Another question for the attorneys.

[southflorida]

Hello. I have a first mortgage with Popular mortgage and a second mortgage (heloc) with HSBC. I refinanced about two and a half years ago. I am in default on the first, 4 months past due and expecting a forclosure notice any time.
That is not my immediate question though.

My question for the attorneys is about the previous mortgages I had. They were a first and second both held by Household finance. Both obviously were paid off in the refinance. Or they were supposed to be! I received a letter from Household a couple of weeks ago stating that my account was being transfered to their sister company Beneficial finance. When I checked the account # it was that of my old first mortgage. When I called them to see what they were talking about. They also seemed confused until they looked up my account records and found that the second had been paid in full and a release issued, however the first for some reason, purhaps a late payoff, had a balance of $27.60 and as a result was never released. I then asked if that meant they were still technically the first mortgage holder, and although she was not sure, she did believe so. Without asking, she said she would request a waiver of the amount owed and if granted I would receive the release in 4-6 weeks.

Does this affect my present situation? Does this create a problem for Popular Mortgage? Are they really my second mortgage and don't know it? Would that be to my advantage somehow? Are they protected by title insurance? Can they get their money back from the title company since it is their mistake? Can they still foreclose, if it comes to that? Why didn't the title company for both my present first and second mortgage pick up on that. It was their job, Right? Now that Household knows, can my present second with HSBC jump in and grab first position?

I am not necessarily looking for trouble with Popular or HSBC. Depends on how my modification goes. So far they seem very nice.

Sorry about all the questions, I'm new here. And this is a fascinating situation.

UPDATE: Just received another letter today from Household saying my account has been transferred to Beneficial.

[Brian K.]

My all time favorite question “why didn’t the person before take care of it”. The simple question is the title company hired some very unqualified people to handle huge volumes of paper. The banks hired some very unqualified people to handle huge volumes of paper. No one ever cares, it’s not there job.

Technically, the title company is responsible to make sure the payoff reaches the prior mortgage holder in the correct amount. The first lender should have notified you of the shortfall. The underwriter for the title company should have caught this at the time of the issuance of the policy of insurance.

The new lender is in second position by 27 dollars (no real impact)

Given the condition of your loan documents, and the quality of the professionals dealing with your loans you should have your documents reviewed to see if there are other more serious issues.

[MlcMBjnn]

Can I add a question to this discussion? I was checking my credit report the other day and found that one of them had an old mortgage account with Washington Mutual still listed as open. This account was the first refinance I did on my old house in 2002. It was paid off by the second refinance in 2004 and the house itself was sold in 2006. Do I need to get in touch with the credit reporting agency to fix this? I believe I probably have the release somewhere as I never throw anything away - it would just be a pain to locate. Should I even worry about this? Thanks.

[Andrew]

Negative acct info in your credit report will remain for 7 yrs, bankruptcy's can last 10 yrs. Positive acct info is usually on your credit report for 10 yrs. You can try to dispute the record and it may get deleted but if its a positive acct you might as well leave it.

[southflorida]

Sorry to sound ignorant. But where can I have my documents reviewed? An attorney?
Where can I find someone who knows of these things? Is it expensive?

[Andrew]

Talk to Brian about this, he is an attorney in Florida.

[mreedlaw]

Good evening:

My name is Michael Reed, and for the last nine years, I have been a Maryland attorney. I appreciate this forum as an opportunity to help people better understand their options when facing a foreclosure. For too long, many brokers and lenders have been taking advantage of borrowers. I expect that I will be writing more about that in the near future.

I should know - for the last five years I have been a settlement attorney at various title companies. I hold title insurance licenses in Maryland/DC, Virginia, and Florida. I would estimate that I have conducted roughly 1000 settlements (and have several war stories to share), and cleared title (unreleased mortgages -- known as deeds of trust in my jurisdiction, bankruptcies and foreclosures).

As far as the posting here, the title company is typically responsible for paying off the prior liens on the property, especially if they collect an obtain/prep release fee (usually in the 1300s on the HUD-1 Settlement Statement) or a release fee (Line 1201 on the HUD-1 Settlement Statement). If the loan required title insurance (Lines 1108-1109 on the HUD-1), then the title company is "on the hook" for obtaining the releases. If they did not obtain the release as shown on the HUD, then the title company should reimburse you for the release recording fees that they collected for.

Here's the tricky part - occasionally when you refinance a 2nd mortgage or equity line, it is sometimes down directly by the lender without use of a title company. In that case the 2nd mortgage lenders do not always worry about obtaining the releases (also known as certificates of satisfaction). I've run across this with HSBC/Beneficial and Chevy Chase Bank, from time to time.

Another item to consider is this: even of a payment is sent to the lender for a second mortgage or home equity line of credit, a close out letter is needed to be signed - otherwise the lien that you thought was paid off, has actually been sitting open, in the county land records and on your credit report, as a $0 balance.

Finally, to add to the mix, once a loan is refinanced/paid off, the lender sometimes sends the releases directly to the title company, sometimes they send the releases directly to the borrower (with vague instructions telling the borrower to go record the document at the local courthouse), and sometimes the lender send the release directly to the courthouse themselves. So between the credit report and the prior HUD-1s (which should have the title company's name and phone number on it), you should be able to track down those release.

[Moe Bedard]

Hi Michael,
Welcome to the forum........just wanted to let you know that it is not o.k. to post any contact information at all in your posts. I have removed that information from the post. This is a NOT for profit informational forum. Your information and knowledge regarding title settlements is greatly appreciated if you are willing to post it without telling people to contact you inside of your posts........
Thanks,