Once you send in your final mortgage payment (or you payoff your loan when refinancing or selling your home), your lender has an obligation to act. It’s the law.
The bank is required to prepare and record in the public records where the property is located a “satisfaction of mortgage.”
Why? So the public records can reflect the title to your home or condo is free from the bank’s mortgage lien.
When a borrower pays off his or her mortgage or home loan, it means he or she has satisfied the debt.
However, paying off the debt doesn’t mean the property’s chain of title is free and clear of the lien. The lien created by the mortgage is still reflected in the public records.
Basically, a mortgage is like a cloud on title. When the mortgage was originally recorded it was done so to protect the bank’s interests while the loan was being repaid. The recording of the mortgage created a lien against the property which the entire world can see when searching the public records.
After receiving payment in full, a lender is required to prepare a document showing the lien has been removed from the property. That document (the “satisfaction of mortgage”) has to be recorded in the public records.
Over the years there have been so many issues with satisfaction of mortgages that our legislature passed a law outlining the steps a bank, or other lender, is required to take after the mortgage debt has been satisfied.
Condos in South Palm Beach, Florida
Florida Statute 701.04, is the law the sets forth the the steps that a lender must take to remove and cancel their lien on your home or condo. The law is specific as to those steps (see below). The lender doesn’t get to choose what to do.
First of all, the bank has to remove the lien by preparing a written document. Especially important, the lender has to record the satisfaction of mortgage in the proper county public records. This is called filing notice. Then the notice has to be shared with the borrower.
And, all of this has to be done within a certain number of days. Meaning, the bank has a deadline.
Florida home owners should be aware of the legal requirements for satisfying their mortgage. If it is not done correctly, then the lien will remain in the public records and the owner will not have clear title to his or her home – which can be problem later on when, for example, they try to sell the property or when they die and the property is distributed to their heirs or beneficiaries.
The mortgagee or assignee who receives that final home loan payment must execute a written document that acknowledges the mortgage has been paid in full, or “satisfied.”
This written acknowledgment must be proven or acknowledged (i.e., signed before a notary public).
It must then be filed with the clerk responsible for the real estate records of the county where the property is located.
After the bank files the documentation with the real estate clerk’s office, then the bank must let the borrower know that this has been done. The lender must send notice to the borrower that the documentation has been filed with the clerk.
This is notice that the lien has been removed. It confirms to the borrower that he or she now has full legal title to the property without the lender having any lien against it.
Under Florida law, the bank has to act within a reasonable time, which has been defined as sixty days (60 days) after the date of the full payoff of the mortgage or home loan.
Within this 2 month time period, the bank has to (1) file the proper notice in the county real estate records as well as (2) give proper notice to the home owner of this recorded satisfaction of the mortgage.
What happens if the home owner has to sue the bank because it failed to prepare and record a satisfaction of mortgage? The bank will have to pay the home owner’s legal fees to bring the lawsuit. That’s also stated in Florida Statute 701.04.
Of course, there are times when bad things happen. Sometimes, a Satisfaction of Mortgage in the public records does not remove the bank’s lien against the chain of title.
1. Mistakes, Accidents, or Fraud
Mistakes can be made, for instance. If a borrower gets a notice in the mail from the bank that there has been a Satisfaction of Mortgage filed in the real property records, but there is still a balance due on the home loan, then it’s obvious that an error has been made.
Under longstanding Florida law, the borrower doesn’t get a windfall here. The bank will be able to fix that mistake in the public records.
It’s true that cancellation and discharge of a Florida mortgage in the formal county records is considered an absolute bar to collecting any more money from the borrower as well as an extinguishment of the mortgage. However, if there has been a mistake, or an accident, or some kind of fraud, then Florida courts have held this general rule will not apply. Biggs v. Smith, 134 Fla. 569, 184 So. 106 (1938).
2. Foreclosure Judgment
Another big exception to the Satisfaction of Mortgage law happens when the lender forecloses on the property. If the borrower stops paying on the home loan, then the bank can file a lawsuit to foreclose on the home or condo.
Once the foreclosure lawsuit ends, if the bank wins, then it gets a judgment of foreclosure signed by the judge. That allows the lender to sell the home or condo in order to get money to pay off that unpaid mortgage balance.
Under Florida law, the lender (mortgagee) does not have to file a Satisfaction after the sale of mortgaged property pursuant to a final judgment of foreclosure. The title is clear for the third party buyer at the foreclosure sale under the foreclosure laws, but the defaulting homeowner does not get documentation in the record that would suggest that his debt had been paid. Lashinsky v. First Fed. S & L Ass’n, 434 So. 2d 38 (Fla. Dist. Ct. App. 1983).
When you pay off your home loan, it’s sometimes a cause for celebration. You have achieved the American Dream of owning a home free and clear! The thing is, that doesn’t happen unless the bank does its part to remove the lien it has on your property.
Unfortunately, because of the very same reasons which lead to foreclosure fiasco several years ago, bank often fail to record a satisfaction of mortgage. In some instances, a lawsuit may need to be filed against “your lender” before a satisfaction of mortgage is issued; meaning, you may need a judge’s signature on a court order to make sure your property is free and clear of the bank’s mortgage
If you are dealing with a lender who refuses to issue a satisfaction of mortgage in Florida, a good piece of advice is to speak with an experienced Florida real estate lawyer to learn about your rights, because the law provides for the payment of attorney fees if the lender fails to timely issue and record a satisfaction (which means, in many instances, the homeowner will not have to pay any money to the lawyer, unless the lawyer wins the case). Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
_______________Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.
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