DEAR BENNY: I paid my mortgage off in late May. What should I expect to see in the way of documents? How do I really know it is complete? –L.
DEAR L.: When you borrowed money to buy or refinance your home, you signed a mortgage document or a deed of trust. The latter is more commonly used throughout the country.
Your lender recorded that document among the land records in the county where your property is located. Now that you have paid off your loan, there has to be something filed to indicate that the mortgage (or deed of trust) has been paid and released from land records. Different states have different forms: Some use simple releases, while others use certificates of satisfaction.
Your lender will either arrange to file the release, or will send that release document to you for recording.
You should make sure that the release has been recorded, and a helpful employee in the local recorder of deeds should be able to confirm this for you.
Although not necessary, you should ask your lender to return the mortgage document and the promissory note back to you, marked "Paid and Cancelled."
Here are two more things you should do: First, if your lender has been escrowing money to pay your real estate tax and insurance, make the appropriate arrangements with the taxing authority and your insurance company so they start sending you their bills.
Next, if you have an automatic payment plan whereby the lender is sent the mortgage check each and every month, don’t forget to cancel that arrangement.
DEAR BENNY: We bought our home in 1971 and somewhere along the way we have lost the HUD-1 settlement (escrow) statement. Where and how would I be able to get a copy of this? Isn’t this something I would need in case we were to sell? –Carol
DEAR CAROL: You have raised a difficult question. The HUD-1 is the settlement statement currently in use for the great majority of residential real estate transactions. It lists all of the numbers (charges) involved when you first bought — or refinanced — your property.
Yes, it is always helpful to have your HUD-1 when you go to sell it, because the more legitimate expenses you can add to your home purchase, the higher your tax basis will be. And the higher your basis, the less tax you may have to pay.
But this may be academic since you have owned the property for all these many years. If you have also lived in the house for two years before it is sold, you can exclude up to $250,000 (or $500,000 if you are married and file a joint tax return) of the profit you make. Of course, any profit above those thresholds will be taxable.
However, I do not believe that HUD-1s were even in existence back in 1971. When the Real Estate Settlement Procedures Act (RESPA) became law in 1974, the law mandated that a universal settlement statement be used for all residential closings. The Department of Housing and Urban Development (HUD) created the form and thus the name HUD-1.
Back before there was a HUD-1, simple settlement statements were used — often one for the buyer and one for the seller.
Do you remember where you went to closing (called escrow in some Western states)? If so, you should contact that company, but I suspect that they have long since retired their old files.
You could also check with your lender, but once again, I don’t think this will be productive. If you live in a homeowner association or a condominium, the property manager may have a copy of your settlement statement.
Otherwise, you will have to recreate the settlement sheet from memory. The courts have often held that just because you don’t have papers does not mean that you did not have expenses.
DEAR BENNY: When my ex-wife and I got divorced she signed a quitclaim deed. Do I need to do anything else to get her name off of the deed and will there be any tax implications? –Brad
DEAR BRAD: A quitclaim deed basically means that the grantor (your wife) is deeding you whatever interest she has in the property — nothing more and nothing less. I often joke that I will be happy to give you a quitclaim deed to the Brooklyn Bridge.
A quitclaim deed is usually used when a divorcing spouse conveys his or her interest in the joint property to the other spouse who will end up owning the property.
In order for it to be effective, however, it must be recorded among the land records where the property is located. An attorney or the local recorder of deeds should be able to assist you.
Once the deed is recorded, you will be the sole owner of the property.
As for the tax implications, no gain or loss is recognized when property is transferred from a spouse (or former spouse) if the transfer is "incident to a divorce." This means that there is either a court-ordered divorce or a property settlement agreement between the parties.
For tax purposes, the basis of the property of the person transferring the property becomes the tax basis of the person receiving the house. For further clarification, discuss your situation — before you sign the deed — with your tax advisors.
One tip: If you are going through a divorce, and one of you will end up owning the entire property, consider making the transfer while you are still married. Many jurisdictions waive any transfer and recordation fees for transfers between husband and wife. However, if you are no longer married, (depending on your state law) you may have to pay these fees.
DEAR BENNY: Three years ago, I had to file for bankruptcy. Since then, I’ve had a very good track record. I have no debts (only have a debit card). I have paid rent faithfully ($950 per month). My credit rating has risen to about 675. I have found a condo in an area where two units have sold for approximately $110,000. The unit I am looking at is listed for $69,900, because it needs some work. I wonder if in today’s market I stand a chance of being able to find financing with my background. –Dick
DEAR DICK: Filing for bankruptcy can impact your credit standing for as much as 12 years. You should talk with a number of mortgage lenders and see what they say. Since the condo you are interested in buying will have a lot of equity, some lender may be willing to work with you — although the interest rate may be higher than the current market rates.
As you know, the economy is sluggish, and many lenders who have been financially impacted by the mortgage "meltdown" are justifiably nervous of making loans to people who have bankruptcy in their history. Do you have any relative (or friend) who can guarantee the loan? Perhaps the seller may be willing to take back all of the financing, in which case you do not have to go to a commercial lender.
I would first talk with a financial counselor so that you can learn all of the options that may be available to you. Your state or local government may also have a mortgage loan program that will meet your needs.
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 firstname.lastname@example.org.
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