Q: We are still furious over an episode that occrurred recently when we sold our house.
The settlement attorney informed us that we had to pay trustees' fees of $100 to release ourstanding mortgage [the so-called deed of trust]. We do not understand why these two trustees can get away with such a high charge? Is that legal?
A: We use deeds of trust instead of mortgages for one bai sic reason: A mortgage often requires court action to foreclose on property of the defaulting borrower.
Under a deed of trust, however, the borrower literally and legally deeds the property to one or more trustees, who -- when the borrower defaults -- have the authority to sell the property at an auction foreclosure sale, upon the written request of the lender.
Needless to say, there are different rules and regulations regarding foreclosures in Maryland, the District and Virginia, but for all practical purposes, the trustee has the authority to sell the property.
There is a high duty on the part of the trustee to both the borrower as well as to the holder of the debt -- the lender. Accordingly, the trustee must act with strict impartiality.
Examine your own deed of trust. I suspect that if your are like most homeowners, you did not take the time to read and understand the concepts contained in that legal document.
But if you analyze a deed of trust, you will see that the trustees have the authority to sell the property in the event of default, to require that the property be fully insured, and to pay all taxes and assessments that become due during the pendency of the trust.
Fortunately, trustees rarely are called upon to take any action because most borrowers don't let their houses go to foreclosure sales.
However, there is another function of the trustee, namely to release the trust when the lender has been paid in full. A form release is generally prepared, and when the trustee is satisfied that the promissory note secured by the deed of trust has been paid in full, the trustee will release the deed back to the borrower. This release must be recorded on the appropriate land records, to assure the real homeowners that the deed of trust will not stay on the record as a cloud on the title.
Trustees generally charge $10 for these services, plus a 50-cent notary charge. This is a standard fee for the Washington area.
Unfortunately, there are some trustees who take it upon themselves to make a little extra profit, and they attempt to charge whatever they can get away with. The general theory is that homeowners are so happy paying off the outstanding debt, they won't really object to another "nominal" charge.
Is there any limit to the trustees fees? Once you have signed the deed of trust, it is probably too late to complain, especially if the trustees' fees are spelled out in the legal document entitled "Deed of Trust." But, here are some protections to be included in your deed of trust before it is signed:
Determine in advance what the trustees fees will be. Perhaps the best way is to include a provision in the document itself stating: "Each trustee shall be entitled to no more than $10 for releasing said deed of trust."
Spell out the address of each trustee in the trust document itself. It is important to find the trustees when you have paid off your note, and often it is difficult to locate them individually.
Require that the lender be permitted to substitute trustees, in the event of the disability, death or disappearance of the named trustees.
Benny L. Kass is a Washington attorney. Write him in care of the real estate section, The Washington Post, 1150 15th St. NW, Washington 20071.