In this ever changing landscape of bank failures, short sales and multiple mortgage assignments, borrowers often overlook the last step in these transactions, which could come back to haunt them. That last step is getting the prior, paid-in-full mortgage released “of record” in the City Register’s office.
Many people fail to understand that merely paying off their previous mortgage is not sufficient. One more step is required to complete the process. Under the laws of New York, a release must be recorded in the City Register’s office to clear title to the property.
Lenders often, but do not always, send the release directly to the City Register’s office for recording. Sometimes the lender mails the release directly to the borrower along with the borrower’s original promissory note and mortgage marked “PAID IN FULL.” The borrower is often so happy just to see the original note and mortgage marked “paid in full” that he stores those documents along with the original release in a safe-deposit box and never realizes that a title cloud has just been created.
If no one takes the final step of recording the release of lien, the old mortgage remains as a title cloud against the borrower’s property. Most borrowers do not discover this problem until later when they are selling or refinancing their home. At that time, their lawyer reviews the new title search, which will reflect that prior lien as open and unreleased. Often there is time sensitivity caused by a pending sale or refinance, and those transactions will be delayed until someone obtains and records the satisfaction document.
So when you receive that “PAID IN FULL” letter, make sure you share the documents received in this package with your attorney so that he or she may confirm whether the satisfaction of mortgage document has been recorded. Once on record, you can rest assured that when you do sell your home no further documents will be required to prove that the bank has been paid.