Old Republic Title and the industry as a whole continue to experience an increase in claims resulting from forged reconveyances of releases of mortgages. These claims often involve either (1) mortgages which have just recently been released within 12 months prior to the date of the current commitment or preliminary report and, (2) to a lesser degree, unreleased mortgages where the seller, buyer or a third party presents a fraudulent un-recorded release at or just prior to the real estate closing.

Usually, most real property is encumbered with a mortgage securing an owner’s debt or obligation to a lender. So, when a title examiner or title searcher determines from their search that the subject land is “free and clear” of mortgages, that fact should be further investigated with the outcome of that investigation documented in the title file.

Therefore in order to help stem the tide of claim losses, in addition to any other precautions your operations are already using, the following precautions should be implemented prior to closing a transaction where an outstanding mortgage in your chain of title has been released outside your closing within the prior 12 months.

a.       If a mortgage has been released without an associated sale or refinance, then the lender should be contacted for confirmation that their loan has been paid off and their security has been released. Typically, a sale or refinance will involve a conveyance of the land to a bona-fide purchaser for value with a concurrent mortgage or alternatively, a refinance mortgage.

b.      If the seller, buyer, or third party presents a mortgage release to the closing officer at or prior to closing for an uncancelled loan, the closing officer must contact the lender for confirmation that the loan has been released. Contact the lender in the same fashion you would use if you needed current demand pay-off figures. Do not rely upon any contact information supplied by the parties to the transaction.

c.       If the land being searched is “free and clear” of any mortgages where the owner has been the owner for less than 5 years, then please contact one of our underwriting attorneys. 

Should you have any questions on the foregoing, please contact Steve Gratman, Esq., Paula Mack, Esq., Bill Corrigan, Esq., or Dwight Edwards, Esq.