Bulletin: CT000015

Dear Associates:

The large number of mortgage refinance transactions over the past few years has left the public records with a significant number of paid but unreleased mortgages and some questionable releases of mortgages.

National lenders and the companies they use to service their loans prepare and forward mortgage releases for recordation in numerous jurisdictions throughout the country.  The sheer volume of releases, coupled with the state specific requirements for releasing mortgages can result in errors. Many releases never make it to record because of the errors.  As to others that are recorded, title searchers and attorneys inConnecticut examining these releases are frequently confronted with dealing with these errors and must try to determine which of these releases may be relied upon.

Underwriting Guidelines:

Unreleased, but satisfied prior mortgages:

It is always Stewart's goal to facilitate real estate transactions where reasonably possible.  In transactions where it can be reasonably determined that a prior mortgage loan has been paid in full and reasonable safeguards are put in place to assure the satisfied mortgages will be discharged post closing, Stewart will approve closing with the prior mortgage open of record.  Special permission to close must be obtained from the Connecticut State Office. When requesting permission to close with prior open mortgages, proof of payment of the prior mortgage and a written undertaking/indemnification from a prior title insurer or an undertaking from an attorney should be submitted for review.

Releases with Errors:

Connecticut Standard of Title 18.4 provides that a "... release of mortgage is sufficient, notwithstanding error[s] in dates, amounts, volume and page of record, property descriptions, names of parties and other information, if considering all the circumstances of record, sufficient data are given to identify, with reasonable certainty, the mortgage sought to be released." [Emphasis added]

The comments to Standard 18.4 provide that, normally a mortgage release is merely a record termination of the security interest. Actual termination occurred by operation of law as a result of the debt payment. However, payment of a mortgage debt is a factual issue. A mortgage must be judicially terminated absent a properly delivered release.

Standard 18.4 provides that, despite the number or types of errors in a release, if the searcher can determine that a particular mortgage was intended to be released, the release is sufficient.  In essence, substance prevails over form, allowing the title searcher to report the mortgage as released despite the errors. 

Standard 18.5 follows 18.4 by providing that a release of modified mortgage which refers to either the mortgage or the modification is deemed sufficient to release both.

Stewart's underwriting guidelines follow title standards set forth in 18.4 and 18.5.

However, Standard 18.4 does not cure the situation where the person executing the release of mortgage is not the holder of the mortgage at the time the release is given. In such a case: (1) you must obtain a new or duplicate release from the last holder of record; or (2) obtain an assignment from the last holder of record to the releasing entity; or (3) you must show that the releasing entity, is, in fact, part of the same entity by merger or acquisition (i.e.- Norwest and Wells Fargo or NewMil Bank and Webster Bank being one in the same); or finally (4) the releasing entity is doing so under Power of Attorney previously recorded.