Discharge of The Debt and Mortgage

Loans and Finance

Discharge of The Debt and Mortgage

Everyone recognizes instinctively that when a borrower pays off the mortgage debt in full, the mortgage itself is extinguished. The popular mythology of the borrower “burning the mortgage” reflects this basic concept. The concept is indeed correct, but it is a bit more complex and requires some further explanation read more.

To being with, a mortgage may be paid off by either of two classes of persons: those who are “primarily responsible” for paying it and those who are not. Who is “primarily responsible?” the concept is not dependent on the existence of personal liability on the debt. Most obviously, the mortgagor is “primarily responsible” if he or she still owns the real estate, whether the debt is recourse or not. Likewise, if the real estate is sold, the grantee becomes “primarily responsible,” whether the grantee assumed personal liability on the debt or not. Even a tenant in common, a life tenant, or other holder of a limited interest in the real estate is “primarily responsible” except to the extent that someone else has a duty to reimburse him or her for part of the payment he or she might make.

If a complete payoff of the loan (including any validly accrued interest, prepayment fees, and other miscellaneous items) is made by somebody who is “primarily responsible,” the mortgage is indeed extinguished. Legally, it doesn’t exist anymore. Of course, that doesn’t make it disappear from the public records. Hence, the mortgagee has a duty to provide a suitable document, recordable in form, showing that the mortgage has been released. The person marking the payoff can then records it clear the records. We can correctly refer to the payoff as “redemption” of the land from the mortgage.

Incidentally, the great majority of states have statutes that formalize the mortgagee’s duty to provide a recordable document discharging the mortgage. The name customarily given to the document varies from one jurisdiction to another; it may be called a release, a satisfaction piece, a discharge, or (particularly where deeds of trust are commonly used) a re-conveyance. The name has little significance. Theses statutes often provide a fixed time period (e.g., 10 to 90 days) within which the lender must provide the document of discharge. Many of them impose financial penalties on lenders who fail to comply, and, in addition, allow the payer to recover any actual damages resulting from the lender’s failure to provide a discharge from a title loan Atlanta.