Q: How long should I wait for the deed to my house after the final payment? Should the paperwork be automatic in coming to me or are there steps I should take? Who do I contact if I receive nothing after waiting a reasonable period of time?
The seller of my property held the mortgage, and has been uncooperative in many ways throughout the term of the mortgage. I would like to learn how long I should wait to hear from him.
A: I am a little confused by your question, since you are asking about the deed to the property. Normally, when you go to settlement, you will receive a deed to your property, although in the various jurisdictions here it takes from two weeks to four months to get the deed back from the recording offices.
I suspect that you are talking about a document that is labeled "deed" but in reality is a deed of trust, i.e., the mortgage document.
Oversimplified, under a deed-of-trust arrangement, you borrow money from a lender, and sign a promissory note. The note specifically says that you promise to pay so much per month, at a given interest rate, and the entire note is due and payable at a specified time.
To secure that promissory note, and to assure a relatively easy way of collection, you also sign a document known as a "deed of trust." In effects, you convey title to your house to a trustee, selected by the lender, and title is not given back to you until you have fully paid the promissory note. Bear in mind that under a deed-of-trust arrangement, the trustee, in effect, holds legal title to your property.
While this often is described as a fiction - since you pay taxes and have the benefits of ownership - once you default on your promissory note the trustee has authority to sell your property for the benefit of the noteholder. The rules for foreclosure proceedings differ among the states, so you would be well advised to look at your own laws in the event you are in default.
Once you have paid off the note, needless to say, you want title back from the trustee. Again, while the rules and procedures vary from state to state, generally speaking the trust deed must be released from the land records where your property is located. After all, if someone will search title on your property, they want to see that you are, in fact, the owner of record.
When you sell your house, the title attorney usually makes the necessary arrangements for releasing your old deed of trust. However, often we pay off our mortgage before we sell the property. This could be the first mortgage, as in your case, where the seller took back the financing, or it could be a second deed of trust, where you borrowed some money to make home repairs, take a vacation or make other investments.
These deeds of trust must be released from the land records, and unless you take the steps needed to accomplish this, no one else will do it for you.
Thus, when you make your final payment to any lender, make arrangements to get back, at the time you make the final payment, the promissory note your originally signed. The lender must write across the face of the note "Paid in full and cancelled," and sign it. Then, take that paid and cancelled promissory note to the office of the recorder of deeds in the jurisdiction where your property is located, or to your family attorney, to determine the mechanics of physically releasing the trust.
One cannot emphasize too strongly the necessity for releasing these deeds of trust as promptly as possible after the promissory note has been paid in full. All too often, the owners want to "burn the mortgage," since they are so happy that it has been paid up. However, years later when they go to sell the house, the title search reveals that there still remains an outstanding deed of trust. Since the original promissory note has long been lost - if not destroyed - the owners may end up having to pay a lot of unnecessary money for a bond, to induce and indemnify the trustees to release the property.
Correction: Last week's column stated that when property is held by two parties in joint tenancy, obligations, lawsuits or other debts do not necessarily attach to the property itself. This was meant to refer to the situation where a husband and wife own property as tenants by the entirety. However, if two parties hold property as joint tenants their interest in the land can be attached to satisfy any money judgments.