Flickr photo: Kristin Hamilton
Hopefully you were able to take advantage of the low interest rate decade with a mortgage refinance. With many people going from 6% down to 4% APR, they were able to restructure their financial position which gave a boost to personal wealth.
But, there is a lurking issue for many of you. A sneaky problem that might derail your future home sale… even ten years from now.
What is missing will cause a title issue. And that, dear readers, is a properly recorded Certificate of Satisfaction showing that your old loan was paid in full.
Here is the sequence of events:
- You applied for the refinance and provided all documentation
- Your new lender happily approved your new loan
- You went to closing or settlement on that new loan (signing lots of papers)
- That “Settlement Agent” sent the pay-off to the old lender and closing papers to the new lender
- The new mortgage (Deed of Trust here in Virginia) was recorded at the County Courthouse
- You started to receive payment notices from the new lender at your super-duper, ultra low rate
- Sound familiar?
But there’s one more item on the list!
There is actually a last step here that many lenders seem to forget every once and a while. It isn’t a big deal to them, but , for you when you go to sell your home it may create a title issue that derails your sale.
In Virginia that old lender has 90 days to generate a legal document called a Certificate of Satisfaction (CS). It states that the old loan has been paid in full and it too has to be Recorded at the County Courthouse.
Just last month this issue surfaced in a transaction. In this case the seller had refinanced in 2003 but the CS was never recorded. And, to make the situation even more exciting, the bank had been bought out and the old settlement company was out of business (wonder why?).
This was the third missing CS case that I saw in 2013
When I told the listing agent that this issue needed to be resolved or settlement would have to be delayed (see Paragraph 16 of the Regional Sales Contract) if his client had not remedied the situation, well, let’s just say he was irritated.
In fact, he was pissed off!
Since this was my third trip down this road this year, I gave him some creative suggestions for tracking down the old loan information. He was thankful and used them to make a reasonable case that the loan was paid.
In Virginia the home buyer has the right to pick the settlement agent. My buyer clients used one of the firms that I suggested (RGS Title in Oakton, luckily) and they were really on top of it playing detective. They discovered the old bank had been acquired by CitiMortgage and placed an urgent request to have them start researching their archives.
With less than a week to spare, the missing CS was located and sent to the Fairfax County Courthouse to be properly recorded into the land records.
Are you sweating yet?
If you are suddenly sweating because you refinanced once, or twice, or possibly three times in the past decade, what I discovered will make you sweat some more. At this time you can’t access those County land records over the Internet to see if the CS was recorded. Sorry, nope. Not for public view.
You have some options:
- assume everything was done properly
- look though your old files
- contact your old Settlement Agent
- hire a title search company to check for you
Last summer an agent played hardball with my clients about a missing Certificate of Satisfaction. My clients were selling their town home of seven years when the Settlement Agent called me to tell me about the missing CS.
In their case when they bought the house in 2006, the old Settlement Agent did not follow up to ensure the Seller’s CS was recorded.
And here’s the real kicker (which is so DC), that old lender was the credit union for the CIA. Oy Vey!
To make a long story short, that reformed agency credit union actually uncovered the old CS (maybe it was the voice mail I left on the voice mail of the previous owner who I tracked down) and the house went to closing.
If you have questions know that I am happy to point you in the right direction.
