mortgages; deeds of trust;
releases
DPA |
Committee on Financial Institutions & Insurance |
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DPA |
Caucus and COW |
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DPA |
Third Read |
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DPA |
As Passed the House |
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As Transmitted to the Governor |
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HB 2071 makes
statutory changes relating to the release of liens to allow a partial release
of lien if a title insurer assumes financial responsibility for issuing the
release. The bill also addresses pay
off demand statements issued by banks as well as procedures
for trustee sales.
Current statute establishes procedures for executing a release of a lien for satisfaction of a mortgage or deed of trust. A lender has sixty days after a lien has been satisfied to execute and record a release. After that time period title insurer may initiate a release after notifying all lienholders and a thirty-day response period has expired. The statute was intended to clear a title in the event that a mortgage lienholder would not or could not execute a release. The proposed legislation expands and clarifies the existing language on partial release of liens by enabling a title company to execute a partial release provided the title company complies with the notice requirement and take financial responsibility of up to $500,000 as security in the event of foreclosure. Similar language pertaining to manufactured homes is contained in the bill. The partial release provisions are beneficial in the instance where a home buyer purchasing directly from a subdivision developer can obtain a clear title for one lot out of entire subdivision.
Additionally, in the absence of recording a notice of satisfaction, a mortgage or lien will remain on record without a release even if the maturity of the lien is likely to have expired. One contributing factor for this situation is due in part to the savings and loan crisis of the 1990s where many records were misplaced or destroyed and banks or thrifts went out of business. They may also be recorded under an antiquated records system and not available on microfilm. HB 2071 would establish an expiration date for these liens or mortgages. The maturity dates would depend on certain information available in county records.
Finally, there is no current statute governing lending practices for pay off demand statements. Pay off demand statement is a notice from a lender to a borrower of the exact amount required to pay a mortgage loan in full. A lender may make revisions at any time and fail to execute a line release based on revised pay off amount. Prospective purchasers could be forced to renegotiate their loan agreements in order to obtain additional funds. The legislation requires lenders to provide pay off demand statement upon written request and holds the lender to the statement for a time period of fourteen days.
Provisions
· Authorizes a title insurer to record a partial release or satisfaction of a mortgage providing the title insurer assumes the risk of releasing the mortgage or lien. The bill specifies an amount of maximum lien value of $500,000 for releasing a lien.
· Clarifies that the title insurer must wait the full 60 days prior to filing a notice for a release of a mortgage or deed.
· Specifies that a mortgage or deed of trust is deemed released after :
· Ten years following the final maturity date of a line or mortgage if the final maturity date is discernable from the records of the county Recorder; or
· If no maturity date or fixed last payment date is ascertainable from the county or is nonexistent, then fifty years after the mortgage or lien was recorded.
· Adopts the California code that allows for a 10-year extension of the time periods set forth for expiration of mortgages and deeds of trust by establishing a notice of intent to preserve a security interest. This achieves the 10-year extension.
· Requires a lender to prepare and deliver a payoff demand statement upon within fourteen days of receiving a written request for the pay off demand.
· Defines pay off demand as a written request for a demand statement made by an entitled person or agent.
· Allows lenders to provide the pay off demand statement electronically only if the person making the request asks for it in electronic form.
· Stipulates that the individual requesting a pay off demand may rely on figures provided by their lender. The pay off statement may be amended so long as the amended statement is received by the borrower prior to 1) close of escrow; 2) transfer of title; 3) recordation of a mortgage or deed of trust. An entitled person may rely on amended figures if they are delivered prior to closing.
· Clarifies the “date certain requirement” shall be that referenced in the definition. The definition states that the statement is from the date of preparation, which should include anticipated costs on a per diem basis that remains unchanged for up to thirty days. Therefore, language indicating escrow and transfer of title are unnecessary.
· Specifies those additional monies exceeding the original pay off statement may be pursued through an unsecured loan, but shall remain separate from the transaction associated with the statement.
· Places liability on any beneficiary failing to prepare and deliver pay off demand within fourteen days or more, and establishes a penalty of $500 for failure to deliver a statement.
· Establishes a separate cause of action with judgement including forfeiture or damages resulting from failure to provide pay off statements. The language clarifies that one judgement award shall bar any ensuing suits associated with the same obligation.
· Provides that if a lender has more than one branch office, the borrower may request a pay off demand statement from the address listed on the payment billing notice.
· Authorizes the lending companies to charge a $30 fee for preparing the pay off demand statement. It is currently not in statute.
· Defines the terms "beneficiary," "deliver," "entitled person, " and "payoff demand statement" for the purposes of the legislation.
· Makes changes to ARS 42-15203 establishing similar procedures for release of liens with regards to manufactured homes. Proper notice must be provided to secured interests and the owner of the property as a condition of release. A title insurer is liable for any errors in executing the release and is subject to damages and attorney's fees.
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Establishes the
applicability of the legislation for notes created or renegotiated after the
effective date of this act.
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Establishes that all
interested parties associated with a sale of a deed of trust waive objections
and defenses of the sale if it is not done before 5:00 p.m. on the last day of
the sale (holidays and weekends excluded).
Notice must be provided to the trustee within twenty-four hours of
filing the order.
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Stipulates that a sale
is voided if it violates the procedures prescribed in the bill because of an
undisclosed order entered by a court within the appropriate time frame. The sale would then take place as
determined by the trustee, or twenty-eight days later (except weekends and
holidays). If the sale is postponed
because of an undisclosed order, the trustee must provide a list of all bidders
of the previous sale to the party resuming the auction.
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Clarifies that a
payoff demand statement shall provide the amount from the date of preparation
taking into consideration information to reasonably calculate the payoff amount
on a per diem basis. This amount is to
remain unchanged as provided in the note for up to thirty days.
· Makes other technical and conforming changes.
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45th Legislature
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Second Regular Session 3 May
15, 2002
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