DEAR BENNY: In a recent column, you listed what should be done when a mortgage is paid in full. My mortgage was paid in full in August 2008. I have all the paperwork and have done everything you suggested except for the original promissory note and deed of trust. I called my mortgage company yesterday and asked to have the original promissory note returned to me marked "paid and canceled," and their response was that they had sent me everything I needed. I asked them what happens to the original promissory note that I signed, and the response was that all of my personal information is safe with them.
Is it important that I obtain the original promissory note? If so, how do I go about getting that? Would it make a difference if I requested it in writing — as compared to a phone call to their customer service department? I know I have clear title to my property based on a copy of the deed of reconveyance issued by my county’s register of deeds. Would some other company have the original promissory note? I refinanced my mortgage in July 1993, and the original company notified me a few years later that I should start sending my payments to another company; then a few years ago, I was notified that another mortgage company had merged with or purchased that company and I needed to start making my payments to a third company.
I’ve heard the expression, "Now I can burn the mortgage papers since my mortgage is paid off!" Is that the only reason for obtaining the original promissory note? Please advise. –Barb
DEAR BARB: When you borrow money and get a mortgage to buy a house (or refinance an existing mortgage loan), you sign two important papers: a promissory note — which is the "IOU" to the lender — and a deed of trust (also called a "mortgage" in some parts of the country). The deed of trust is recorded among the land records in the county where the property is located. This is to provide security for the lender should you go into default.
When you sell or pay off the loan, the deed of trust must be released from land records. The release is called different names in different states.
Your mortgage loan has been released, so you do not have to be concerned about the status of your title. However, the promissory note is still outstanding.
While it is not a major problem, it is possible that some unscrupulous person could take that note and try to collect against you. You will win because you have proof that you paid off the loan, but it could be a hassle and an expense to get an attorney to defend you.
So, I suggest that you make an effort to get the note back. Unfortunately, as you have indicated, your note has probably been sent to several different lenders over the years. Send a demand letter to all of the previous lenders to whom you were making mortgage payments, and send a copy of your letter to your state attorney general’s office as well as to the Federal Trade Commission and the Federal Reserve Board in Washington, D.C.
That should get the attention of your lenders.
DEAR BENNY: I was a seller whose buyer would not sign to release the contract. What can I do? –Lea
DEAR LEA: My answer has to be based on my experience with clients here in the Washington, D.C., metropolitan area. I do know that laws — and customs — are different throughout the country.
Let’s assume that you have a contract with buyer A, who has made it clear that he does not intend to honor the sales contract and will not go to closing (called escrow in the western part of the country. There is a myth among real estate agents that in order for the seller to remarket the property and try to sell it to a third party, buyer A has to sign a release of the contract.
Yes, it would be helpful to get this release signed, but it is neither mandatory nor necessary.
The seller can put the property back on the market. The only way that buyer A can put a hold on the property and block the sale to a third party is to file a lawsuit for specific performance, and file among land records a document known as a "lis pendens" (translated to mean lawsuit pending).
Clearly, if buyer A files such a lawsuit, that means that he is ready, willing and able to complete the transaction — which he has already stated in the negative.
So, my suggestion is to advise buyer A — in writing — that if he does not agree within the next 10 days to go to closing, he will be in default and you will try to sell to someone else.
Here’s another suggestion: Sellers should try to get the earnest money deposit as large as possible, so that buyer A will understand that should he default on the contract, he will lose all of his deposit money.
DEAR BENNY: My father is one of 11 family members who are heirs to a piece of property (raw land) that has been in our family for years. Title is currently held in the estate of our long-departed relative, and taxes have been paid annually. As the years go by, and as these heirs pass on, more and more surviving family members will come into this complex family ownership, so my brothers and I would like to purchase the property before the 11 heirs become 20 or 30. We have approached our relatives, most of whom we have never met, and are offering to buy out their interest based upon a similar sale in the recent past. Several quickly accepted our offer, but others are more reluctant.
My question is: What happens if we eventually get say, 10 "yeas," but there is one lone holdout? Does one family member have a veto over the wishes of everyone else? Is there any legal means (i.e. "majority rules") to compel this person to sell his/her interest? Your insight and/or suggestions will be appreciated. Thanks! –Rex
DEAR REX: However you do it, you should resolve the matter before there are more heirs involved.
You indicate that the property is currently held in the estate of one of the relatives. Is there a personal representative (called PR or administrator) of the estate? Have you reviewed the last will and testament of the deceased?
I believe that the PR should have the authority to sell the property for the best and highest price. If you and your brothers want to buy, get a current appraisal and make an offer to the PR. In some states, the PR may need court approval to make the sale; in other states, the PR by law already has the authority to sell.
When the property is sold, the PR will distribute the net sales proceeds to all of the heirs. I suspect that the PR will be anxious to resolve this quickly. I have been involved in too many cases where it is difficult — if not impossible — to find all of the heirs, especially as more and more are born (and die) as the years go by.
Ultimately, if some heirs remain holdouts — and the PR is unwilling to sell — you may have to file a lawsuit called a partition suit.
I suggest that you and your brothers retain local counsel who understands real estate and probate law.
DEAR BENNY: I filed bankruptcy in 2007 and received a discharge of personal liability on all debts. But, I have continued to make voluntary payments on my home (I owe about $90,000). There is a second mortgage on the home. I did not sign a reaffirmation agreement with either company. If I stop making payments on the second mortgage (I owe about $27,700), can they make me sell the house? –Harold
DEAR HAROLD: I am not a bankruptcy attorney so I strongly suggest that you discuss your situation with an attorney who specializes in that area. Although you did not reaffirm either debt, I am concerned that by continuing to make those voluntary payments, a judge might take the position that your actions constituted a reaffirmation.
DEAR BENNY: I recall reading that the government has a program for first-time homebuyers that involves no money down and a $7,500 "grant" for closing costs. Does such a program exist? If so, would a newly divorced mother of two qualify for the program even though she and her ex had purchased a house together? –Ron
DEAR RON: Last year, Congress enacted a law that gives first-time homebuyers the right to take a $7,500 tax credit on their income tax return. However, in reality this is an interest-free loan, which must be repaid over a 15-year period (or paid in full when the house is sold or the loan refinanced).
You or the divorced mother should consult a mortgage lender to determine whether you can qualify for a loan. If so, and if you are a first-time homebuyer, you should be eligible for that $7,500 tax benefit.
But it is next to impossible in today’s financial situation to obtain a no-money-down loan. Most lenders will insist on at least 5 or 10 percent down, depending on the financial situation and credit rating of the potential borrower.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to [email protected].
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