I’m trying to help an elderly friend sell his property in Pennsylvania. The title search shows a lien that he does not remember; in any case, it should have been paid off in 2013.
The original bank that lent the money no longer exists, and the mortgage was sold several times over the years. The last known bank cannot find any trace of the lien. How do we go about clearing this lien from the title at the courthouse? Do we have to find the current/latest mortgagor? Do you have any other ideas?
Over the years, Sam has had real estate clients who don’t recognize old loans on title. This is usually because their loan was made with Bank A, and in the intervening years, Bank A was sold several times or changed its name or went out of business and was absorbed by Bank B, which was later absorbed by Bank C.
So, when they look at title, they see a lender name that is completely unfamiliar, especially if they refinanced frequently or have owned several different properties over the year.
With this in mind, the first thing to do is to help your friend “remember” whether he had a loan on the property and with which lender. You can then use the Internet to track back whether the lender listed on his title is, in fact, the same lender.
Assuming it is the same lender and the lender is now out of business, you may need to help your friend find his documentations from the loan and collect other proof that he has paid off the note. That proof may be a document that releases the lien that was sent to your friend but never recorded.
Another issue we frequently see is a mortgage from a prior owner that was never released and continues to show up on title.
So, let’s say your friend purchased the home some 30-plus years ago and the prior owners had a mortgage. If your friend obtained title insurance at that time, the title company that issued the title insurance policy should back up that policy (even 30-plus years later, assuming they’re still in business) and make sure that any future sale goes smoothly.
Assuming it was your friend’s mortgage from a long time ago, and he finished paying that loan off years ago, and the expiration date on the mortgage for the loan was 2013, he might be in luck. A future title company may see that lien but ignore it due to the passage of time. (They may assume that a loan that is more than 30 years old without any adverse notifications attached to title was paid off in full.)
You should know that many title companies are quite knowledgeable on who the successor banks are that have assumed loans from banks. You could ask to see if they know who succeeded the bank and call that one. If they don’t know, and the bank was FDIC-insured, you could consult with the FDIC to track the successor bank. (You might also be able to find out more at FDIC.gov or HelpWithMyBank.gov.)
If you already did that, and that’s the way you found out that they have no record of the loan, then you might be on a wild goose chase.
You could speak with a local title company representative or a closing attorney to see if they have any suggestions for you. Luckily your friend isn’t closing now, and with the passage of time the lien becomes more “stale.” After a certain number of years, the title company will ignore that lien. You can imagine that a lien from 1970 for a 30-year mortgage would have been paid off 16 years ago.
If the title company can verify that there are no suits against the property or the seller, they may make the underwriting decision to ignore that mortgage and issue a title insurance policy to a new buyer with coverage over any possible claims on that seemingly “open” mortgage.
They would do that on the belief that the risk is so low on such an old mortgage that it basically doesn’t matter. But to be sure, please have a conversation with a real estate attorney in your area, a closing attorney or a title company representative for more information about any options you may have at this point.
Ilyce Glink is the creator of an 18-part webinar and ebook series called “The Intentional Investor: How to be wildly successful in real estate” as well as the author of many books on real estate. She also hosts the “Real Estate Minute” on her YouTube channel. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them at ThinkGlink.com.