Wednesday, September 19, 2007

query: title company liability wrong payoff amount

A title company's obligation is to its insured, the owner, the lender, or both. If there was an error on the mortgage payoff or the amount collected on the HUD, the title company has a duty to work out a solution and get that mortgage satisfied.

That does not mean that the title company will not pursue every means at their disposal to recoup funds owed by the mortgagor. So, whoever owed the mortgage money that is the subject of the error will eventually have to make restitution and pay up. It's their obligation.

The title company may also pursue a settlement with the mortgagee. If the lender gave a payoff letter that contained the wrong figures and the title company relied on it to close, they may be able to force the lender/mortgagee to accept the lower amount.

The main issue is that the title company goes to bat to protect the integrity of the title and will remove the mortgage lien by whatever means they choose.

4 comments:

Anonymous said...

right on the money and thanks for th ethical analysis!!

Diane Cipa said...

Hey, thanks, Anon. ;)

IndianaJ said...

Very clear answer. Thanks so much!

What about in the case of a civil judgment liability payoff? Our lender required we payoff a civil judgment at closing. The lender added the sum of that judgment to our loan and had the title company issue a check payable to the original creditor (an apartment complex). Our problem is now two-fold. 1. The original creditor no longer exists and their principals unreachable. 2. If I pay the court directly they will request 8% statutory interest compounded annually for the last 9 years (money we don't have on hand).

One more year and this judgement will be unenforceable for being beyong the statute of limitations. What is the title company's obligation?

Diane Cipa said...

If the judgment was one that attached to the real estate, the title company should have controlled the payoff by getting current information concerning the status of the party holding the judgment.

In any case, you have a judgment that is either attached to the real estate or it is a debt payoff that was a condition of your mortgage loan.

I presume the check has not been cashed because the party cannot be located.

If the judgment is attached to the real estate, the title company could use that money to hire an attorney to resolve the matter. They have an obligation to the mortgage lender to protect their lien position.

As a debt payoff issue, if the transaction were in PA, the title company would hold the money for five years then consider it abandoned and escheat it to the PA Dept. of the Treasury. The owner of the money is the judgment holder. The money is not yours.