Question: I have refinanced twice in the last five years and have enjoyed my interest rate dropping each time. I am due to settle on another refinance when I found out that my lender is refusing to draw up the closing papers because the two previous loans are not recorded as released in the county. I know the loans have been paid off because I used the same Settlement Company each time. Everyone keeps blaming each other and I'm just trying to get to closing. Is this common and who's really at fault?

Answer: A title agent would be able to answer your question better but unfortunately I have some experience with this problem.

First of all, due to the constantly changing interest rate environment and the emergence of "low cost" and "no cost" refinance programs, homeowners are indeed holding their mortgages for a shorter period of time. It's a competitive industry and loan officers around the country are eager to sign up folks for a refinance as soon as it makes financial sense.

Let me explain what happens when you refinance your home. An application is submitted and approved with the new lender. The title agent (or settlement attorney, depending upon what state you live in) requests a payoff from the old lender. The actual payoff figure will include the principal balance plus any interest due.

At the settlement table, the borrower signs the promissory note and several other disclosures. The loan funds are either wired or delivered to the settlement company office. The settlement agent is in charge of dispersing those funds. In most cases, the funds are used to pay off the old mortgage.

Once the old mortgage is paid off, the old lender must issue a Certificate of Satisfaction (CS). In Virginia, where I make most of my loans, the old lender is given 90 days to provide the CS. If the lender is late, it is subject to a $500 fine.

From my experience, the CS is either sent to the county for recordation or the office of the settlement agent, who will the record the CS with the county. Either way, the paid-off note should be recorded within 120 days of pay-off.

In your situation, the old liens obviously never got recorded as paid. Before I start laying the blame, it is important to note that during huge refinance waves, it will take longer for lenders to issue a CS. It will take longer for counties to record the CS. And it will take longer for a settlement company to facilitate the recording of the CS. So I think it's prudent to cut some slack to these folks when they are inundated with pay-off requests.

However, your situation is a bit different. If I read your story correctly, I understand that you have two unreleased liens attached to your house that have been paid in full for a long time - the oldest has been paid off for perhaps five years. I also understand that you have used the same Settlement Company each time.

Here's my take on this. Your settlement company certainly should have seen this coming. It's more common to have one paid note that hasn't been released but you have two unreleased liens on the property. Technically, that puts your loan in third position, when it should be first. Apparently the new lender is a bit too uncomfortable with this.

So who's at fault? Lenders must bear the responsibility of issuing a Certificate of Satisfaction in a timely manner. If they don't, it is the job of the Settlement Company to ensure that liens are released. If that means banging on the door of the lender, so be it. The bottom line is that it is the Settlement Company's job to get these things recorded. Some lenders may make the job more difficult than others, but the responsibility of getting it done falls upon the Settlement Company.

Published: April 24, 2002

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, the president of PMC Mortgage Corporation in Alexandria, VA, is a mortgage columnist whose work has appeared in numerous consumer, real estate, and mortgage publications. Mr. Savage welcomes your questions for possible use in this column, however because of the volume of mail received, Mr. Savage cannot answer questions individually.