Into the Matrix: The Future of the Unauthorized Practice of Law in Real Estate Closings Following Matrix Financial Services Corp. v. Frazer

Into the Matrix: The Future of the Unauthorized Practice of Law in Real Estate Closings Following Matrix Financial Services Corp. v. Frazer

By Neil C. Robinson, III

Excerpt from Into the Matrix: The Future of the Unauthorized Practice of Law in Real Estate Closings Following Matrix Financial Services Corp. v. Frazer, 63 S.C. L. Rev. 1001 (Summer, 2012)

I. Introduction

In the first quarter of 2011, South Carolina ranked thirteenth in the country for residential mortgage delinquencies, and fifteenth for foreclosures. 1 The increase in foreclosures is an epidemic that has been sweeping the entire country for the past several years. Many more people are struggling to pay their mortgages and often flirt with foreclosure. 2 In the third quarter of 2011 alone, foreclosure filings in the nation totaled 610,337. 3 While there are some signs that foreclosure filings decreased in the past year, foreclosures will continue to be prevalent in our current economy. 4 However, imagine a situation in which a person is able to stop paying a mortgage and the lender is precluded from taking back the property or requiring the person to pay any more money? A new South Carolina Supreme Court opinion might make this hypothetical a reality for some future borrowers if lenders do not follow South Carolina law when preparing and conducting the borrowers' real estate closings. 5

On August 8, 2011, the South Carolina Supreme Court issued an opinion in Matrix Financial Services Corp. v. Frazer [enhanced version available to lexis.com subscribers], holding that a lender is barred from pursuing any equitable remedies against a borrower if the lender engaged in the unauthorized practice of law in the closing process. 6 In South Carolina, foreclosure is an equitable remedy; 7 therefore, this holding means that foreclosing on a borrower's home will not be an available option to lenders who fail to act in accordance ...

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