Brian S. Cantor, Attorney-At-Law’s: Your Closing is Done but Your Responsibilities are Not!
So you thought the work was done! You closed and signed what felt like one hundred documents, but the work is not done. Your closing, whether it is a refinance, sale or purchase has a certain amount of homework for you and/or your attorney after the closing.
In all three instances, after the closing, you will receive a package from your attorney or settlement agent. These documents should be saved and kept with the rest of your important documents such as your tax returns. Some documents, such as your title insurance policy, you may want to store in your safe deposit box.
The title insurance policy insures the title to your home. Some policies provide coverage for forced removal of structures, which did not receive permits from the municipality, as well as survey coverage. Generally, a title policy will cover an item which could have been picked up on a title search such as a mortgage or judgment lien as well as items that can’t be discovered in a search such as a forged deed. If you refinance after your purchase, you may need a copy of the policy to receive a discount on the new lender’s loan policy.
In a purchase you will receive the deed back from the city or town clerk’s office after it has been microfilmed. Depending on the clerk’s office it can take a few weeks to almost a year. Once you receive it back, you should store it with the rest of your closing package. If you lose it you can obtain a certified copy from the municipal clerk, just like you can obtain a duplicate birth certificate. You will not need it to transfer title when you sell. Unlike the title to your car in which you sign over the title document to the buyer, the land records reflect your ownership. The status of your title is determined by a title search. At closing a new deed is prepared and signed by the seller.
Some of the documents you will need for your tax return for the year. One of these is the closing statement, previously known as the Hud or Respa statement, (now post October 2015 a “CD” or Closing Disclosure.) This is important because some of your closing expenses may be deductible on your taxes. Your tax preparer will need a copy. If you sell your property, the following January you may receive a 1099 to attach to your tax return. This helps you report the capital gain or loss on your real estate. Under certain circumstances you may have to pay taxes on the capital gain on your real estate. I suggest that you consult your tax preparer for these rules.
In a sale or refinance, it is common to pay off a mortgage, or other such liens like a credit line or judgment lien. While you know that it has been paid, a title searcher who only finds the mortgage on the land records but no corresponding release or satisfaction of mortgage must report the mortgage or lien as unpaid. The bank, which was paid off, will either send the release to the municipal clerk’s office, the closing attorney, or directly to you. The release should be recorded promptly on the land records. The bank must send the release by law within sixty days of the payoff or be subject to statutory penalties. In the case of the lender who sends you the release, it may be sent along with the note marked “paid” as well as the original mortgage. Sometimes it may be sent alone.
You should notify your closing attorney if you receive a document entitled release or satisfaction of mortgage so that they can check to see if the release was prepared properly. All too often the release is defective because the last known assignee of the mortgage does not sign the release. Often a loan will be sold several times. Also, the land records may not reflect these assignments. Thus an original mortgage from you to bank A may be sold to bank B which in turn sells the loan to bank C. Bank A signed the release. As far as the land records are concerned A no longer had an interest to release. The release is defective. Bank C the last record holder of the mortgage would have to sign the release. If there was a gap in the chain of assignments, i.e. one of the assignments was not recorded on the land records, you will need to obtain the proper assignment. Often, the bank just fails to prepare a release.
Furthermore, if you do not take care of obtaining the releases shortly after closing, you may forget about it until you go to sell the home. At that time the bank you paid off may be out of business or changed names or entities several times. It would be difficult at that point to obtain a release. At that point you may be able to record an affidavit. However, you may need to include copies of cancelled checks and other written evidence that you paid off the lien. Now I hope you see why it is so important to save these materials.
How long should you hold on to these documents? Forever. You never know when a letter or document will come in handy to resolve a title issue or to prove that you paid off an unreleased lien or to prove what you may owe someday on an audit.
Maintaining proper documentation may save you from delaying a closing and therefore, save you money.