Clear Title PSA

[sengsational]

Closing date is fast approaching for DW's dad's house and we got some unexpected news. The "paid off" house didn't look that way to the title search guy. So now there's a scramble to draw up a lease agreement until this can be sorted out.

So my reason for posting, primarily, is to give readers something to do for your beneficiaries: make sure the register of deeds' records agree with yours.

Depending on your county, it can be pretty easy; I made sure all loans were satisfied/cancelled yesterday on my house. I'd refinanced a few times and for each loan, they had scans of the documents. I printed some highlights and wrote down the book and page numbers.

The county where FIL's house is doesn't have security deeds available online, only warranty deeds. But the title company said the original loan isn't recorded as satisfied, and a call to the register of deeds confirmed that. There has been one bank takeover after the other since this loan was taken out, so "just call the lender" doesn't cut it. And the fact that you have a copy of a big check and then no more monthly checks doesn't cut it. Scouring the files didn't turn up any kind of loan satisfaction document, so I presume the payoff took place and the company managing the loan never sent out the satisfaction docs to the homeowner or the register of deeds. Or it could be the register of deeds lost it and also my FIL lost it, but I think that's less likely. He should have followed up, if that were the case, but probably what seemed important at the time was that nobody was asking him to pay anything.

So if your house is paid off, it might be worth a dive into the records to make sure the register of deeds agrees with you, and you have the book and page of the cancellation / satisfaction documents for every loan you've ever had, back to the original one.

 

[gauss]

Can your title guy and/or real estate agent help to shepherd this through?

I noticed that my late fathers condo had an unreleased loan on it also that had been fully paid off years before.

The lender's back office was quite difficult to deal with and the lien still remains.

I figured that when I actually go to sell the house, hopefully the professionals would have better luck in resolving this than me (given that they don't get paid if the deal doesn't close).

-gauss

 

[sengsational]

That's what I thought too, but when my wife indicated that she didn't do this every day (trying to get to the right people at huge institutions for loans originated by companies three or four buyouts ago), and she wondered if this wasn't someone else's job, she got quite an earful, apparently. But I had the same idea...give them everything you can find, then let them sort it out. The last known company and the account number. The digging is apparently what they get paid to do.

 

[gauss]

In my area, the real estate area is very hot. I could see the professionals not wanting to mess around with this when things are moving so quickly. During slower times however.....

 

[gauss]

I guess one possible word of advice is to not screen any phone calls during this process -- answer them all. The bank I was dealing with would call from numbers that I didn't recognize with names that were not descriptive. You could never reach the people to call them back and the idea of setting a meeting time with them fell on deaf ears. Just a suggestion.

 

[jazz4cash]

I guess I thought an owner’s title insurance company would sort this kind of thing out.

 

[Peter]

We ran into something similar during a HELOC application. The bank said there was a lien against the property from Sears Mortgage. Now, I have the payoff document from Sears, and, furthermore, there's a clear record of all the relevant grant deeds at the county office.

We decided not to go ahead with the HELOC for other reasons, but I wanted to satisfy the nagging thought that there was something in the record that needed to be fixed. So I asked a local realtor to do a title search. Clean title, no liens, was the report.

I still have that nagging thought, though! The bank guy must have got his information from somewhere ...

 

[sengsational]

I guess I thought an owner’s title insurance company would sort this kind of thing out.

I'm not sure how that would work. When FIL bought the house, he gave the title insurance guy an easy one...the house was built and owned by the builder. The property was conveyed, and all was as it should be. Now, 23 years later, a buyer comes along and hires another title search, buys title insurance, etc as part of the buying process. The county shows a record of the original loan, but nothing was recorded showing it was paid-off.

So are you saying that the title insurance company from the original loan would be on the hook to either find the payoff info or somehow cover the future owners against anything left unpaid? I thought they were only responsible for defects in the title from before the point of the original conveyance.

 

[Peter]

I

So are you saying that the title insurance company from the original loan would be on the hook to either find the payoff info or somehow cover the future owners against anything left unpaid? I thought they were only responsible for defects in the title from before the point of the original conveyance.

I think it would be the escrow company that would sort out issues like this, at least in California.

 

[jazz4cash]

I'm not sure how that would work. When FIL bought the house, he gave the title insurance guy an easy one...the house was built and owned by the builder. The property was conveyed, and all was as it should be. Now, 23 years later, a buyer comes along and hires another title search, buys title insurance, etc as part of the buying process. The county shows a record of the original loan, but nothing was recorded showing it was paid-off.

So are you saying that the title insurance company from the original loan would be on the hook to either find the payoff info or somehow cover the future owners against anything left unpaid? I thought they were only responsible for defects in the title from before the point of the original conveyance.

i probably don't know what I'm talking about. My quick investigation says title insurance only covers things that happened in the past (before last title transfer). We had a huge problem with MILs home that was purchased for cash (so no title insurance) and a defect was uncovered that had been missed by 3 prior searches. So I guess you need to get the mortgage company to provide documents required to release the lien.

 

[Potstickers]

i probably don't know what I'm talking about. My quick investigation says title insurance only covers things that happened in the past (before last title transfer). We had a huge problem with MILs home that was purchased for cash (so no title insurance) and a defect was uncovered that had been missed by 3 prior searches. So I guess you need to get the mortgage company to provide documents required to release the lien.

At least in Colorado, even if you buy with cash, you can purchase an owner's title policy. If you buy with a loan, you can add an owner's policy inexpensively. I wouldn't buy a property without some recourse on title defects.

 

[sengsational]

Just for "fun", I flipped through the documents from the two refinances I did on MY house (not my FIL's house that's being sold).

Every refinance, they charged for a title search and for lender title insurance (owner title insurance was blank).

There was a paragraph in one of the packages that talked about two kinds of title examination: marketable title and insurable title, but didn't go into details about the differences. Then there's also a limited kind of title insurance that piggy-backs on an earlier title insurance policy. With refinances, when there's less risk, they often "tack to an existing title insurance policy", rather than go back for 30 years. This saves time, but if there's ever a claim, you have to dig back farther in history to the original full title insurance policy.

So to continue the PSA that might benefit your heirs: At absolute minimum, write down the name of the closing attorney for every loan that got recorded. It would be great to have the title insurance policy details, but for the refinances, I only have the company name, pulled from the closing statement. But for my original purchase, I do have the title insurance details.

And another favor you can do is somehow mark this home loan closing stuff "never throw away". We might not be having this trouble if the that was done on FIL's records. We can't know now, but it's a possibility that closing documents for loans that followed the one that's showing unsatisfied were thrown out during the house clean-out and purge of files. If we had those closing documents, there would be an attorney's office to call, possibly, and title insurance company to call. But we have neither.

 

[RetireBy90]

We had contracted to purchase a home in 2007 and when we got ready to close the closing agent found an outstanding loan that had been paid off but never recorded at the county. The bank was 3 or 4 mergers ago and no records could be found. They agreed to write a title insurance policy, and they convinced me the loan was paid off but we walked and lost $10K because I didn't want to buy the problem with the title. 13 years later the same people still own and live in that home.

 

[jazz4cash]

At least in Colorado, even if you buy with cash, you can purchase an owner's title policy. If you buy with a loan, you can add an owner's policy inexpensively. I wouldn't buy a property without some recourse on title defects.

I assume cash transactions are eligible for title insurance everywhere but I could be wrong about that too! The thing about a cash purchase is there is no mortgage company requiring title insurance so an unsophisticated buyer paying cash at a bankruptcy sale got themselves in deep trouble. They started fixing up the property and uncovered structural issues that required a bank loan. That’s when the defect was detected. The property had been mortgaged 3 times and sold twice without uncovering the issue.