Caveat Jurista Y'all: Is the Mortgage Securing your Property in South Carolina Enforceable?
The South Carolina Supreme Court’s ruling in Matrix Financial Services Corp v. Frazer, et al, may have a significant impact on lenders and borrowers operating directly or indirectly within the State. In Matrix, the Court confirmed that a lawyer is required in all loan closings “for the protection of the public,” and the failure to use a South Carolina licensed attorney constitutes the unauthorized practice of law and will result in the lender not being able to foreclose a recorded mortgage.
The Matrix court considers the following items to constitute the practice of law, and therefore requires a South Carolina licensed attorney:
- Performing a title search,
- Preparing title and loan documents (deeds, notes, and other instruments)
- Closing a loan
- Recording the instruments
- Disburse proceeds
In Wachovia Bank, N.A. v. Coffey, the South Carolina Court of Appeals came to the same result as the Matrix court, where a lender engaged in the unauthorized practice of law will result in its inability to enforce any rights under the transaction. In Wachovia Bank, the bank processed a line of credit secured by a mortgage on real estate without the involvement of a lawyer. The bank later sought to foreclose the mortgage. Finding the bank's actions to be the unauthorized practice of law, the Court of Appeals held that the bank could not pursue any legal or equitable remedies arising out of the transaction.
Given the sweeping ruling of the Matrix and Coffey courts, we caution our readers – whether they’re lenders, borrowers or any party having a secured interest – to avail themselves of a South Carolina licensed attorney when dealing with a financing in the state.
Thank you Morris Ellison, Esq. Womble, Carlyle, Sandridge & Rice PLLC for bringing to our attention the subject matter of this post.