Mortgage Satisfaction: File or Face the Consequences

After a mortgage loan is paid off, the lender typically files a satisfaction of mortgage to release the lien on the borrower's real property.  For most lenders, particularly those who routinely make loans secured by mortgages, the filing of the satisfaction of mortgage is handled promptly in accordance with their internal procedures.  However, some lenders, whether because mortgages are not typically part of its security for a loan or they are just disorganized, the timeliness of their mortgage release is less than stellar.

This can cause problems for a borrower, or a new owner of the real property, when the prior mortgage was paid off but the public record still shows a lien on the property.  I personally ran into this problem when a prior owner's lender failed to file a satisfaction of mortgage on the condo I purchased.

Most states have laws that address this issue by requiring lenders to record a satisfaction of mortgage, lien release or similar filing within a specified period of time after the loan obligation has been fully repaid.  The time frame differs from state to state, but is typically 90 days or less.  In many states the requirement only applies to residential mortgage. If a lender fails to comply with its affirmative obligations under the statute, it faces penalties under state law, which can be substantial in some states and nominal in others.

In Ohio, a lender must record the satisfaction of a residential mortgage within 90 days from the date the mortgage was paid off. If the mortgage lender fails to comply with this requirement, the borrower may recover, in a civil action, damages of $250. This provision doesn't prevent the borrower from seeking any other remedies that might be available to him or her.  See ORC section 5301.36.

Given the fact that attorney fees to bring the civil action would run well in excess of $250, the penalty doesn't amount to much and small claims court is the only viable venue for bring any such action.  This statute provision hasn't been updated since 1984.  I confess that I did not avail myself of it when the bank dropped the ball on filing a mortgage release on my condo. A phone call to the bank was sufficient to resolve the issue and prod the bank into fulfilling its obligation.  Often that's all it will take. The simplest solution is always the best. 


residential mortgage said...

That is why consumers must be educated about mortgage and its process for them to avoid undesirable problems or confusion in the future. It is important to have all the documents to be properly organized so that when the time comes that the mortgage satisfaction is filed, everything will be fine.

Anonymous said...

Just one reason why you can't say it's over till it's over. You gotta file the papers or else the rental residential properties you just got paid off will go kapoot.

Unknown said...

Hi! Is it ok to use these information in my project? thanks!

Unknown said...

It's good to be warned about these sorts of pitfalls. There are way more issues that come from transferring of property than I had originally thought. It's definitely a smart idea to get an attorney that's experienced with real estate so you can be prepared for this type of problem. I don't think the average home buyer knows about these regulations, so it's worth investing in an attorney.