State considerations on attorney opinion letters

Since Fannie Mae made its announcement, there has been an increased interest in how attorney opinion letters (AOLs) operate in various states. Different states have various perspectives on how these new waves of AOLs should be performed and what they can cover.

“There are no limitations that would prevent the use of an AOL in any state as attorneys are permitted to issue legal opinions in all states,” said Stacy Mestayer, Voxtur chief legal officer. “From an economic perspective, some states do offer the opportunity for more savings to the consumer. The reason for that is that certain states have promulgated title insurance rates, which leads to higher title insurance rates in those states. Using an AOL in those states generally results in more savings for the consumer."

ACREL/ABA guidelines

On Jan. 15, 2003, the American College of Real Estate Lawyers (ACREL) Opinion Committee and the American Bar Association (ABA) Section of Real Property Probate and Trust Law Committee on Legal Opinions in Real Estate Transactions issued their Real Estate Opinion Letter Guidelines.

The guidelines discuss areas in which an attorney should and should not opine. Among other things, it states, “Because of the availability of title insurance, the existence of difficult factual issues, and the need for title searches beyond the capacity and expertise (and/or the scope of engagement) of most real estate attorneys, opinions requested as to the ownership of property, the effectiveness of the lien of security instruments or exceptions to or encumbrances on title to real property are inappropriate. Opinions as to the form of a mortgage or deed of trust necessary to create a lien against real property collateral and a recitation of the procedures necessary to perfect and provide record notice of such lien are, on the other hand, frequently given. Neither such a ‘form of documents’ opinion nor a general enforceability opinion implies a substantive title opinion, and no express disclaimer of such opinion is necessary.”