Q: Late last year, I started the process of refinancing my condo and I was scheduled to close on January 31.
The paperwork was given to the bank’s lawyer for the closing but when I didn’t hear from him, I called him. It was at this point that I was told that my loan from 1994 had not been signed off on even though I refinanced with the same bank in 2003.
The current lawyer asked that I call the lawyer that worked on my refinancing in 2001 and find out what happened. Now, both lawyers are going back and forth on this issue including trying to find the lawyer from the time I purchased my home back in 1994.
The bank gave me an extension on my loan for an additional month to get these issues resolved, but I had to keep calling and calling to get something done. Close to closing the attorney said I needed insurance to refinance my condominium even though I had given the document to the bank.
Even getting the attorney to schedule the closing was frustrating. Does what I went through sound right to you or is it just me?
A: Your frustration in trying to get your loan closed is rather common. Wouldn’t it be nice if closings could go smoothly and without delays and repeated requests for documents?
It seems that you had a problem with the title to your home. More specifically, when you refinanced your home in 2003, the attorney handling your transaction paid off your prior loan at the time you received the new one.
Back in those days, it was not unusual that lenders failed to send the documentation releasing the lien of the mortgage that was just paid off. That is to say, when a lender gives you a loan they place a lien – a mortgage or trust deed – on the title to your property. When you pay off the loan, the lender is supposed to release the lien. But in many cases the lenders failed to prepare and send that documentation.
Even though you might have had the same bank refinance your loan over and over again, it was (and is) so common for banks to immediately sell off the loan to a different lender or investor. The fact that you refinanced with the same lender probably didn’t help you, your attorney had to figure out whether the prior loan was paid off.
Your current attorney closing your loan transaction had a couple of routes to take in trying to clear the title to the home and allow you to close on the refinance. One way he could determine whether the loan was paid off was to contact the prior closing attorney to determine if that person had the original document that released your prior mortgage and see if he failed to record that document with the department that accepts land documents for recording.
The second way that attorney could have tried to get a copy of the release of that lien would be to call the lender that ended up holding that loan and see if that lender or loan servicer could produce another original releasing the lien of your prior mortgage.
In some parts of the country, title agents and title insurance companies facilitate the documentation relating to these releases by working with each other and promising to hold one company harmless if the other company handled the closing. So, if your closing attorney also handled the title insurance for the refinancing, he could have called the closing attorney from the prior deal to determine what title company he worked with when you refinanced almost ten years ago and have the title companies between themselves clear that title issue.
One last item, some lenders actually send the releases of their liens directly to their borrowers. So it could have been possible that you received the lien, did not send it to be recorded, and that the document might be sitting in your file.
If the closing attorney figured it out – and it usually does not take more than one week to 10 days to take care of this issue – you should have been set for your closing.
Now, when it comes to insurance, lenders these days will want to make sure every homeowner has a valid homeowners insurance policy on their home and will want to see proof of that insurance.
If you are buying or refinancing a condominium, the lender will want to make sure that the condominium association has insurance on the building and that the homeowner has insurance on the contents of the home, including kitchen cabinets, flooring, window coverings and all items that make up the condominium.
While your closing attorney could have checked with the lender to see if you had given the copies of the insurance to them, sometimes it’s easier for closing attorneys to ask the borrower for the information.
Some borrowers feel put out that they have to go through all these sorts of hoops to get their deals closed. Closing on a loan isn’t like ordering food at the drive-through. While it’s unfortunate that your attorney wasn’t able to reach the right people and had to contact you for assistance, I’m hopeful you were able to give the attorney what he needed so that you could get to the finish line.
The current mortgage marketplace is fraught with difficulties, and if you’ve been able to close, even if you’ve had some frustrations and delays, that’s all that matters.
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