Q: I recently paid off my home but did not receive the deed. If I don’t have the deed, how do my kids prove that I owned it to transfer title? Does it have to go through probate?
A: I get this question fairly regularly. Why don’t I get the deed after the mortgage is paid off?
It’s probably best to start at the beginning, the loan. When a person borrows money from a bank, they attend a closing and are presented with about two pounds of paper to go through. Among those sheets of paper are two really important documents: the note and the mortgage.
The note (also known as the promissory note) is the personal guarantee that the borrower will pay back the bank. In other words, it’s an acknowledgment that money is owed and sets out the terms of the loan and repayment. It’s unlikely that you will receive the loan without signing a note, at least not from a bank.
The second important document is the mortgage. The mortgage is essentially the instrument that creates a security interest in the property. It serves as a lien on the property that gives the bank a collateral interest.
To put it in the simplest terms possible, the note is the personal obligation and the lien created by the mortgage is the security interest. It is possible to borrow money by simply signing a note and not a mortgage. If the lender does not take a collateral lien, i.e. the mortgage, the loan is unsecured.
This leads back to your original question: Why didn’t I get a deed when I paid off the mortgage? The answer is easy, they don’t have it.
There is a misconception that the lender holds onto the deed which I blame on auto loans. As you know, when you finance a car, the lender takes a security interest in the car (there is a section on the title for banks to claim their security interest) and most banks hold onto the title until the loan is paid off. Once the loan has been paid, the bank signs the title releasing their interest and sends the original title to the consumer.
Mortgage lenders don’t usually hold onto the original deed. After recording, the original deed is forwarded to owner by the title insurance company along with the title insurance policy. The bank doesn’t hold onto the deed because they don’t have to: they have a recorded mortgage.
That’s the reason the bank didn’t send you the deed; you should already have it. If you can’t find it, you can get a copy of it at the county recorder’s office or, if you live in Lake or Porter counties, online.
What you should be looking for is the recorded satisfaction of mortgage. That’s the recorded document that releases the mortgage. If you didn’t get the satisfaction, you should call the lender to make sure one was prepared and recorded.
Finally, if you own the home solely in your name without a TOD designation, it’s possible and even likely that a paid-off home will end up in probate.
Christopher W. Yugo is an attorney in Crown Point. Chris’ Estate Planning Article appears online every Sunday at www.nwi.com. Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, IN 46321 or to Chrisyugolaw@gmail.com. Chris’ information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.
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