The satisfaction of a mortgage is particularly important to the owners of real property. Satisfaction occurs when a mortgage loan is paid-in-full where the mortgage is not a lien on the property. Upon completion of payment "Satisfaction of Mortgage" refers to the document provided by the mortgage lender indicating that payment-in-full was received.
Many states have laws that regulate the process by which a mortgage lender provides a satisfaction of mortgage intended to prevent damages from arising when lenders fail to present a satisfaction of mortgage document in a timely manner. While these laws may provide an added incentive for mortgage lenders to fulfill their obligations to payees some states have enacted laws that may unfairly punish minor lapses on the part of the mortgage lender.
The Pennsylvania Mortgage Satisfaction Law has a rather draconian punishment awaiting lenders that fail to mark a mortgage satisfied upon request from a borrower within 45 days of that request. The Pennsylvania Supreme Court has stated that this request does not have to be in writing, but can be communicated by the borrower to the lender orally at the time the last payment is made to satisfy the mortgage. After that oral request is made, the lender has 45 days to "enter satisfaction either upon the margin of the record of such mortgage recorded in the said office or by means of a satisfaction piece, which shall forever thereafter discharge, defeat and release the same; and shall likewise bar all actions brought, or to be brought there upon."
The fine imposed on the lender for failure to file the satisfaction piece or otherwise mark the recorded mortgage satisfied within 45 days of the request "shall for every offense, forfeit and pay, unto the party or parties aggrieved, any sum not exceeding the mortgage - money ... ." (emphasis added).
In Other Words, if the Mortgage was for $200,000, the Fine can be $200,000 Payable to the Borrower! While the interests of those who satisfied a mortgage are important and damages may arise from failure to provide the satisfaction of mortgage in a timely manner it is virtually inconceivable that the damages that arose would amount to the full value of the loan.
What do you need to do to avoid this fine?
- create a centralized log and diary system in the loan/mortgage department to enter:
- the date of a request to satisfy;
- whether the request was made orally or in writing; and
- the date the mortgage was marked satisfied in the records at the courthouse.
- establish an uniform settlement sheet procedure regarding notations to indicate requests to satisfy.
- direct the loan/mortgage/collection department to mark all mortgages satisfied if judgment is satisfied after a sheriff's sale.
For additional reading, the most recent Pennsylvania Supreme Court opinion on this subject is O'Donoghue v. Laurel Savings Association, 728 A.2d 914 (Pa. 1999.) In O'Donoghue a Pennsylvania business owner appealed the summary judgment order in favor of Laurel Savings. Laurel had failed to provide a mortgage satisfaction within forty-five days of the payment of three loans totaling nearly $600,000. Laurel marked the loans as satisfied after notification of O'Donoghue, who subsequently brought suit. The appeals court affirmed the lower court's summary judgment, addressing the method by which satisfaction must be requested and discussing recording and marking of the satisfaction of mortgages in its discussion.