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Mortgages and Deeds of Trust (“Mortgage”) are present in the sale and purchase of almost every home. A seller may still owe on his or her original Mortgage or may have recently refinanced it. Perhaps there was a Home Equity Loan or HELOC taken on the home. When a mortgage or HELOC is paid off, the borrower expects the lender to provide a release (commonly called a certificate of satisfaction) and record that release with land records in the appropriate county or city. But it is actually the borrower’s responsibility to record that release with the appropriate land records office.

Misunderstanding and poor communication of that responsibility often results in release recordings left undone, creating an unreleased deed of trust, and one of the most common title issues in residential real estate.

In a residential setting, the title company may not get notification of the existence of an unreleased deed until just before closing. When that happens, the seller or refinancing borrower will have to scramble to find the release or contact the lender. Sellers and refinancing borrowers are often surprised to find out their Mortgage payoff was never recorded.

This can happen for several reasons.  Perhaps the lender simply did not issue a release.  It is also possible the lender sent the release to the borrower without adequately defining the borrower’s responsibility to record that release.  Sometimes the lender is an individual and not a bank, and that individual cannot be located to obtain a release.  The paperwork may even have ended up in a drawer somewhere or destroyed in a Mortgage burning party.  Whatever the issue might be, resolution can take time, and time may be running out to close under the contract.

In Maryland, a law exists to help alleviate the issue of unreleased deeds of trust. It applies to the age of the document and when it was recorded. The law in Maryland is clear, if a Mortgage is old enough (40+ years), then it is presumed to be released and there is no further need to track down a release.

Section 7-106 (c) of the Real Property Article of the Annotated Code of Maryland states in part that if (a) 12 years have elapsed since the last payment date or maturity date in the Mortgage or (b) the last payment date or maturity date cannot be ascertained from the Mortgage and 40 years have elapsed since the date of recordation of the Mortgage without a continuation statement being filed, then there exists a presumption that the Mortgage is paid off and thereby no longer effective against the property. A title insurance company can use this law to help sellers and refinancing borrowers of property located in Maryland avoid the trouble and expense of searching for a release.

Without this code section, title could not be sold free and clear of liens and encumbrances and the unreleased Mortgage would always be a cloud on title. Homeowners could not sell their property nor could borrowers refinance while the unreleased Mortgage remains unreleased of record.

Sellers, title agents, realtors, and refinancing borrowers should be aware of this law and be aware that an unreleased Mortgage can appear at any time in the process of selling or refinancing a home or business.  When it does, an experienced title company will be able to guide you through the process of resolving unreleased deeds of trust in a timely manner.

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