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