Norman D. Farnam
Wisconsin has adopted new rules governing the process of paying off and satisfying mortgages. The law was born out of the frustration of borrowers, particularly homeowners trying to sell their homes, with unresponsive lenders who delay or fail to furnish payoff statements or record mortgage satisfactions after receiving full payment from the borrower.
When it comes time to sell a home, a borrower wants to know what he or she must pay the lender. The new law provides a process that borrowers can use to request a payoff statement from their lenders and imposes rules that lenders must follow to timely furnish requested payoffs. If a borrower provides a proper notice to his or her lender of a request for a payoff, the lender must provide the payoff, usually at no charge, to the borrower within seven business days of the request. The lender cannot make the payoff statement subject to change prior to the payoff date. If the lender has sold the loan to another lending institution, the lender must supply that information to the borrower within seven days of a payoff statement request.
The law further requires that the lender timely provide a satisfaction of mortgage after receipt of full payment by the borrower of the secured debt. A lender who fails to timely furnish a satisfaction is subject to penalties. Under the new law, title companies are empowered to file affidavits of satisfaction if the borrower has paid off the debt and the lender has failed to satisfy the mortgage securing the debt. The title company affidavit is intended to be an alternative method to clearing title to property to allow transfer if the lender has failed to satisfy its mortgage. The title company is authorized by the law to file an affidavit of satisfaction after it has given notice to the lender that the title company has grounds to believe that the lender has received full payment. A title company’s affidavit is only available to satisfy mortgages on residential real estate.
Finally, the new law provides a mechanism by which a lender can resurrect a mortgage that was accidentally satisfied. It is not uncommon for a lender to accidently satisfy its mortgage. Under the previous law, there was no clear method for a lender to revive a mortgage once satisfied short of asking the court for a declaration. Under the new law, a lender may file a “document” of rescission to revive its erroneously satisfied mortgage. The rescission document will reinstate the mortgage as if the satisfaction had never taken place. However, rescission will not be effective as to those who took action in reliance on the mortgage satisfaction document prior to the time the rescission document is recorded.
If you have any questions about how the information in this article may affect you or your business, please contact Norm Farnam at firstname.lastname@example.org or (608) 257‑2281 or your Stroud attorney.
DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice. This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.