Lender’s Bounced Checks Create Lawyer Havoc
Posted Aug 16, 2007 6:31 AM CST
By Debra Cassens Weiss
A mortgage company that went belly-up has left Atlanta-area lawyers digging into their own pockets to cover escrow losses.
HomeBanc Mortgage Corp. may have issued as much as $20 million in bounced checks on July 30 and 31 before it filed for bankruptcy, according to the Fulton County Daily Report. Lawyers who weren’t aware of the lender’s troubles closed mortgages without waiting for the checks to clear.
Now the lawyers are using their own funds to replace escrow losses to satisfy ethics rules that regulate the accounts, the legal newspaper reports. In some cases, the lawyers are taking out home equity loans or using their credit cards to cover the money.
Georgia State Bar General Counsel William P. Smith III said lawyers aren’t in violation of ethics rules as long as they cover the escrow losses and make sure other clients’ escrow money is unaffected.