Canceling Mortgages

When someone mortgages a house or a piece of commercial property, the financial institution giving the mortgage protects itself by recording the mortgage so that the public-at-large will be able to learn of the financial institution's interest. When the mortgage obligation has been paid in full, the mortgagor should clear the mortgage of record so that the public-at-large can learn that the property is free of the lien.

More frequently than might be imagined, this is not the case. Too often, borrowers, both commercial and residential, are so thrilled to see a mortgage document returned to them after a loan has been paid, that they quickly file the document away to a safe, but often forgotten place. Others, imbued with the joy of having put the obligation behind them, tear or burn the document.

Not so fast! The public (which, for this purpose, includes anyone who might want to lend on the property in the future) will not know that the property is cleared of the lien until the satisfied mortgage has been canceled of record. Unless it has been canceled "on the record," the mortgage will rear its ugly head at the time that the property is refinanced or sold – a most inconvenient time! If, at that time, the property owner can find the original document showing the discharge from the lender, the only harm done is some unnecessary anxiety. On the other hand, if the document is lost and the borrower has to return to the lender for another recordable document, closing of the new transaction may be delayed. Given the wave of bank mergers, the closing may be delayed for quite some time with its attendant increase in anger, frustration and, every now and then, the loss of the new deal. The bottom line? – make sure that a mortgage cancellation, satisfaction, or discharge is recorded before holding that mortgage burning party. If you have any question at all about the process, just call us.