Q. At last, the happy day. I have paid off the 20-year mortgage on my residence in the District of Columbia. The bank has returned the mortgage papers and advised me as follows:
"We suggest that you take your deed of trust and paid and canceled note to the title attorney of your choice so that the indebtedness may be removed from the District of Columbia records."
Why do I need to see a title attorney? Can I do it myself and save the fee?
A. First, the legal fee involved for preparing the release of the deed of trust should be quite nominal -- somewhere in the $50 to $60 range.
When you borrowed money from the bank 20 years ago, you signed a promissory note wherein you agreed to pay so much per month for a period of 20 years. The note was amortized, which means that a computer carefully calculated monthly principal and interest payments so that the entire balance would be paid in full at the end of 20 years. I suspect that 20 years ago, we did not have computers, but were able to do these calculations either by relying on specially prepared charts or by doing the calculations by hand.
When you signed the promissory note, you also signed the mortgage papers, or, in your case, the "deed of trust." The deed is similar to the mortgage in that you deed the property in trust to a trustee (or trustees) selected by the bank. The trustee has two basic functions. If you pay the mortgage off in full at any time, the trustee is obligated to release the trust from the land records. There is a form, called a "deed of release," that releases the mortgage from the land records.
The second function of a trustee is to start foreclosure proceedings if you default. If you look in the classified section of this newspaper, you will see a column titled, "Legal Notices." There you should find some advertisements titled, "Trustee Sale of Valuable Property." Under D.C. law, the trustee has legal title to the property and can foreclose on it at a public auction if the borrower defaults. There are various consumer protections in the law. For example, the trustee must give written notice to the borrower and then wait 30 days before foreclosing. And the written notice must go to the borrower's last known address -- with the burden on the borrower to notify the lender if he or she moves.
Thus, it is important to release the deed of trust from the land records. A one-page form can be prepared in which the trustee releases the deed of trust from the records. The release, if properly drawn up, can then be recorded among the land records.
As you know, when you first signed the deed of trust, it was recorded among the land records. This is legal notice to the entire world that the bank has an interest in your property. Similarly, when the bank releases its interest, this is also legal notice to the entire world that you now own the property.
You do not have to use the services of a title attorney to prepare the deed of release. However, you do have to make sure that all the appropriate blanks are filled in, that the deed of release is properly notarized and that it is in recordable form. For the nominal fee involved, it may make sense for you to consider using the services of a title lawyer to clear up your title.
As you can appreciate, if you do not clear the title, the outstanding deed of trust will continue to show up on the land records when you go to sell the property, and the sale may be significantly delayed.
Make sure that when your bank sent you the package of papers, it also sent you the original note, marked, "Paid and Canceled." The trustee has to be completely satisfied that you have paid the note in full before signing the release.
If you do not have the original note, I suggest that you contact the bank immediately to track it down.
There is nothing worse than selling your house and suddenly finding that there is an old outstanding deed of trust still on the land records.
Now that you have paid your house in full, I cannot let this opportunity go by without discussing one of my favorite topics -- namely, refinancing. You are sitting with a considerable amount of equity in your house. I call this "dead equity," insofar as your house may go up in value whether you have 100 percent equity or zero equity. If you need your money now, refinancing may be the answer.
Remember that by refinancing you are pulling out your own money from the property, which is a tax-free transaction. If you ever decide to sell the property, on the other hand, any profit will be taxed at the appropriate rate.