurance. A condition for the issuance of the loan policy of title insurance was that the existing mortgage be paid off and satisfied of record. The loan policy indicated the new mortgage was a first mortgage on the public records when, in fact, the existing mortgage had not been satisfied. Several months after the closing, respondent's clients were contacted by the holder of the existing mortgage and discovered the existing mortgage had not been paid. The clients attempted to contact respondent but for several months were only able to talk to respondent's staff. After the clients were finally able to talk directly with respondent, respondent caused the existing mortgage to be paid off and satisfied of record. Respondent maintains the check to pay off the existing mortgage was issued at closing and was hand delivered to the holder of the mortgage on the day of closing, the original check has never been located, and respondent has not been able to discover any explanation as to what happened to the check after it reached the holder of the existing mortgage. Respondent contends the funds to pay the existing mortgage remained secure in respondent's trust account from the time they were received until paid by way of a new check to the holder of the existing mortgage. Respondent acknowledges he did not provide competent representation to the clients, that he was not diligent in handling the matter, and that he gave incorrect information to the new lender when he represented that the new mortgage constituted a first lien of record on the secured property when, in fact the existing mortgage constituted a first lien on the property. Respondent maintains he was utilizing a computer program that he thought was reconciling his trust account on a monthly basis. However, respondent recognizes that the system he was using was inadequate to meet the requirements of Rule 417, SCACR, inasmuch as respondent failed to recognize the funds in this matter had been retained and undisbursed in his trust account for over a one-year period. Approximately fourteen months elapsed from the date of the closing of the refinanced transaction until the existing mortgage was paid off and satisfied of record. As a result of the foregoing, foreclosure proceedings were initiated against the clients by the holder of the existing mortgage, but were eventually resolved. In addition, the clients filed a civil action against respondent which was settled.