In the past week I have been approach twice by people seeking to buy or build on online commercial lending document assembly system and asked for the appropriate platform. As a consultant, I patiently explained the options and why merely purchasing a system would expose the company to unacceptable risks; that while I was a lawyer turned programmer, this went beyond the risks I was willing to assume as an automator. In so doing, the issue arose, what warranty does an automator make as to the legal viability of the forms produced.
The Inquiry
I want to start a lending business producing loan documentation for all 50 states. Can you direct me to some forms I can use. I want to automate them, let people enter information over the internet. And of course, they need to be legally viable and enforceable in all 50 states. Can you help me.
The Reply
Sure. Do you have the forms. I can build you a system and get you online for a reasonable fee in a reasonable amount of time. You have a choice of platforms, each with their benefits and their limitations. The choice between HotDocs, GhostFill and DealBuilder depends on where you want to put your money, how you want to deploy the system, and who will be using the system.
Why there can be no warranty
Most if not all software agreements disclaim “consequential damages” or limit liability to the cost of the license. Any other approach and the development of software is not cost effective. We can warrant that the software will present and interview, and that based on the selected items certain text will be included or excluded. We cannot warrant that the selection of particular text is legally valid. For that you need a lawyer.
Why You Need a Lawyer
Where I part ways is over the content. I can build the business logic, the rules, the work flow and collect a nice sum in exchange for my valuable efforts. But I will not be the lawyer. When a million dollar loan defaults and the language of the default clause gets exercised, I don’t want my words on the hook that a judge will say, “this clause is not enforceable; perhaps in New York that’s the way they do things, but here in Oklahoma, we require __________ and you failed to include that in your loan agreement.
Moreover, even if I had an “enforceable” set of multistate forms for today, tomorrow, a new court decision in Oklahoma, could change the standard and require modification of my forms. Sure, we can get a piece of paper that has the business terms, but it is the nuances that make the paper have its value as commercial paper. If I were lending tens of millions of dollars, I would want to make sure such paperwork was effective.
Value of Document Assembly
In writing this, I am not knocking the use of document assembly for online commercial lending. It is actually a fabulous idea, incredibly cost effective and profitable. The typical bank lending process is slow and fraught with “inefficiencies” that can be eliminated. A company like ING Bank can have an entirely online system, automating many of the banking processes and eliminating the opportunity for human error. When applied to lending, document assembly allows you to support real business logic and conditional language, mapped against a legally valid form and allows you to offer a range of flexible financing options. I am all for it. My only concern is that you retain legal counsel in building the business logic and in maintaining that business logic.