Satisfaction of Mortgage: Skipping it has Disastrous Consequences

The seller has their proceeds. The buyer has the keys. Time for a celebration, right? Wrong. Before the champagne is uncorked, there remains one crucial post-closing task to be completed. If not completed, it can cause huge headaches down the line. It’s called recording the satisfaction of mortgage, discharge of mortgage, or lien release.

If the satisfaction of mortgage isn’t recorded, the property owner may have trouble when they try to refinance or sell the property. They’ll have to chase down the discharge documents and get them recorded in order to clear the title. It can even cause a delay to the closing. Because real estate is a referral-based industry where customer satisfaction is the key, failing to record the satisfaction of mortgage can have huge implications for your business down the line.

But lenders, you’re in luck! Kind of…Tired of hearing from angry homeowners, state legislatures across the country have provided incentives for lenders to promptly record the satisfaction of mortgage. Some of these incentives have teeth.

In many states, statutes require lenders to record the satisfaction of mortgage, lien release or a similar filing within a specific time-frame after a loan has been paid off. Some jurisdictions only have these requirements for residential mortgages, however. The time-frame varies by state.

For instance, in Massachusetts, M.G.L. Chapter 183, Section 55 states that lenders must discharge the mortgage within 45 days of receipt of full payment of the loan. Failure to comply within the 45-day timeframe subjects the lender to penalties “in an amount equal to the greater of $2,500 or the actual damages sustained by the mortgagor as the result of the failure, together with reasonable attorney’s fees and costs, in addition to all other remedies available at law.”

Find out what the statute is in your state to stay compliant!

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