Obtaining a Mortgage Discharge

Obtaining a mortgage discharge is a critical part of selling property or refinancing a loan. This simple (but extremely important document) shows that a mortgage was fully paid.

The vast majority of the time, mortgage discharges are properly recorded in the land records, and nothing more needs to be done. On occasion, however, further action is needed if this was not done, or not done properly.

Mortgages 101

A mortgage is an agreement that gives a lender security against a borrower when making a loan for real property. When a borrower borrows money to buy property, the lender almost always requires the borrower to grant it a mortgage, in case the borrower does not repay the money. This allows the lender to foreclose the property, if the borrower defaults on the debt.

Mortgages, importantly, are filed (known in legal terms as “recorded”) in the appropriate county land registry. This allows anyone (most importantly, a potential purchaser of property) to know that a lender has an interest in the property.

When a mortgage is paid in full (either by the borrower or through a loan refinance), a mortgage discharge must be recorded. This is important for selling property: few, if any, potential buyers of property will want a home with unpaid debt on it!

By law, most lenders are required, on their own, to file a mortgage discharge once the debt is paid in full. Most of the time, this occurs without a problem, and the property owner generally gets notice of this in the mail. This, importantly, must be recorded in the land records along with the underlining mortgage.

Obtaining a Mortgage Discharge: What Can Be Done If A Problem Arises?

Problems with mortgage discharges generally occur when (1) a discharge isn’t recorded or (2) there is a question whether the entity who recorded the discharge had the authority to do so. In either case, what can be done?

The law allows, in specific circumstances, for the filing of an affidavit, which can serve as a mortgage discharge on its own. The law has detailed requirements on what is required for this option. Determining whether this applies should always be the first step in addressing a mortgage discharge problem.

If such an affidavit cannot be done, it is sometimes possible to obtain a new mortgage discharge from the lender. I’ve had luck doing this on a recent case, which saved my client enormous time and money.

If neither of the above are options, a property owner may also file an action in Land Court seeking a court order to discharge the mortgage. Such a case requires the property owner to include the lender as a party, and provide them an opportunity to object. This type of case can be helpful when it is not clear who the lender is, or whether the lender is still in existence.

Final Thoughts

If need assistance with a real estate matter, contact me for a consultation.

Deadlines for Enforcing a Mortgage

The Appeals Court issued a decision last week concerning the deadline for enforcing a mortgage in Massachusetts, under the obsolete mortgage statute. The full decision, Thornton v. Thornton, is included below.

Thornton isn’t the first appellate decision to look at this issue, and continues a trend of Massachusetts courts rejecting attempts by borrowers to eliminate mortgage requirements.

What Is a Mortgage?

A mortgage is an agreement that gives a lender security against a borrower when making a loan for real property. Under a standard mortgage, a lender is permitted to foreclose a property if the debt is not repaid. Without a mortgage, a lender would only have the right to sue the borrower for the owed money, and have no claim to the property itself.

A mortgage, importantly, is only a security agreement, and not the loan itself. While it is common for homeowners to state they are “paying their mortgage”, in reality, the homeowner is making payments towards the loan associated with the mortgage, known as the promissory note.

Mortgages and the Statute of Limitations

Massachusetts, like nearly every other state, has deadlines for bringing civil lawsuits, known as a statute of limitations. A common misconception is that the deadline for bringing a breach of contract claim applies to the enforcement of mortgages. The argument goes that, if the lender has not pursued a foreclosure for the owed loan within six years, no claim exists.

As explained in Thornton, this deadline applies only to enforcing the loan itself . . . not the mortgage. In other words, even if six years has passed since the loan default, the lender can still enforce the mortgage through a foreclosure.

Mortgages and the Obsolete Mortgage Statute

A bar, however, does exist for enforcing a mortgage through the obsolete mortgage statute. This law prevents the enforcement of mortgages in limited circumstances:

35 years from the recording of the mortgage or, in the case of a mortgage in which the term or maturity date of the mortgage is stated, 5 years from the expiration of the term or from the maturity date, unless an extension of the mortgage, or an acknowledgment or affidavit that the mortgage is not satisfied, is recorded before the expiration of such period. 

The borrower in Thornton argued that this deadline came from the promissory note. The Appeals Court rejected this argument, holding there was no basis for using the deadline from the note for this purpose.

In this case, because there was no maturity date stated in the mortgage, the thirty-five year deadline applied.

Practical Implications For Enforcing a Mortgage

Thorton underscores a critical point about the obsolete mortgage statute: courts, in my view, interpret this law strictly and will not allow a borrower to escape the enforcement of a mortgage unless all conditions of the statute are met. This statute is primarily intended for mortgages that are “up in the attic” and long forgotten by lenders, and courts are reluctant to extend this law much further than that.

This isn’t to say that a borrower has no options against a foreclosure. To the contrary, I’ve help many homeowners avoid foreclosure based on a wide array of defenses. None of these defenses, however, involve an elimination of the mortgage. For this reason, borrowers need to be realistic when dealing with such a matter.

Conclusion

If you need assistance with a mortgage matter, contact me for a consultation.

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