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Housing Counsel: When Your Mortgage is Paid Off

Written by on Sunday, 25 June 2006 7:00 pm

Question: Several years ago, my sisters and I purchased our present residential property and obtained a mortgage loan from a bank. At the settlement, we were given a copy of the Deed of Trust. We recently paid off that mortgage and the bank sent us a copy of the release which had been filed with the County recorder of deeds.

Are there any other documents which we should have? Also, when we bought the property we paid for a title insurance policy. However, we never received a copy of that policy. How can we procure our property's real estate title?

Answer: Let's start from the beginning. When you went to settlement to purchase your property, you signed a number of documents. These included (1) a promissory note to the bank, (2) a deed of trust (the mortgage document), and (3) the HUD-1 settlement statement.

You should have received a copy of all these documents when you went to settlement. Since you purchased the property more than 10 years ago, I doubt that the settlement attorney will be able to locate your file at this late date. Indeed, that settlement attorney may not even be around now.

You purchased a title insurance policy. The attorney recorded the deed to the property among the land records in the county where the property is located. It usually takes several months before the county will return the recorded deed to the attorney. But once that deed has been received, the attorney should have sent you that original deed, along with your title insurance policy.

But not to worry. Once a deed has been recorded among the land records, it is a public document, and if you need to obtain a copy, you should be able to get one directly from the appropriate county office.

As for the title insurance policy, you should be able to find out which title insurance company issued the policy by looking at your HUD-1. Usually, the name of that company is listed on the line which reflects the amount of money you paid for this insurance.

As a practical matter, however, you really do not need that policy now. Since a long period of time has elapsed, and there have been no claims against your property, I seriously doubt that you will ever have need for the policy. Obviously, this is not a guarantee, but the passage of time has probably eliminated any possibility that someone could claim against your property.

There is one caveat to this, namely when you go to sell the property, the title attorney searching title for the benefit of your buyer may find extraneous problems. For example, your settlement attorney may not have released the mortgage of your seller, and it will still show on the title report.

Thus, while I doubt that you will ever need your title policy, it would be a good idea to try to locate the policy just in case problems arise in the future.

Now, you have paid off your mortgage. Your lender did the right thing by arranging to record a release of that mortgage on the land records. From my experience, not all lenders do this. Too many lenders just send the original promissory note and original deed of trust back to the homeowner, marked "paid and cancelled." The burden -- and the cost -- is on the homeowner to make sure that the mortgage is released.

Too often, homeowners do not understand the importance of having the mortgage released. They are so happy that they have paid off their debt, that they "burn the mortgage." That is a very bad idea, and will cause you potential problems in the future when you go to sell the property.

I suggest that you either go directly to the county land records to confirm the status of your title, or retain a title attorney to conduct a title search. The cost for this search should not exceed $200 to $300.

This is important for your peace of mind, so that you can be assured -- once and for all -- that you own your property free and clear.

Finally, it is strongly recommended that every homeowner keep all of their settlement documents at least until they sell the property. The HUD-1 settlement statements, however should be kept for at least 6 years, since they are the best proof of expenses, basis for tax purposes, and capital gains evaluations.

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  About the author, Benny L. Kass

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.