Topic: Mortgage Payoff Statements and Releases
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What is the correct way to pay out an escrow account when a borrower terminates a mortgage loan? Is it taken off of the loan principal or is it refunded directly to the borrower?
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We believe that, until January 2014, at the termination of a mortgage loan, the remaining escrow account must be refunded directly to the borrower (unless the total amount of surplus is less than $50, in which case the amount may be applied to the loan principal). 12 CFR 1024.17. The Department of Housing and Urban…
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Can we charge a lien release fee on mortgage loans, and how much can we charge?
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The Illinois Mortgage Act provides lenders with three alternative methods of releasing a mortgage (765 ILCS 905/2): Delivering the release to the county recorder. *If the bank will be delivering the release to the county recorder, we recommend including the following statement on payoff statements: “Notice to All Persons: ___________(“Lender”) objects to the filing of…
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Can we charge a loan payoff processing fee?
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We do not believe that there is any restriction on charging a payoff processing fee, on the condition that the customer contracted to pay such a fee in your loan agreement. Section 4.1 of the Interest Act appears to prohibit such fees on revolving credit lines, as it states that lenders must pay “all expenses,…
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Does Illinois require that we send loan payoff statements to customers, and can we send these statements electronically?
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Illinois law requires you to send certain documents when a loan is paid off. As to mortgages, you must execute and deliver a release of the mortgage to the mortgagor or to the county recorder. 765 ILCS 905/2. The release must be delivered within one month after the payment of the debt. 765 ILCS 905/4.…
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Could we add a sentence to the notice required under the Mortgage Act explaining that the borrower is responsible for recording the mortgage release? Many customers are confused by the wording of the statutory notice, which can be read to state that the bank will be recording the release.
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The Illinois Mortgage Act requires that you print the required notice on the face of the release of the mortgage — the “instrument in writing releasing such mortgage” that you are required to deliver to the borrower after you have received full satisfaction and payment. 765 ILCS 905/2. That section contains no provision requiring that…
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Are we allowed to charge a payoff processing fee on mortgage loans?
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We do not believe that there is any restriction on charging a payoff processing fee, on the condition that the customer contracted to pay such a fee in your loan agreement. Section 4.1 of the Interest Act appears to prohibit such fees on revolving credit lines, as it states that lenders must pay “all expenses,…
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Do we need to disclose loan release fees on the GFE and HUD-1 forms? How can we disclose the fee upfront, since it may have increased significantly by the time the loan is terminated?
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Yes, you should disclose a mortgage lien release fee in both the HUD-1 and in your TILA disclosures. The RESPA regulations require that you disclose all charges paid by the borrower on the HUD-1. 12 CFR 1024.8(b)(1). The HUD-1 instructions clarify that you must disclose “all charges imposed upon the Borrower and the Seller by…
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Some title companies in our area have begun filing “certificates of release” on our mortgages when our customers refinance or sell their homes. Our bank has always complied with the Illinois Mortgage Act and filed a release of our lien with the county recorder within thirty days after a mortgage has been paid off. Is there anything we can do to prevent this practice?
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The short answer is yes. Include a statement similar to the following in big, bold letters in all of your payoff letters: “Notice to All Persons: _______ (“Lender”) objects to the filing of a “Certificate of Release” pursuant to the Mortgage Certificate of Release Act in relation to any and all mortgage liens held by…