Even After Paying Off a Mortgage, Some Papers Are Worth Keeping

Q: Several years ago, my sisters and I purchased our 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 that had been filed with the county recorder of deeds.

Are there any other documents that we should have? Also, when we bought the property we paid for a title insurance policy. We never received a copy of that policy. How can we get title to our property?

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

You should have received copies of all those documents at settlement. Because you purchased the property more than 10 years ago, I doubt that the settlement attorney will be able to locate your file. That attorney may not even be around.

You purchased a title insurance policy. The attorney recorded the deed to the property 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 it to you, along with your title insurance policy.

But don't worry. Once a deed has been recorded, it is a public document, and if you need to obtain a copy, you should be able to get one 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 the company is listed on the line that shows how much you paid for the insurance.

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

There is one caveat: When you sell the property, the title attorney searching title for the benefit of your buyer could 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 find it just in case problems arise.

You have paid off your mortgage. Your lender did the right thing by arranging to record a release of the mortgage on the land records. From my experience, not all lenders do that. Too many lenders just send the original promissory note and original deed of trust back to the homeowner, marked paid and canceled. 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 could cause you problems when you 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 such a search should not exceed $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, I strongly recommend that all homeowners keep all settlement documents at least until they sell the property. The HUD-1 settlement statements should be kept for at least six years, and probably longer. They are the best proof of expenses, as well as for demonstrating your basis for tax purposes.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.