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Reader offers insight on fee paid to lender to show final payoff

Over the past dozen or so years, some lenders have failed to send documents to their borrowers that show the final payoff of a mortgage. (iStock)
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Q: I just read the article regarding the woman that has not received her release of mortgage document from her lender. If it was my big box lender, she would not get the release of mortgage until she pays the special release and mail fee. I had to pay $158.50 two years ago to get it.

A: Thanks for your email. Our column talked about the documents you might get once you paid off your home mortgage. Over the past dozen or so years, some lenders have failed to send documents to their borrowers that show the final payoff of a mortgage.

Lenders may send out a final loan statement showing that the borrower has paid off the loan. They may even send out a letter letting the borrower know that the lender received a final payment on the loan and that nothing further is due.

More Matters: How to tell if the county has officially canceled your mortgage after you paid it off

But the lender should also send a document to the borrower or directly to the office that handles the recording or filing of real estate instruments. This document would be called a release of mortgage or release of trust deed.

You mentioned that you did not get the release document. When you contacted your big box lender, it agreed to send you the document once you paid a fee. Usually this fee covers the recording or filing fee plus a nominal document preparation fee. When you sell your home and request a payoff letter from your lender, the lender includes these fees in the quote. However, if you simply end up paying off your loan naturally or send extra money to pay off the loan, the lender may net out your account, close it and show it as paid in full without sending out the release document.

For example, in Cook County, Ill., the cost to record the release fee is $98. Some lenders may simply add the $98 fee to the payoff amount and list it on the payoff letter as a line charge. Some lenders charge $5 for the release letter while others charge a higher amount. Some lenders even charge owners to wire the mortgage money to them.

More Matters: She paid off mortgage after her husband died. Should she worry that the lender hasn’t sent her the deed?

If you sell your home and the settlement agent wires the final payoff to the lender, the settlement agent may charge you a fee to wire the funds and the lender you are paying off will charge a second fee to receive the money.

Side thought: We really are in a business environment where everyone charges for everything.

Thanks for your comment.

Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (Fourth Edition). She is also the chief executive of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through the website, BestMoneyMoves.com.

©2022 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.

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