MORTGAGE RELEASE WAIVERS
Requested by: Vermont
Survey Deadline: November 3, 2006
The State of Vermont, Right of Way Section would like to ask the following questions to all
other state right of way divisions.
1. Does your state waive the need for a mortgage release based on some minimal
acquisition value?
2. If so, do you require the mortgage holders name be on the compensation check?
3. Have there been any instances where this was problematic?
If this is a procedure that is utilized, details of the procedure from your manual would be
greatly appreciated.
Robert M. White
Right-of-Way Chief
Vermont Agency of Transportation
National Life Building, Drawer 33
Montpelier, VT 05633-5001
Phone: (802) 828-2619
Fax: (802) 828-2456
E-Mail: rob.white@state.vt.us
ALABAMA
ALASKA
ARIZONA
1.
Typically, a waiver of release is not granted no matter what the acquisition value. The
Department strives to obtain free and clear title. In rare occasions, and when the risk
is considered minimal, a waiver of release is approved due to excessive mortgage
release fees on a nominal value acquisition.
2.
If a release is to be obtained, the Department abides by the instructions provided by
the mortgage servicing company.
3.
In general, property owners are explained the process and asked to contact their
mortgage servicing company should they have further questions. It seldom becomes
an issue after that.
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
1.
Connecticut obtains full or partial releases of encumbrances for all "fee" acquisitions
regardless of the value.
2.
Along the same thought process, however, we do not obtain Subordination
Agreements for "easement only" acquisitions with low values and no permanent
structures to be maintained in the easement area.
DELAWARE
DISTRICT OF COLUMBIA
FLORIDA
1.
FDOT does not waive mortgage releases for any parcel based on the acquisition
amount. We authorize our districts to waive release of subordinate interests based on
a joint risk assessment by the district right of way office and district general counsel.
However, this is very rarely done.
2.
N/A
3.
N/A
GEORGIA
HAWAII
IDAHO
The State of Vermont, Right of Way Section would like to ask the following questions to all
other state right of way divisions.
1.
Yes. The Ohio Department of Transportation (ODOT) has a provision in the 5203
section of the Real Estate policy and procedure Manual.
a) When the Fair Market Value Estimate (FMVE) is $5,000 or less. This is a nominal
compensation amount with low risk to ODOT and the owner. The Value Analysis
format is typically used for simplistic and low value acquisitions.
b) When the FMVE is greater than $5,000 and the value of the residue when
compared against the remaining mortgage amount provides a loan to value ratio
(LTV) that does not exceed 80%.
2.
No; the only time a mortgage holders name is on the check is when the mortgage
holder will receive the proceeds from the FMVE.
3.
To my knowledge there have been no problems.
ILLINOIS
1.
Yes, for acquisitions below $10,000 when we perceive no likelihood that the owner
may default on the mortgage; that there may be a foreclosure, or when the remainder
property has a value exceeding $10,000.
2.
No.
3.
Yes. When the property owner's mortgagee files for foreclosure, we have had to work
with the mortgagee to have our property released from the foreclosure suit. In the two
or three times this has occurred over the past five years, the department's property
has successfully been released without costs to the department. The pertinent section
from our policies and procedures manual is as follows:
4.04-1
MORTGAGE LIENS
A mortgage constitutes a lien on the land to be acquired. If all of the property is being
acquired, a complete and general release of the lien of mortgage must be obtained
from the mortgagee. When only part of a property is being acquired, a partial release
of the mortgage must be obtained from the mortgagee. Partial releases will not be
required on partial acquisitions costing $10,000 or less unless the department has any
reason to believe that there is a possibility the owner may default on the mortgage,
there is a chance of foreclosure, or the remainder’s value is less than $10,000. This
includes fee takings and permanent easements.
The mortgagee must be named a payee on the warrant even though a partial release
has been obtained, unless it requests in writing that its name be omitted from the
warrant. Mortgage companies should be paid as their interest is shown on the title
commitment. Their local agent should not be made payee. If the mortgage has been
assigned to another company or its name has changed, the warrant should pay the
company to which it is assigned, or the current name of said company. Any such
changes should be clearly detailed in the signatory portions of warrant requisition. If
the state is acquiring "Access Rights" from a property, such acquisition will have an
impact on the value of remaining property. Therefore, it is also necessary to secure a
partial release from the mortgage company as with any other acquisition over $10,000.
All releases must be recorded. When the department’s acquisition involves only the
taking of a temporary easement a “Mortgagee’s Consent to Temporary Easement” (LA
408Y) will need to be obtained in place of a release on those parcels over $10,000.
The mortgagee should be named a payee or a letter obtained stating they do not want
to be named payee on Temporary Easements over $10,000.
Generally, a partial release of the so-called "blanket mortgages" covering real property
owned by the large utility companies, subject to the Illinois Commerce Commission,
such as railroads and power companies, will not be necessary. A statement should be
made in regard to the title exception on the warrant request, as follows: "after
considering Section 4.04-1 of the Land Acquisition Manual a release is not required."
Where a substantial amount is involved requiring Illinois Commerce Commission
approval to the sale, the release should be obtained.
INDIANA
1.
Yes, we recently raised the limit from $10,000 to $20,000 (offer amount).
2.
No. We provide a letter to the owner telling them to contact their mortgage regarding
any division of funds. Since we didn’t get a release, we don’t feel that assuring
payment is made to the mortgagee would mitigate a demand for payment in a
foreclosure.
3.
I recall 3 instances out of approximately 5,000 mortgage waivers (over 10 years) in
which the mortgagee foreclosed & approached INDOT for payment on the r/w we had
acquired. While we paid twice for these 3 properties the time savings in clearing
parcels without the delays in obtaining mortgage releases is very cost effective. See
www.in.gov/dot/pubs/manuals/rightofway/03buyingmanual12-05. Page 28 describes
the policy on waivers but cites the old limit of $10,000. We haven’t updated the on line
manual yet.
IOWA
1.
Yes, if the acquisition amount is less than $25,000 and where there is clearly sufficient
remaining property value to protect the interest. In some instances we have waived
the requirement for larger acquisitions. Some of the huge institutions operating
nationally have requirements and administrative fees for releases that we believe to be
excessive and unreasonable, and worth the risk of waiving the necessity for a release.
Those decisions are on a case by case basis.
2.
We give the mortgage holder the opportunity to be named on the check.
3.
No, and we have used our criteria for the past four or five years.
The following is from our manual:
The process for handling mortgages, liens and judgments depends on the size and
complexity of the transaction. Purchase money mortgages take precedence over
other interest holders.
Generally, an acquisition with compensation of $25,000 or less where there is clearly
sufficient property remaining to protect the interest requires only that the mortgage
holder be notified of the pending transaction. The interest holder is requested to
assert their security rights, if any, prior to the closing of the transaction. They can
request they be named on the warrant.
KANSAS
KENTUCKY
LOUISIANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
1.
Yes, if the taking is minor and less than $25,000. We compare the balance on the
mortgage and the value of the remaining property to assess the possibility of the
mortgage amount exceeding the value of the property after the taking. In most cases,
MDOT would be acquiring an easement, not fee simple interest.
2.
No, because the taking is low value easement.
3.
Not yet, but there is always a risk the mortgage could go into default, then acquisition
would be invalid. We have no written procedure, it is strictly a risk management
decision.
MINNESOTA
1.
Yes, on a case-by-case basis.
2.
No.
3.
No, but if the property were to be later sold, it would be a problem.
MISSISSIPPI
MISSOURI
MONTANA
1.
Yes, $10,000.00 or less.
2.
No
3.
Not to this point. This policy has been in place a number of years.
NEBRASKA
NEVADA
NEW HAMPSHIRE
1.
NH waives mortgage releases for acquisitions with appraised value of less than $5000
2.
No
3.
No
NEW JERSEY
1.
Although New Jersey DOT has no formal policy regarding mortgage releases,
considerable discretion is exercised by our Closing Unit in this regard. For those
permanent acquisitions of a nominal value, say $5,000 and less, mortgage releases
will be sought; however, the receipt of same will not be an overriding factor in making
payment.
2.
No, we do not name mortgagees on the compensation check absent a release. If a
release is obtained and the lender demands all or a portion of the proceeds, payment
is subject to the agreement of the owner.
3.
Situations whereby we need to make a double payment are few and far between. The
cost savings in not condemning such cases far outweigh the risks taken.
NEW MEXICO
NEW YORK
1.
NYSDOT waives the Assignment of Claim and Release requirement for partial
acquisitions valued at $5,000 or less (excluding donations and $1PW) where
mortgages are held by institutional lenders.
2.
No, the compensation check is made payable to the property owner.
3.
We have not experienced any problems with this policy. In 1997, we initiated this
policy for amounts up to $2,500 and in 2005, we extended this policy to include
amounts up to $5,000.
Attached is the e-mail that we provided to our staff on 12/8/05 which includes the Right
of Way Instruction and the Affidavit form (depending on the owners) that the property
owner must execute.
We would be interested in hearing the responses that you receive from other states. If you
need additional information, please let us know. Thank you.
NORTH CAROLINA
NORTH DAKOTA
1.
No
2.
N/A
3.
N/A
OHIO
OKLAHOMA
1.
We utilize the waiver valuation limit, currently $10,000.00.
2.
Yes
3
A few, but our Business Office / Accounting Personnel have done a great job keeping
these issues moving forward.
OREGON
PENNSYLVANIA
1.
We waive the need for a mortgage release for takes under $25,000 where there is no
severance to the remainder and the take does not significantly diminish the ability of
the remaining collateral to support the loan.
2.
No, we do not require the mortgage holders name to be on the compensation check.
3.
We have not had any problems.
PUERTO RICO
RHODE ISLAND
SOUTH CAROLINA
1.
WAIVER - The mortgage release can be waived on acquisitions $20,000.00 or less,
unless we are acquiring the entire property and/or relocation assistance is involved in
the acquisition; there are damages or extenuating circumstances such that the value
of the remainder property will not cover all liens. This waiver is not a blanket
authority to ignore mortgages, but allows the acquisition agent to review the
Landowner’s interest in the property and ascertain if the remaining value of the
property is sufficient to provide security to the mortgage holder. If there is any
question regarding the mortgage holder’s security, the release should be
secured. The Acquisition Agent will approve, sign and hi-lite the entry on the agents
worksheet and Title certificate.
a. Acquisitions $20,001.00 to $50,000.00 OR up to 10% of mortgaged dollar
amount may be waived by Team Leader using the above criteria and initialed on Right
of Way Agent’s worksheet.
b.
Excess of $50,000.00 may be waived by Right of Way Administrator or Director
documentation.
NOTE: - IF UPON RECEIPT OF SIGNED TITLE TO REAL ESTATE THE WAIVER OF
A MORTGAGE RELEASE IS DETERMINED TO BE APPLICABLE,
NOTIFICATION/CONTACT WITH MORTGAGEE IS NOT INITIATED.
2.
If the mortgage Release is waived, we do not add the mortgagee's name to the check.
3.
We have had two or three instances where the mortgage has foreclosed on the
property and named SCDOT as a party. To date we have successfully avoided
making a duplication of payment because the value of the remaining property exceed
the mortgage value
SOUTH DAKOTA
1.
We always attempt to get a partial release. However, on those parcels that meet the
following requirements: a) the value of the settlement must be less than $10,000 (not
including relocation benefits) b) the after value of the landowner's remaining property
(as determined from the appraisal) must exceed the value of the mortgage, we send
the partial release and give them 15 days to return it, and if not received after 15 days,
we process the voucher for payment and do not include the bank.
2.
Yes, if they respond and request to be included. No, based on the explanation in
Item 1. above.
3.
So far we have not encountered any problems.
This is procedure is based on legal council's recommendation for non responsive lending
institutions and the need to process documents for project requirements.
TENNESEE
TEXAS
UTAH
1.
If the value is $15,000, because many of our acquisitions are below this value and the
lending institutions were not concerned with the small takings.
2.
No
3.
No
Threshold for
Acquisition of Property or Lein Release.xls
VERMONT
VIRGINIA
1.
2.
3.
Our Right of Way Manual of Instructions sets forth the following criteria to be used
depending on the property rights to be acquired and the amount of compensation due
the landowner. Acquisition of temporary easements- < $10K - close subject to deeds
of trust, taxes and judgments - > $10K - staff attorney to advise on closing subject to
title objections. Acquisition of Permanent easements - < $10K - close subject to deeds
of trust, taxes and judgments - > $10K - Obtain release or subordination of deeds of
trust. Close subject to judgments and taxes as no land acquired. Acquisition of Fee
(Partial Take) - <$1K - close subject to deeds of trust, taxes and judgments >$1K Obtain partial release of deeds of trust. Staff attorney to advise on releases of
judgments and taxes. Acquisition of Fee (Total Take) - Obtain releases of deeds of
trust, judgments and taxes regardless of value.
It is left to the discretion of the Assistant Attorney General in charge of closing as to
whom the check is drawn.
There was a foreclosure where VDOT had not obtained a release for an "under
$10,000.00" settlement that caused VDOT to have to pay again the new owner who
had bought at foreclosure. The foreclosure wiped out the VDOT settlement and deed
with the first property owner who was foreclosed since VDOT had no release. This
foreclosure was a problem and where deeds of trust call for lenders to receive any
proceeds or else there is a default - we have to pay the lender to avoid serious
consequences for the landowner.
Please advise if additional information is desired.
WASHINGTON
1.
Yes -- Here is the procedure from our right of way manual:
8-3.6 Clearing of Deeds of Trust, Mortgages, and Other Monetary Liens
8-3.6.1 General
Most mortgages and deeds of trust contain a condemnation/eminent domain or an
acceleration clause calling for all proceeds to be applied to the unpaid balance; if
proceeds are not applied to the unpaid balance, the lender can call all amounts
immediately due and payable.
8-3.6.2 Rules
Partial Reconveyances or Releases are not required on partial acquisitions when the
dollar amount of compensation does not exceed $10,000 (including damages, but
exclusive of cost-to-cure/cost-to-move damages and compensation paid to replace or
move a well or septic system) and there are no appreciable improvements (building,
garage/sheds, outbuildings, etc.) in the area being acquired. If the compensation is
between $10,001 and $25,000 (including damages, but exclusive of cost-to-cure/costto-move damages and compensation paid to replace or move a well or septic system)
and there are no appreciable improvements (building, garages/sheds, outbuildings,
etc.) in the area being acquired, the risk of assuming this additional liability must be
made by the Real Estate Services Manager (RESM). Over $25,000 is reviewed on a
case-by-case basis and requires approval by the RESM and the Regional
Administrator.
8-3.6.3 Procedures
Under $10,000, the Acquisition Agent informs the property owner of any condemnation,
due on sale, or acceleration clauses, and the risk associated therein and so notes in
the activities diary. The response of the owner should also be clearly noted. The
Acquisition Agent also notes in the encumbrance report on the Right of Way Parcel
Transmittal Sheet that the property is being acquired subject to the lien. Between
$10,001 and $25,000 the following procedures apply:
A. The Acquisition Agent completes the Request to Accept Encumbrance (Form
RES-333) and submits it prior to transmittal to the Real Estate Services Manager
(RESM) for consideration.
B. The RESM evaluates the request based on the following criteria:
1.
2.
3.
4.
Age of lien and current status of payment
Amount of lien and risk of being called due
Equity (market value of remaining lands less balance of lien)
Evaluation of all liens, including taxes and assessments, as noted on the title
report
5. Evaluation of any other unrecorded interests
C. If approved by the RESM, the Acquisition Agent obtains written permission from
the property owner that they have been informed of any condemnation, due on
sale, or acceleration clauses and the risk associated therein.
D. The owners signed statement and Request to Accept Encumbrance form are
included with the transmittal package.
E. If RESM’s review determines unacceptable risk, the RESM rejects the waiver,
and Acquisition Agent clears the encumbrance, per normal procedure. Over
$25,000, the procedure outlined above for $10,001 to $25,000 applies.
However, the Request to Accept Encumbrance form must be approved by the
Regional Administrator prior to submittal of transmittal.
Note: This procedure does not apply to DSHS liens and other child support
judgments.
2. No
3. Not yet.
WEST VIRGINIA
WISCONSIN
1.
The regional real estate managers in Wisconsin have discretion not to require a partial
release of mortgage on non-complex acquisitions, involving minor interests and little or
no severance to the owner's remaining land.
2.
No
3.
In the last seven years, Wisconsin's real estate acquisition program has averaged in
the neighborhood of 1,900 parcels per year. Of that figure, approximately 70% were
eligible for acquisition using the applicable waiver valuation methods. To a reasonable
degree of certainty, in only two instances, during that period of time, the agency has
been included in foreclosure proceedings effecting title to parcels the agency
attempted to clear utilizing the above-described expedited method.
If you have any questions with regard to this response, please contact me at your
convenience.
Joel V. Batha
Acquisition Facilitator
Technical Services Section
Wisconsin Dept. of Transportation
(608) 266-2053
WYOMING
1.
Yes
2.
No
3.
No