‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Jacob Passy at TheBigMove@marketwatch.com.
I have a home that I purchased in 1983, and I have refinanced and taken out equity lines of credit (ELOCs) multiple times. I now have about 13 payments left on the primary mortgage. When I signed papers on my last ELOC, I found out there is an old title lien from a past refinance. So it is probably greater than 10 years old. I think it is from a mortgage company that went bankrupt. Do I need a real estate attorney? Will this thing age out? How do I get rid of it?
Retired 67-year-old in California
You’re right to want to get this situation resolved. A forgotten lien can become quite the headache when trying to sell a home or refinance a mortgage. It looks like you’ve managed to be lucky so far, and the old lien you’re dealing with hasn’t prevented you from being able to refinance thus far. But if you ever need a new loan in the future or want to sell your house, this old lien could became a major roadblock.
Situations like yours are rather common, particularly if the mortgage was paid off between 2000 and 2012, said Nicki Compary, general counsel and director of title operations at Click n’ Close Title. That’s because of “the frequent selling of loans before the real estate bubble burst and the consolidation of lenders and banks after,” Compary said.
The good news is that the law’s on your side, so long as the mortgage related to the lien was paid off when you refinanced. “Every state has a law mandating that the lender either send you a document providing the mortgage is paid off (called a satisfaction) or file themselves with the local land records,” Steve Gottheim, general counsel at the American Land Title Association, told The Big Move in an e-mail. “If they didn’t do that in this case, you will need to go to that lender to have them file the satisfaction.”
Here’s what you need to do:
- First, locate the records from the refinance in question. You’ll want to look for the payoff statement and the settlement statement or HUD-1 form. If you have trouble finding those documents, the title company that worked with you during the refinance should be able to assist, Gottheim said. (Word of warning though, most states only require the companies to maintain these records for seven to 10 years after the closing, he added.)
- Next, find the current contact information for the lender with the lien. Contact them to request to have the release of lien executed and filed.
You mentioned that the mortgage company may now be bankrupt, but not all hope is lost. If the company doesn’t exist, the title company that paid off the lien should have a copy of the documents you need that show the lien was paid and that the title was insured without the lien listed as an exception, Compary said. “If the title company no longer exists, the underwriter of the title policy should have a copy,” Compary added.
When a mortgage company goes out of business, other lenders and servicers will step in and acquire their loans. If you find the old mortgage documents, look to see if there is a Mortgage Electronic Registration Systems (MERS) ID Number listed on the first page of the mortgage. You can look this number up in the registry to find the current contact information for the lender, Gottheim noted.
In a worst case scenario where you can’t reach the old mortgage company or title insurer, your current title company can help. “Many title companies have the ability to rely on the affidavit or indemnification from the title company that paid off the previous loan as good proof that it was paid off (even if it’s still of record),” Gottheim said. “These indemnities can help you and your lender address that old loan if it pops up on your next refinance or when you go to sell your home.”
Plus, every lien has terms, and there are statutes of limitations in place at the local level. These do vary, but if they’ve run out, title companies can help remove the lien.