Public Reprimand No. 2007-27
DAVID GLENN BAKER
Order (public reprimand) entered by the Board December 17, 2007.
The respondent received a public reprimand for the conduct described below.
- In May 2006, the respondent agreed to represent a seller of residential real estate, anticipating a simple straightforward transaction. The respondent had no experience representing lenders in real estate closing transactions and had limited experience and no specialized training representing buyers or sellers in real estate transactions.
- In August 2006, the buyer qualified for a mortgage. The buyer or the mortgage broker informed the lender that the purchase price was $489,000. and that the seller would take back a second mortgage in the approximate amount of $73,000. The lender agreed to the terms of the second mortgage.
- The closing took place on September 18, 2006, at the Suffolk County Registry of Deeds. A settlement agent, the respondent, the respondentís client (the seller), the buyer and the sellerís broker were present at the closing. The buyer was not represented. At or just prior to the time of the closing, the buyer began to have second thoughts and wanted to renegotiate the terms of a second mortgage that he agreed to give to the seller. Further, the buyer protested that the buyer and seller had signed a purchase and sale agreement at a lower purchase price. The buyer threatened to walk away from the transaction putting the respondentís client at risk of foreclosure or financial harm. The respondent, his client and the buyer discussed the matter outside the presence of the settlement agent.
- After consulting with his client, the respondent hand-drafted an agreement and the agreement was signed by the parties and the respondent stating that the seller would accept $25,000 (to be repaid within three years) in full consideration of the second mortgage, and that the buyer would receive a payback on the stated purchase price in the amount of $20,000.
- After the agreement was signed, the parties went back to the closing table. The buyer and the seller then executed a HUD-1 settlement statement prepared by the settlement agent. The statement reflected a contract sale price of $489,000, a principal loan of $415,650, plus a second mortgage back to the sellers in the amount of $73,350.
- At no time did the respondent inform the settlement agent of the agreement or the revised terms of the transaction. The settlement agent had no knowledge that the HUD-1 did not reflect the actual terms between buyer and seller, the true nature of the transaction or that there were substantial sellerís concessions at the time he asked the parties to execute the HUD-1. The settlement agent had no knowledge of any prior discussion of the parties regarding any reduced purchase price or revised mortgage.
- The seller signed the HUD-1 settlement statement and certified that it was a true and accurate statement of all receipts and disbursements made and that he had carefully reviewed the document. At no time did the respondent discuss with his client the language of the certification or the potential consequences of signing a HUD-1 settlement statement that did not reflect the true nature of the transaction.
- At no time did the respondent intend to defraud the buyerís lender or the secondary mortgage market. The respondent did not appreciate that the terms of the side agreement should have, at minimum, been disclosed to the settlement agent, and the therefore failed to inquire of the settlement agent, or other more experienced counsel, whether the agreement executed outside of closing was, or might potentially be deemed, an unauthorized sellerís concession. The lender has been made aware of the side agreement and has elected not to pursue any remedies against the buyer or seller.
- The respondentís failure to provide competent and diligent representation to his client, and his failure to discuss with his client the potential consequences of signing a misleading HUD-1 settlement statement, were in violation of Mass. R. Prof. C. 1.1, 1.3 and 1.4.
- The respondentís failure to affirmatively disclose to the settlement agent that the HUD-1 settlement statement signed by his client did not reflect the actual terms and disbursements, constituted a misrepresentation of fact, in violation of Mass. R. Prof. C. 8.4(c).
- This matter came before the Board on a stipulation of facts and disciplinary violations and a joint recommendation for discipline by public reprimand. The Board accepted the partiesí recommendation and imposed a public reprimand.
1 Compiled by the Board of Bar Overseers based on the record of proceedings before the Board.
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