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 Post subject: Mortgage payoff - paperwork warning
PostPosted: Thu Oct 11, 2012 7:30 am 

Joined: Thu Jun 23, 2011 3:24 pm
Posts: 87
Hi all. Minor rant to post here - bottom line, when you pay off your mortgage make *sure* that the lender files the discharge with the County Clerk (or whichever office tracks liens/land records where you live).

If they don't, be a squeaky wheel right away and call the servicer or lender until they get it done! Most records offices are happy to help you look up your mortgage & whether it has been properly marked as paid off.

The story so far: my in-laws, now 87 & 89, paid off their mortgage lump-sum and early in 2000. They are planning on selling their house next year and are taking out a small home equity to do some necessary repairs prior to sale (there is no debt on the house otherwise) - this is more tax efficient than their selling investments to fund the improvements, especially since the gain on the sale of the house will come in well under taxable limits.

So, title search comes back and there is no recorded discharge of the mortgage that was paid off in 2000. Not necessarily a big deal, often turns up this way and usually you just call the lender, get them to (re)-do the filing, a week or two wait but all set.

EXCEPT in this case:
We call the original lender, yes they see the loan was paid off, please email them the title search & signed request form from borrower and they'll handle in 5 business days.

5 days later, they call us (my spouse was a mortgage broker in the 80s & 90s so he is our king of paperwork) and explain that they can't/won't do it because they didn't own the loan when it was paid off. Did they record an assignment? No - not such a surprise, often happens...but they seem unable to tell us the details of the assignment and are unwilling to file an affidavit of assignment, etc. And other than "Fidelity" they can't tell us who the loan was sold to. REALLY?

Apparently the loan was sold in early 2000, just before my in-laws paid it off. In fact, the original lender has records that my in-laws called to confirm the receipt of payoff & that they (the lender) checked with "Fidelity" and confirmed that the payoff had been received. Seems that the payoff may have occurred after the loan was sold but before they notified the borrower. The original lender is unwilling/unable to do anything and we don't (yet) know who the purchaser is (we did find a Fidelity Mortgage that does business with the original lender but they checked ss#, property address and original loan # and found no matches). So we are in a black hole of records (or lack thereof)...

The original lender has promised to call us back again today and deign to share whatever contact info for the purchaser of the loan they may have.

Worst case (and looking more likely with each conversation with the original lender), in our state (NY) we will have to hire a lawyer to go through the steps of legally discharging the debt (involves getting copy of the cancelled payoff check, payoff letter, putting an ad in the paper, etc.). This takes a few months.

The *only* good thing about this is we might be able to clear it up before putting the house on the market - can you imagine if they had an acceptable offer and then ran into this issue?


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 Post subject: Re: Mortgage payoff - paperwork warning
PostPosted: Thu Oct 11, 2012 9:01 am 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1164
Why didn't they make sure this was taken care of back then? Considering the chaos that the housing market has went through since then I'm not a bit surprised you're having issues now.


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 Post subject: Re: Mortgage payoff - paperwork warning
PostPosted: Thu Oct 11, 2012 12:34 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5374
Yeah, it is unfortunate that they have to deal with this but I'm not sure you can entirely blame the mortgage company.

We paid off a mortgage in December 1999. The lender sent us an original "Deed of Release" as it is called here but did NOT record anything. We had to record it ourselves. It's not that they dropped the ball. It is actually not their responsibility but many mortgage companies do it as a courtesy.

I would think the title company could take care of this for them. That's why they are paying the title company (assuming they are not trying to get out of paying for seller's title insurance).


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 Post subject: Re: Mortgage payoff - paperwork warning
PostPosted: Fri Oct 12, 2012 5:52 am 

Joined: Thu Jun 23, 2011 3:24 pm
Posts: 87
First the good news: thanks to a very persistent phone campaign by the spouse, we have found the right Fidelity (in Wichita, KS) so the discharge papers can get re-generated as soon as my in-laws fill out the right permission slip and get it to them.

DoingHomework wrote:
Yeah, it is unfortunate that they have to deal with this but I'm not sure you can entirely blame the mortgage company.

Tightwad wrote:
Why didn't they make sure this was taken care of back then?


Agreed - this is *not* completely the original lender's fault. That's why my opening line was basically 'make sure the paperwork gets filed completely' :)


(apologies, this got long - thanks for the free therapy ;))
It's one of those 'modern world' quirks - responsibility (shared/if you want it done right, do it yourself or double check) and legality don't always line up exactly.

Title issues (paperwork ones, not actually cloud on title) certainly are quite common now that reality has set into the housing market & folks are actually paying attention to detail. Not sure title insurance helps here (or that it should) - there has been no loan since the one that was paid off in 2000, so their latest title insurance policy would have been at the origination of the loan in 1993 and wouldn't cover this issue? As to a seller's policy, the house isn't even on the market yet, that's slated for next spring. And any new seller's title insurance would want the paperwork in hand showing the loan had been paid off before they issued a policy. If I've got that wrong, let me know!

In other similar cases that we've been involved in, this original lender (and others) have been able to process such requests for missing paperwork. Which makes sense - if they couldn't, what bank/lender who bought a mortgage would have the basis to foreclose on anyone had missed filing the right items? So this case has been particularly trying. "Yes our records confirm receipt of payoff. No we can't give you any paperwork confirming that. No we can't tell you what company could."

I still wonder who sent who what, as my in-laws are the type that both keep every piece of important paper *and* know where it is (they have all the payoff info from their first loan, even though since it was paid off through a refinance that paperwork went to the new bank's lawyer). I wouldn't be too shocked if the buyer of the mortgage sent the originator the discharge to send to my in-laws, since the originator was still servicing the mortgage at the time of payoff. And if the originator then filed it internally, thinking this was just a courtesy as they no longer owned the loan and would have been transferring servicing as well.

We'll see about the assignment...obviously it's the selling bank that usually does that (sure, I bought that mortgage & yes they paid it off, wink wink - that could lead to some issues!) but worst case there is something with a name like 'affidavit of missing assignment' that can be filed.


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 Post subject: Re: Mortgage payoff - paperwork warning
PostPosted: Fri Oct 12, 2012 12:13 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5374
babysteps wrote:
First the good news...


It's great to hear that they are making progress and I'm confident in the end they will get the issue resolved.

One lesson learned from the mortgage crisis recently is that the systems that were in place were inadequate for everyone. In your inlaws' case the process left a lien on their property. But in many other cases banks have attempted to proceed to foreclosure only to find that appropriate liens are not in place or proper procedures were not followed (remember robosigning).

Anyone can go look up their own property in the county records to verify everything is correct and it's not a bad idea to do so every few years. In almost every case there is no need to do so but just understanding the process of verifying public records in your own jurisdiction is worthwhile in my opinion. In most cases it can be done online in a few minutes and is free.


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