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Legal Research Library > Open Mortgages ... Open Mortgages
Select an SECTION SATISFACTIONS FOR PAID MORTGAGES OPEN OF RECORD Satisfactions for Paid Mortgages Open of Record We are continuing last month’s Bulletin topic regarding Satisfactions for paid off mortgages which remain open of record. What happens when a prior bank is no where to be found? What are your options? Your approach will differ depending on whether an open mortgage is from a prior owner or the present owner.
Check the mortgage schedule in your title report. Is there a subsequent mortgage to the open mortgage for which you are seeking proof of payment? If so, it is likely that the first mortgage was “paid off” at the time your client refinanced and took out the second mortgage on the property. As a title company, we can approach the underwriter who insured the second mortgage and ask them to provide us with proof of payoff and indemnify us for the open mortgage. Problems may arise, however, in discovering which underwriter insured the prior title. Subsequent mortgages are refinances where only a mortgage title policy is issued (no owner’s fee policy). Your client will not have a copy of this policy, and will usually not know who insured the mortgage. To track down the title or abstract company, try checking the first page of the recorded mortgage and the county recording sheet. Often the title number and a reference to the title company are listed on one of these documents. Your client may still have his HUD statement which should list the title company paid at closing. An insurer such as Chicago Title can rely on a former insurer’s mortgage policy to clear a prior loan as long as that prior insurer paid off the open mortgage at the time the new mortgage policy was issued. Copies of the prior mortgage policy, the bank payoff letter, the check to payoff the prior mortgage and the cover letter to the banking institution must all be provided to the present insurer. In the alternative, a “Letter of Indemnity” can be issued by the former insurer to the new insurer. If the former insurer did not pay off the open loan, the new insurer cannot rely on the former insurer and its mortgage policy for indemnification. Problems also arise when a prior mortgage is paid off, but a Home Equity Line of Credit is taken out in its place. Often, lending institutions do not insure these types of loans. Under these circumstances an attorney needs to produce a satisfaction of mortgage. Client documentation can be imperative to prove to the prior lending institution that their prior mortgage was “paid off”. HUD statements list payoff amounts and bank names. Bank “congratulatory” letters state that an account is paid in full. Cancelled checks can prove the prior loan was paid off. Back to Top Prior owner mortgages are often easier to reconcile than present owner mortgages. A present owner’s fee policy, issued to the owner at the time of purchase, is enough to clear a prior owner’s open mortgage as long as that mortgage was not assumed by the present owner. Owners often retain their fee policies in their files. If not, check the recorded deed and mortgage for references to the owner’s title insurer and a title number. Again, statements may also provide this information. When you run into situations like this, please be sure to contact Chicago Title’s Clearance Department well before a closing needs to be scheduled. We are happy to assist you in tracking down prior title insurers and obtaining clearance from them. Next month, in our final segment on this topic, we will discuss the most drastic (and least popular) option available for attorneys to prove their client’s mortgage has been satisfied. Section 1921(5) of the RPAPL allows an attorney to furnish proof of payment of a client’s mortgage and submit an attorney affidavit stating his client’s mortgage is paid in full.
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