Obtaining Payoff Statements Directly from the Lender

Looking to avoid title claims related to unpaid mortgages and deeds of trust? We offer 4 tips

Our Claims Team has received various claims related to unpaid mortgages and deeds of trust. Here are two scenarios we have seen arise in the context of a claim:

Scenario One

The agent receives a payoff statement from the seller. The seller sends an email requesting the payoff from the lender and copies the agent on the email.

The agent relies on the email and the payoff statement to wire funds to the lender.

Later, it is discovered that the email address for the lender is fake, and the bank account receiving the payment was held by the seller, not the lender.

Scenario Two

The agent reaches out to the lender for a payoff statement. However, the closing date is approaching, and the lender has not responded.

The seller provides the agent with a printout showing a zero-balance owed on the account. The agent contacts the lender once again for a payoff statement.

The lender confirms over the phone that a zero balance is owed. The agent closes the transaction based on these representations.

Later, it is determined the original lender confirmed a zero-balance due because the loan had been sold to another lender.

An assignment of the mortgage had been recorded, and the current holder of the notes filed to foreclose.

Here are 4 tips to help you avoid these types of claims:

  1. Always obtain a payoff statement directly from the lender. Do not rely on payoff statements provided by other parties. Your request for a payoff should include a letter of authorization from the borrower, the loan number, the property address, the borrower’s name and your fax number or email address.
  2. Only rely on a payoff statement sent by the current holder of the note. Check the MERS system, (if the mortgage is a MERS loan), and the public records for the last assignee.
  3. Be mindful of working with hard money lenders – hard money lenders may assign their interests off the record. (See Bulletin 2017-02 and Claims Title Tip dated September 18, 2017 discussing hard money lenders .)
  4. Obtain separate payoff statements directly from each lender with an interest in the property being sold or refinanced. Do not rely on representations from the borrower or other institutions regarding the balance of a loan.
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This blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on this blog.

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