What Happens When a Lender Fails to Record a Satisfaction of a Mortgage?

Paying off one’s mortgage can be an exciting time for homeowners.  Not only is the homeowner relieved of the burden of their monthly mortgage payments, but they are also finally able to proclaim that the property is owned free and clear.  However, making the payoff alone does not automatically free the home from the mortgage and the lien used to secure it. Under Florida law, a mortgage lender is required to release their lien against the property upon satisfaction, giving the owner clear title to their home, absent any other encumbrances. This article will discuss the requirements that a mortgage lender must fulfill upon satisfaction of a mortgage and property owner’s remedies if the lender fails to do so.

Statutory Requirements

Florida law requires that lenders take several steps to release their claim to a property once mortgage debt has been satisfied. Florida Statute 701.04(2) sets forth the steps that a lender must take to release their lien on a property and sets forth a time limit that the lender must complete these steps.

Step 1: Written Acknowledgment

Upon receipt of the final payment, satisfying a mortgage, the mortgagee (lender) must execute and file a written document acknowledging that the mortgage has been satisfied (i.e., paid in full). This written document must be acknowledged, or proven (i.e., notarized). Additionally, the document must be entered into (filed with the clerk) the official records of the county in which the property is located. This written acknowledgement is commonly referred to as a “release” or “satisfaction” of the mortgage.

Step 2: Notice to Property Owner

After filing the proper acknowledgement with the county, the mortgagee is required to notify the property owner that this has been completed. The lender must provide the borrower notice that the release or satisfaction has been filed with the clerk and the lien has been released. This notice confirms with the property owner that they now have legal title to the property without the mortgage lien against it. It is important to note, however, that if the mortgage is paid off through a foreclosure sale to a third-party buyer, the defaulting homeowner is not entitled to documentation that their debt has been paid. Lashinsky v. First Fed. S & L Ass’n, 434 So.2d 38 (Fla. 5th DCA 1983).

Deadline For Action

Section 701.04(2) Fla. Stat. requires the mortgagee to provide the “recorded satisfaction to the person who had made the full payment,” within 60 days of receiving payment in full of the mortgage. Effectively, the lender or mortgage holder has 60 days, beginning upon receipt of the final payment or payment in full of the mortgage, to file the satisfaction or release with the proper clerk in the county the property is located and provide the property owner proper notice that the filing has been completed and the lien has been released.

Property Owner’s Remedies

 If the mortgagee fails to execute and record a Satisfaction of Mortgage within the 60-day period afforded by statute, the mortgagor (property owner) may file suit and seek a court order directing the mortgagee to execute a satisfaction of mortgage or an order extinguishing the lien against the property. If a property owner is forced to bring a civil action against the mortgagee, they could be entitled to attorney fees and costs under § 701.04(2).  A quiet title action may also be pursued, which is a lawsuit specifically designed to clear any clouds or other encumbrances from the title of real property.

Conclusion

Paying off a mortgage should be an exciting time for a property owner. However, when a lender fails to release the mortgage lien it can leave the owner without free and clear title to their property. In the event the lender fails to release, it is important for the property owner to consult with experienced real estate counsel to assist in taking the proper steps to obtain clear title to their property.

Authors:

• A. Hunter Faulkner
• Maxwell Salain, JD Candidate