Reconveyance an important step when loan is paid off

Q: I recently refinanced my home. During the loan process, the loan officer told me that an old mortgage loan, paid off several years ago with a refinance, still appeared on my title report and that it had never been reconveyed. It held up the loan until they could resolve the issue. What exactly does reconveyed mean and why wasn’t this taken care of the last time I refinanced? Whose responsibility is it to ensure that this happens when you refinance? – N.T., Redmond

A: This is a very important question because many people fail to follow up to make sure the proper documents are recorded when they refinance a mortgage and pay off their original loan.

You often hear people say “the bank owns my house,” by which they mean that they are still making payments on a mortgage. In reality, they own the house from the moment the deal closes and the deed is recorded with the county because Washington is a lien theory state.

When you bought your home, the deed was recorded in your name. Check your title insurance policy and you will see that you are listed as the legal owner of the property. When a bank loans you the money to buy a house it acquires a lien against your home using a document called a deed of trust.

This document gives the lender the legal right to seize control of your property and sell it at auction if you fail to make your loan payments. That’s the lender’s collateral, which protects their investment in case you default on the loan. But as long as you make your mortgage payments on time, the lender has no rights to your property.

Once your mortgage (deed of trust) is paid in full, the lender will record a deed of reconveyance. This document releases the lender’s lien on your property by reconveying its title interest to you. You don’t have to do anything to gain legal title to the property because you already have it.

The only problem is that lenders occasionally fail to record the proper documents to clear title to the property after a loan has been paid off. You have to remember that once the bank has all its money, you become an administrative expense rather than a source of income, so filing the reconveyance is a relatively low priority.

For example, I have a friend who paid off the mortgage on his home a few years ago. He repeatedly called the lender asking for the reconveyance documents. Finally, after 14 months of constant pressure, he got the required documents to release the lien on his home.

Who knows how long it might have taken if he had simply mailed in his final loan payment and assumed everything was fine? I’ve had mortgage clients who found that loans that were paid off decades ago still appear as a lien against their property. These are usually private contracts which were not handled by a bank. In one case, the people involved were now dead, so it was very difficult to clear the title to the property.

It is the bank’s responsibility to record a deed of reconveyance in a timely manner after a loan has been paid off. Typically, this happens within two to four months after closing and you receive a copy of the recorded reconveyance documents in the mail. If you don’t receive anything in the mail within a couple months after paying off a loan, contact your former lender to make sure they have recorded the reconveyance documents. Don’t let too many months go by. The longer you wait, the more difficult it becomes to track down the appropriate paperwork to clear the title to your property.

Mail your real estate questions to Steve Tytler, The Herald, P.O. Box 930, Everett, WA 98206. Fax questions to Tytler at 425-339-3435, or e-mail him at economy@heraldnet.com

Steve Tytler is a licensed real estate broker and owner of Best Mortgage, Inc. You can visit the Best Mortage Web site at www.bestmortgage.com.

Talk to us

More in Herald Business Journal

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Near-death experience planted seeds for downtown Everett toy store

Former attorney Tom Harrison survived 9/11. It caused him to ask what’s important in life. Today, he runs MyMyToyStore.

Sean Jones, membership executive of Everett's Freedom Boat Club, helps club member Carolyn Duncan load equipment onto her boat before she and a friend head out crabbing onThursday, Aug. 11, 2022, at the Port of Everett in Everett, Washington. (Ryan Berry / The Herald)
New Everett franchise offers boats at Everett Marina

Freedom Boat Club’s newest Washington location is in Everett, with six boats available to its members.

Devin Ryan, left to right, talks with Donald Whitley and Drew Yager before a test ride at Bicycle Centres Wednesday in Everett, Washington on August 24, 2022.  (Kevin Clark / The Herald)
New hands take the handlebars for Bicycle Centres

Longtime employees Devin Ryan, Aron Chaudiere and Ryan Brown bought the business that’s been around since 1976.

A truck drives past a sign displaying fuel prices on Friday, Sept. 2, 2022 in Arlington, Washington. (Olivia Vanni / The Herald)
Diesel prices stay high for truckers, farmers

Gas prices have fallen steadily this summer, but diesel costs have started to climb again.

FILE - Test engineer Jacob Wilcox pulls his arm out of a glove box used for processing sodium at TerraPower, a company developing and building small nuclear reactors, Jan. 13, 2022, in Everett, Wash. A major economic bill headed to the president has “game-changing” incentives for the nuclear energy industry, experts say, and those tax credits are even more substantial if a facility is sited in a community where a coal plant is closing. Bill Gates' company, TerraPower, plans to build an advanced, nontraditional nuclear reactor and employ workers from a local coal-fired power plant scheduled to close soon. (AP Photo/Elaine Thompson, File)
Everett nuclear research facility gets $750 million infusion

Bellevue’s TerraPower, which operates an Everett facility, got a hefty investment to fund research.

Logo for news use featuring Snohomish County, Washington. 220118
Business briefs: Leadership Snohomish County names new executive director

Plus a new short-term, career programs at Edmonds College, state grants for small businesses and more.

Tim Leonard, owner of the Machine Shop, is closing the arcade this fall. (Photo by David Welton)
Arcade owner to pull plug on beloved Whidbey Island business

Tim Leonard, owner of the Machine Shop in Langley, recently decided he’ll call it quits this fall.

Jennifer Sadinsky is the owner of Grayhorse Mercantile, one of Langley’s newest stores. (David Welton)
Shopkeeper brings taste of Europe to Whidbey Island

A first-time business owner’s dream of opening a cheese shop became a reality this year.

Rick Winter (left) and Gary Yang, the founders of the former UniEnergy Technologies, stand with one their latest batteries, the Reflex, August 10, 2022. (Dan DeLong/InvestigateWest)
‘Chaotic mess’: Clean energy promises imploded at Mukilteo battery maker

UniEnergy Technologies absorbed millions in public funds, then suddenly went dark. The company is accused of providing tech to China.

Eviation's all-electric plane in flight Tuesday morning in Moses Lake, Washington, on Sept. 27, 2022. (Eviation)
Arlington’s all-electric plane, Alice, takes first test flight

Eviation Aircraft’s battery-powered plane logs successful first flight from Grant County International Airport in Moses Lake.

At two stores – in Edmonds and Renton – Wide Shoes Only store owner Dominic Ahn offers more than 600 styles of shoes for people with wide feet. (Kevin Clark / The Herald)
These Edmonds and Renton shoe stores could change your life

Wide Shoes Only: Huge selection, expert fitting and superior customer service

Amber Weaver, who has worked at the Lakewood Crossing Starbucks for 5 years, with her daughter Melody, outside of her workplace on Thursday, Sept. 22, 2022 in Marysville, Washington. (Olivia Vanni / The Herald)
Complaint accuses Starbucks of anti-union threats in Marysville

Meanwhile, a mother of two said Thursday that Starbucks refused to accommodate her schedule when she returned from maternity leave.