Topic:
MORTGAGE LOANS;
Location:
MORTGAGES;

OLR Research Report


February 5, 2008

 

2008-R-0072

RELEASE OF MORTGAGE—LENDER'S DUTY TO RECORD

By: George Coppolo, Chief Attorney

You asked if Connecticut law requires a lender to record a mortgage release on the land records, or send the buyer's attorney the release, for a mortgage that was paid off from the proceeds of the sale of the mortgaged property.

SUMMARY

The law does not require a lender to record on the land records a release for a mortgage that was fully paid off from the proceeds of the sale of the mortgaged property. But the law requires lenders (mortgagees) to execute and deliver a mortgage release if the mortgage debt has been paid off. They must do so within 60 days after (1) a written request was sent to their last-know address by registered or certified mail, return receipt requested or (2) they received the request from a private messenger or courier service or through any other means of communication, including electronic, reasonably calculated to give the written request or a copy of it.

A mortgagee who does not comply with this requirement is liable for damages for whichever of the following is larger: (1) a rate of $200 for each week after the 60 day period expires up to a maximum of $5,000 or (2) an amount equal to the loss sustained as a result of the failure to execute and deliver a release within 60 days. The mortgagee is also liable for costs and reasonable attorney's fees.

The law provides an additional safeguard when a mortgagee does not provide a mortgage release. Specifically, it authorizes a licensed Connecticut attorney in good standing, a title insurance company officer, or an officer of a bank or other institutional lender to file an affidavit on the land records instead of a mortgage release when the mortgagee does not execute and deliver a release within 60 days after the mortgage was paid off. This affidavit, when recorded on the land records, is a release of the mortgage on the property it describes. But this law only applies to mortgages on one-to-four family residences and residential units in condominiums and other common interest communities. The law authorizes a prison term of up to five years in prison, a fine of up to $5,000, or both for filing such an affidavit for recordation knowing that it contains false information.

DUTY TO PROVIDE MORTGAGE RELEASE

The law requires a mortgagee, or any person authorized by law to release the mortgage, to execute and deliver a release:

1. when the mortgage debt has been paid off;

2. upon a bona fide offer to pay-off the mortgage upon the execution of a release;

3. when the parties in interest have agreed in writing to a partial release of the mortgage where that part of the property securing the partially satisfied mortgage is sufficiently definite and certain; or

4. when the mortgagor (borrower) has made a bona fide offer in accordance with the terms of the mortgage deed for such partial satisfaction on the execution of such partial release (CGS 49-8(a)).

RECORDING AN AFFIDAVIT INSTEAD OF A RELEASE

Under certain circumstances, the law authorizes any attorney or duly authorized officer of either a title insurance company or an institutional lender, on behalf of the buyer who has acquired title to the premises, to execute and cause to be recorded in the land records of each town where the mortgage was recorded, an affidavit that has the same effect as a recorded release.

The law authorizes this if a mortgagee fails to execute and deliver a mortgage release to the mortgagor or to the mortgagor's designated agent within 60 days from the date the mortgagee receives payment of the mortgage loan

1. in accordance with the payoff statement furnished by the mortgagee or

2. if no payoff statement was provided, in accordance with a good faith estimate by the mortgagor of the amount of the unpaid balance on the mortgage loan using a statement from the mortgagee indicating the outstanding balance due as of a date certain, and a reasonable estimate of the per diem interest and other charges due.

A “payoff statement” is a statement of the amount of the unpaid balance on a mortgage loan, including principal, interest, and other charges properly assessed pursuant to the loan documentation of the mortgage and a statement of the interest on a per diem basis with respect to the unpaid principal balance of the mortgage loan.

An affidavit that complies with these requirements, when recorded, constitutes a release of the mortgage described in it (CGS 49-8a(f)).

Mortgagee and Mortgagee Servicer

The law permitting the recording of an affidavit instead of a release defines a “mortgagee” as the person or entity that lent money in exchange for a mortgage on property. If the mortgage has been assigned and the assignment has been recorded on the land records of the town where the property is located, “mortgagee” also means the last person to whom the mortgage has been assigned and recorded on the land records. If the mortgage has been serviced by a mortgage servicer, “mortgagee” means the mortgage servicer (CGS 49-8a(a)(4)).

The law defines a “mortgage servicer” as the last person to whom the mortgagor has been instructed by the mortgagee to send payments of the mortgage loan. The person who has transmitted a payoff statement is deemed to be the mortgage servicer with respect to the mortgage loan described in that payoff statement (CGS 49-8a(a)(5)).

Applicability of the Affidavit Option

The law only applies to mortgage loans secured by a mortgage on a one-, to four-family residential property located in Connecticut, including, but not limited to, a residential unit in any condominium or other common interest community(CGS 49-8a(a)(1)).

What Affidavit Must State

The law requires that the affidavit state the mortgagor's and mortgagee's names, the date the mortgage was executed, and the volume and page of the land records where the mortgage is recorded, with similar information for every recorded mortgage assignment. It must also state that the affiant (person making the sworn statement) has determined that the mortgagee has received payment of the mortgage loan either (1) in accordance with the payoff statement, or (2) in the absence of a payoff statement, in accordance with the mortgagor's good faith estimate of the amount of the unpaid balance on the mortgage loan as evidenced by a bank check, certified check, attorney's clients' funds account check, or title insurance company check, which the mortgagee has signed, or by other documentary evidence that the mortgagee has received payment, including a confirmation of a wire transfer (CGS 49-8a(c)).

The affidavit must also state that:

1. the affiant is an attorney or the authorized officer of a title insurance company or institutional lender, and that the affidavit is made on behalf of, and at the request of, the mortgagor or the current owner of the mortgaged property;

2. the mortgagee has provided a payoff statement for the mortgage loan, or the mortgagee has failed to provide a payoff statement;

3. more than 60 days have elapsed since the mortgagee received payment; and

4. at least 15 days before the date of the affidavit, the affiant has given the mortgagee written notice by registered or certified mail, postage prepaid, return receipt requested, of his or her intention to execute and record an affidavit, with a copy of the proposed affidavit attached to the written notice, and (a) the mortgagee has not responded in writing to such notification, or (b) that any request for additional payment made by the mortgagee has been complied with at least 15 days before the date of the affidavit (CGS 49-8a(c)).

Attachments to the Affidavit

The law requires the affiant to attach to the affidavit:

1. photo copies of the documentary evidence that payment has been received by the mortgagee, including the mortgagee's endorsement of any bank check, certified check, attorney's clients' funds account check, title insurance company check, or confirmation of a wire transfer, and

2. a photo copy of the payoff statement.

If the mortgagee did not provide a payoff statement, the affiant must instead attach to the affidavit a copy of a statement from the mortgagee indicating the outstanding balance due on the mortgage loan as of a date certain and a statement setting out the mortgagor's basis for the estimate of the amount due, and must certify on each that it is a true copy of the original document (CGS 49-8a(e)).

Indexing of Affidavits on Land Records

The law requires town clerks to index the affidavit in the name of the original mortgagee and the last assignee of the mortgage recorded on the land records as the grantors, and in the name of the mortgagors and the current record owner of the property as grantees (CGS 49-8a(g)).

Criminal Penalty for False Affidavit

Any person who causes an affidavit to be recorded in the land records of any town having actual knowledge that the information and statements in it are false is subject to a prison term of up to five years, a fine of up to $5,000, or both (CGS 49-8a(h)).

GC:ts