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Banks May Not Be Fulfilling Obligations When Mortgages Are Paid in Full


Owning property or buying a home is a huge component in achieving the “American Dream.”  Most who buy a property take out a mortgage to finance their purchase.  Making the final payment on that mortgage is an immensely satisfying experience and a well-earned accomplishment.  You are free from future mortgage payments, and in the eyes of the bank, the government, and the public, you can do with the property what you wish.  In many cases, property owners pay off their mortgages when selling their properties and moving to a new home.

To ensure that everyone knows that your property is all yours either to keep or sell to new owners, when you pay off your mortgage, the bank (also known as the “mortgagor”) records a satisfaction of mortgage notice with the county clerk in the county where your property is located.  This demonstrates to the county that your mortgage is fully satisfied and paid for, in full, including all principal, interest, and other fees.  It also shows the county and the public that you are the legitimate and full owner of the formerly-mortgaged property.  Among other things, this allows you to sell your property.  In most cases, the mortgagor is required to record this notice within 30 days of the day you paid off your mortgage, or the mortgagor owes you money.

If the mortgagor does not record a satisfaction of mortgage notice, this can complicate the transfer process when you are selling your property.  Unfortunately, when a potential buyer does a title search on the property, it will appear to the buyer and the county that you do not have a marketable title and cannot transfer it to the new owner.  This may derail a potential sale.

In some cases, even after an initial mortgage is paid off, property owners (or “mortgagees”) need to take out new mortgages or home equity loans for any variety of reasons, including to make home improvements, improve the property’s salability, value, or rental value, or even to finance a child’s education.  If the mortgagor failed to record a satisfaction of mortgage notice, the property does not appear to have clear, marketable title, which can affect the owner’s ability to take out that new mortgage or secure a home equity loan.

Unfortunately, in recent years, a combination of factors—such as banks foreclosing on and needing to manage an increasing number of properties and consolidation in the banking industry as a whole—has resulted in mortgagors failing to fulfill their obligations to record satisfaction of mortgage notices.  A mortgagor’s obligation to record these notices is regulated by state law.  For example, in New York, if the mortgagor fails to file a satisfaction of mortgage notice within 90 days, it must pay the mortgagee $1,500.

Cafferty Clobes Meriwether & Sprengel has investigated banks and financial institutions and determined that banks in some states have failed systemically to file mortgage satisfaction notices for thousands of properties.  These banks may collectively owe property owners/mortgagees hundreds of thousands, or even millions, of dollars, but have failed to pay.

If you paid off your mortgage (either over the course of years or in selling your home) in the last few years, there is a chance that your mortgagor failed to file a mortgage satisfaction notice for your property.  If so, your title does not appear to the public to be clear. As a result of the mortgagor’s failure to file a notice, you may be entitled to recover money from the bank that issued your mortgage pursuant to the law in your state.

If you would like to receive more information on this investigation or you would like the experienced class action attorneys at Cafferty Clobes to investigate whether you may be entitled to receive compensation from your financial institution, please contact us directly at (215) 864-2800.

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