Refinancing as a tune-up for your title
Wednesday, March 25th, 2009One unintended benefit of a periodic refinance is a checkup on the title of your property. Especially recently, with the latest refinance boom, people who have owned their real estate for several years discover that they actually have a mortgage still on record (i.e., not discharged) that was paid off from their last refinance. This is usually because the lender didn’t issue the discharge to the attorney who did the last refinance, or they didn’t send it in to the Registry of Deeds after receiving payment in full, but it could also be that the original discharge was mailed directly to the borrowers and they either threw it away or filed it.
Regardless, it’s a problem that is usually discovered by the bank’s attorney at the next refinance. Most of the time, the loan can still close with the undischarged mortgage or other title issue still outstanding. However, the benefit is that it puts the owner on notice that this issue should be resolved before they try to sell. Even if it’s an issue that’s covered by title insurance, it’s a good thing to fix to avoid any hassle or potential delay in the future when time is of the essence.
As an example, I recently had a refinance where the borrower had an undischarged home equity mortgage still outstanding from the 1980s. I could tell by the title I ordered that the borrower had probably paid the loan off in full because other home equity lines had been taken out after that one, and most of those had already been discharged. I contacted the borrower and let him know of the issue. I advised him to check his records, and sure enough, the original discharge had been mailed to him after he had refinanced in the mid 1990s. He was a pack rat, so the problem was easily remedied, and he brought the original discharge with him to my office for the refinance, and I recorded it for him. That completely solved that issue, and when (if?) he goes to sell in the future, he won’t have to scramble to find that discharge to close on time.
Boston.com ran a post on their real estate blog on Jan. 8 that had a user comment that I wanted to respond to here. The commenter’s handle was “Regretful House Buyer,” so obviously there are some feelings of remorse there. However, the post raises a few issues that are important to discuss (and rebut) in a little more detail.
(more…)