Happy Holidays! It had to come around sooner or later, and to many of us, it is definitely sooner than later. Kudos to those who put up their Christmas decorations right after the Halloween pumpkins, skeletons, and witches. Perhaps those are people who don’t have to work 24/7 like some of us in our industries. Or there are those who never took off the decorations from last year. Which one would you be?
YOU HAVE QUESTIONS, WE HAVE ANSWERS!
VIVA ESCROW Q & A SEGMENT
(Real questions sent to us – verbatim!)
This month I’d like to feature the questions about loans being paid off but never reconveyed. You would be surprised at how common this issue is and how helpless and frustrated it makes the Borrower.
I have a client with 4 properties all paid off without proof. They don’t have any record from the lenders.
Not having a Reconveyance after a loan is paid in full is problematic. Institutional lenders should have sent the Reconveyance directly to the County Recorder for recording after they issued it. To check if that was done the client can either (1) get a search on the ownership of the property to see if Reconveyances show as being recorded, or (2) approach the lenders and ask them to research if the Reconveyances were done and sent out for recording. Also, ask them for a recorded copy or even an unrecorded copy as proof. Usually, the Reconveyances are supposed to be mailed back to the client at their last known address.
If any of these lenders are private lenders, then it becomes more difficult. Here are the steps:
- Locate the private lenders
- Get the original Note and Trust Deed from them,
- Ask the private lender to sign the “Request for Full Reconveyance” (on back of original Deed of Trust)
- Send all these original paperwork to the Trustee for them to issue the Reconveyance and send it out for recording.
And in the same vein….
Can you share the problems that a homeowner might have if the reconveyance or release of mortgage was never issued or recorded? If it was recorded with the county, there should be a reconveyance document on the property. Right?
The Reconveyance document should be recorded with the County Recorder’s office to take the lien off of the property when paid. A Deed of Trust was recorded to put the lien on; so a Reconveyance has to be recorded to show that particular Deed of Trust paid off.
The biggest problem is when you make the payoff but don’t get back the actual PROOF that the loan was paid off for your public ownership records. A cancelled check is not sufficient proof; you cannot “record” the cancelled check. The recorded Reconveyance is the proof that will be needed.
It is very important for homeowners to follow up and get the Reconveyance. If the loan was paid through an escrow transaction, then the escrow and title company will be able to help.
However, if the loan was paid off outside of an escrow transaction, if the Borrower just wrote a check and made the final payment, then it is imperative that they be proactive and make sure the Lender will issue the Reconveyance. This becomes of particular importance when it is a private party Lender who is being paid off. This private party Lender has to return the original loan documents to the Borrower and make sure the Request for Reconveyance is signed by every single individual lender named on that loan. With receipt of the original Request and the documents, the Borrower has to send them to the third party Trustee mentioned in the documents. The Trustee issues the actual Reconveyance which is then sent to the County Recorder’s office to record.
Complicated? Yes, it is for the layperson!
When you have an institutional Lender, it is always easier to get the Reconveyance. They are obligated to issue it once the loan is paid off. Even better, you can always locate them to follow up. The Bank of Americas and the Wells Fargos won’t be going anywhere.
But when you have a private lender, I recommend you set up an appointment with the private lender to do an exchange — I give you the payoff check/cashiers check/ and in exchange you give me the original loan documents and sign the request for full reconveyance section (which is on the last page of the Deed of Trust). Once I physically have these documents, I won’t be afraid if the private person moves away, disappears, or passes away.
If your client is thinking of refinancing and/or selling the property then this reconveyance issue has to be taken care of and at that time the escrow company handling his transaction may be able to help, by contacting the old lenders or, the worst case scenario if the private lender cannot be found, then there is a possibility that a Lost Beneficiary Bond has to be placed.
~ Funny(?) of the Month ~
What will $1M get you in various parts of the country?
Maybe not so funny for us Angelenos.
I do have some health issues and one of the first things I have to do is lose weight. Easier said than done during the holiday season. Then I came across this and made it my Quote of the Month :
~ Quote of the Month ~
The cardiologist’s diet: if it tastes good spit it out
I may be doing a lot of spitting this holiday
My YouTube Offering for the Month
Listen to the complications that arose to a transaction due to the existence of an undisclosed owner!
You Have Questions? We Have Answers!
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
“Escrow is my FOREMOST language!”
The opinions expressed in this blog are solely the author’s.
Your comments and viewpoints are always welcome.
Info @ VivaEscrow.com