Q: I'm trying to sell my home and recently found out there is a mortgage on the property from 20 years ago. The loan was never closed, and now that mortgage company went out of business and my lawyer has no clue what to do.
A: Our first question: Is this an old loan that you took out during the time you owned the property? If the loan predates your ownership of the home, you should find the title insurance policy you obtained when you purchased the home and go back to the title company that issued that policy to ensure your home is now in the name of your new buyer.
The title insurance policy should have shown that the lien of the loan you mentioned was paid off and no longer showed up during a search. This means that this title insurance company should be willing to give the same coverage to your new buyer.
That is to say, your new buyer can buy the home with the assurance from this title insurance company that the old mortgage was either paid off or if it wasn't paid off that the title insurance company will pay off that lender if the lender someday comes to collect.
On the other hand, if the loan was yours and you paid it off some time ago, you should have received a letter from the lender indicating that your loan was paid in full. If you have that letter, you can provide it to the title company as additional evidence that the loan was paid off. Insofar as getting a release letter from the mortgage lender, you might still be able to get it.
While you said that the lender went out of business, most lenders don't really go out of business in the way you might think. If a large lender buys out a small lender, if a bank is taken over by the banking authorities or if a lender shuts its doors, that lender's assets usually end up with another bank. In your situation, your loan and your loan file probably ended up with another bank.
Title companies and other real estate industry people usually know where lenders' files end up. If you are working with a title company, that title company may be able to give you the name of the bank that ended up with loan files like yours.
The first thing you need to do is find your own loan file and find out whether your lender sent the release document to you. If you find the release document, you're set. If you don't find it, you need to know your loan number. With your loan number, you can then call the new lender and ask to speak to someone in the lien release department.
Once you talk to someone in that department, they may be able to find your records and send you a release of lien. Unfortunately, if you are not lucky, you then need to talk to a title company representative or settlement agent that can give you more information.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)