Discharge by Affidavits
Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Summer 2002, Volume 1, Number 2
Discharge by Affidavits
by Pamela Butler O'Brien, Underwriting Counsel
Into every life a little rain must fall, but recently the missing discharge and missing intervening assignment problems seem more like a deluge. You can spend entire days tracking missing intervening assignments and faulty discharges, but who has time? A little foresight can help.
The first step to winnowing down your missing assignment, faulty discharge, and no discharge pile is a properly planned payoff. In the good old days you paid off the lender who, oh joy, was the holder of record. Within a month you received the original discharge, the paid note, and the paid mortgage. Sometimes you even received a recording check. Those days seem more like Camelot than reality today. Today the holder of record is XYZ Company, Inc., but your payoff comes from ABC Servicing. And let's not even talk MERS. In the old days you would have said, "Get me an assignment, and then I will schedule your loan." Today, just how many loans would you close and how many of your lenders would understand the delay? It would probably end your conveyancing practice in short order. So what do you do? A good offense is the best defense: think G.L.c. 183, §55 with every payoff you make. In order to discharge a mortgage by attorney affidavit you must have the following:
- A written payoff statement;
- A negotiated check;
- Thirty days must have passed since the payoff was made; and
- Written notice, sent by certified mail of the attorney's intention to execute and record a discharge by attorney affidavit along with a copy of the proposed affidavit must be provided fifteen days prior to the recording of the affidavit.
If at the time of the payoff you are paying the mortgagee of record and you make sure you obtain a written payoff and that you make payment in a method that will result in an endorsed check being returned to you, you are in good shape to discharge by affidavit if the lender fails to provide the discharge.
More often, you are not paying off the holder of record. What can you do in that case to set yourself up to discharge by affidavit? G.L.c. 183, §55 continues with provisions to enable an attorney to discharge by attorney affidavit mortgages in which payoffs were made to note holders who were not the mortgagee or mortgage holder in the case of federally regulated mortgages, and to discharge by affidavit when payments are made to a mortgage servicer. These affidavits are designed in conjunction with G.L.c. 54C. In order to discharge by affidavit when payment is made to a note holder you must obtain an original or photocopy of the note showing the endorsements evidencing the transfer of ownership to the payee to incorporate into the affidavit and that shall make the discharge effective. I can hear you groaning now. "Yeah, right, they didn't send me a discharge and they're going to send me a properly endorsed note?!" Section 6 of Chapter 55 continues with how to discharge by affidavit when payment is made to a mortgage servicer of a federally regulated mortgage. It provides that you may attach as supporting evidence either a document evidencing the authority of the servicer to service the loan (a servicing agreement or power of attorney) or the saving grace, an affidavit of the mortgagor or an owner of record pursuant to G.L.c. 183, §54C (A)(2)(i). So, when you are paying a mortgage servicer who is not the mortgagee of record get the mortgagor to sign an affidavit that meets the requirements of Chapter 183, §54C (A)(2)(i) (a) stating:
- They are the mortgagors;
- The mortgage is a federally related mortgage on a one-four family home;
- They made payments to the mortgagee from ___ to ___ and to mortgage servicer starting _____;
- Payments were made to servicer because they received notice from the holder to make payments to the servicer about _______;
- Evidence of payments; i.e., cancelled checks;
- All payments were made in good faith; and
- Mortgagors are unable to obtain an original or copy of the servicing agreement.
Et voila, you have the necessary documents to discharge by affidavit. If you get the discharge from the servicer, the affidavit sitting in your file can also be used in conjunction with an attorney's affidavit in support of discharge and thus avoid the situation where you have paid off the loan and received a discharge that is ineffective as the entity discharging the loan is not the holder of record.
Now that we have perfected the art of a good offense, what about discharges in the chain of title that are imperfect, and of course the mortgagor is long gone? Can they be cured with affidavits? The answer is a resounding - maybe. G.L.c. 183, §54C prescribes two forms of affidavit that may help: an affidavit of subsequent owner in support of discharge and an attorney's affidavit in support of discharge by mortgage servicer recorded together. First and foremost, this section only applies to discharges executed on or after the effective date of the statute on mortgages that were recorded prior to the statute. In other words, for mortgages dated before April 10, 1997, the discharge must be dated after April 10, 1997. An affidavit pursuant to this section will not cure the defect in a 1986 mortgage discharged in 1993. In that unfortunate circumstance see Donald Brown's article. The affidavit of subsequent owner requires that the owner be the owner of record for the premises for a period in excess of three years. If this is the case, an affidavit from them stating the following, recorded together with an attorney's affidavit and the discharge, will release the lien:
- That they are the owner of the premises;
- That they have been the owner in excess of three years;
- That their deed made no reference to the mortgage remaining outstanding;
- That they purchased in good faith and for value in the belief that the premises were not encumbered by the mortgage;
- That they have not made payment on the mortgage; and
- No claims have been made under the mortgage subsequent to their purchase.
When stumbling through the missing discharge or missing assignment maze, remember the legislature was thinking of us, and did pass some legislation to help. The MCA has distilled the requirements of the two applicable sections into several easy-to-work-with forms. You can find them in your MCA Handbook under forms 15A - 15G. Good Luck!