A First Look at the Transfer of Notes (text p.
446)
• “Although both the note and mortgage are
transferred, the note is viewed as the controlling
document.”
• Article 3 of the Uniform Commercial Code
contains the law of notes.
• A note transferee who qualifies as a holder in
due course takes free of important defenses of
the maker of the note.
– Think of a HDC as an especially well
protected BFP
1
Donald J. Weidner
A First Look at the Transfer of Notes (cont’d)
• To qualify as a holder in due course, the transferee must
acquire a negotiable instrument in good faith and without
notice of defenses against it.
• The UCC (1990) states that good faith (among
merchants) “means honesty in fact and the observance
of reasonable commercial standards of fair dealing.”
– 2001 revision comment says honesty in fact is
subjective and reasonable commercial standards is
objective.
2
Donald J. Weidner
A Quick Overview of UCC Law of Notes
(Supplement pp. 50-52)
• Caveat about the Smith & Lubell statement at text
p. 566: “Since the note is evidence of a debt and
is a negotiable instrument, only one copy of it
should be signed by the borrower.”
– Under the Uniform Commercial Code, not all
notes qualify as negotiable instruments
– The “holder” must take a negotiable instrument
to be a “holder in due course.”
3
Donald J. Weidner
Rights of Holder in Due Course
• Rights of a holder in due course (UCC 3305)
– In general, a holder in due course takes free
of “personal defenses” but takes subject to
“real defenses” (see next slide)
– Breach of warranty is a personal defense from
which the HDC takes free
4
Donald J. Weidner
UCC § 3-305 DEFENSES AND CLAIMS IN RECOUPMENT
A holder in due course is not subject to “personal defenses”
(such as breach of warranty).
A holder in due course is subject only to the following “real”
defenses:
”(1) a defense of the obligor based on
(i) infancy of the obligor to the extent it is a defense to
a simple contract,
(ii) duress, lack of legal capacity, or illegality of the
transaction which, under other law, nullifies the obligation
of the obligor,
(iii) fraud that induced the obligor to sign the
instrument with neither knowledge nor reasonable
opportunity to learn of its character or its essential terms,
or
(iv) discharge of the obligor in insolvency
proceedings;”
5
Donald J. Weidner
Official Comment to Revised UCC 3-305
• The Official Comment to the revised UCC
305 states that the holder in due course
doctrine:
– “applies only to cases in which more than two
parties are involved. Its essence is that the
holder in due course does not have to suffer
the consequences of a defense of the obligor
on the instrument that arose from an
occurrence with a third party.”
• The big issue is usually who qualifies as a
holder in due course.
– See UCC 3-302, 3-104, 3-106.
6
Donald J. Weidner
UCC § 3-302 Who is a Holder in Due Course
”(a) [With very limited qualification], ‘holder in due course’ means
the holder of an instrument if:
(1) the instrument when issued or negotiated to the holder
does not bear such apparent evidence of forgery or alteration or
is not otherwise so irregular or incomplete as to call into
question its authenticity; and
(2) the holder took the instrument
(i) for value,
(ii) in good faith,
(iii) without notice that the instrument is overdue or has
been dishonored . . . ,
(iv) without notice that the instrument contains an
unauthorized signature or has been altered,
(v) without notice of any claim to the instrument . . . , and
(vi) without notice that any party has a defense or claim in
recoupment . . . .”
- § 3-104 (b) provides: “Instrument means a negotiable
instrument.”
7
Donald J. Weidner
Notice
• Consider that a HDC is one who takes without
“notice” that the instrument is overdue or of a
defense against it.
• “Notice” does not require actual knowledge because
it is defined in terms of “reason to know.”
– A person has notice of a fact if the person, “from
all the facts and circumstances known to the
person at the time in question, has reason to
know that it exists.” UCC 1-202(a).
8
Donald J. Weidner
UCC § 3-104 When Instrument is Negotiable
”(a) [With minor exceptions], ‘negotiable instrument’
means an unconditional promise or order to pay a
fixed amount* of money, with or without interest or
other charges . . . if it:
(1) is payable to bearer or to order . . . ;
(2) is payable on demand or at a definite time; and
(3) does not state any other undertaking . . . to do
any act in addition to the payment of money,
but the promise or order may contain (i) an
undertaking or power to give, maintain, or protect
collateral to secure payment . . . .
* The old language requiring a “sum certain” was
removed. New Section 3-112(b) was added.
9
Donald J. Weidner
New UCC Section 3-112(b) and “Fixed Amount”
• UCC Section 3-112(b) now provides:
– “(b) [i] Interest may be stated in an instrument
as a fixed or variable amount of money or it
may be expressed as a fixed or variable rate
or rates. [ii] The amount or rate of interest
may be stated or described in the instrument
in any manner and may require reference to
information not contained in the instrument.”
• This language was added in 1990 to dispel any
doubts about the negotiability of variable interest
rate notes.
• Furthermore, the entire amount due need not be
calculable from what is written in the note itself.
10
Donald J. Weidner
UCC § 3-106 When Promise or Order Unconditional
“(a) [With minor exception], for the purposes of
Section 3-104(a), a promise or order is
unconditional unless it states (i) an express
condition to payment, (ii) that the promise or
order is subject to or governed by another
record, or (iii) that rights or obligations with respect
to the promise or order are stated in another
record. A reference to another record does not
of itself make the promise or order conditional.
(b) A promise or order is not made conditional (i)
by a reference to another record for a statement of
rights with respect to collateral, prepayment, or
acceleration, or (ii) because payment is limited to
resort to a particular fund or source.”
11
Donald J. Weidner
More on Whether a Note Fails the “Unconditional
Obligation” Requirement to be a Negotiable
Instrument
What result in a 1975 Florida case: the note stated it
was “secured by a mortgage on real estate . . . The
terms of said mortgage are by this reference made a
part hereof.”
-
See Holly Hill Acres, LTD. V. Charter Bank of
Gainsville, 314 So. 2d 209 (Fl. App. 1975) (text p.
448).
12
Donald J. Weidner
UCC § 3-203 Transfer of Instrument; Rights Acquired
by Transfer
(a) An instrument is transferred when it is
delivered by a person other than its issuer for
the purpose of giving to the person receiving
delivery the right to enforce the instrument.
--Transfer of the right to enforce it
(b) Transfer of an instrument . . . vests in the
transferee any right of the transferor to enforce
the instrument, including any right as a holder in
due course, but the transferee cannot acquire
rights of a holder in due course by a transfer,
directly or indirectly, from a holder in due course
if the transferee engaged in fraud or illegality
affecting the instrument.
13
Donald J. Weidner
UCC § 3-203 Official Comment
2. . . . Under subsection (b) a holder in due
course that transfers an instrument transfers
those rights as a holder in due course to the
purchaser. The policy is to assure the holder
in due course a free market for the instrument.
There is one exception to this rule stated in the
concluding clause of subsection (b). A person
who is party to fraud or illegality affecting the
instrument is not permitted to wash the
instrument clean by passing it into the hands of
a holder in due course and then repurchasing
it.
14
Donald J. Weidner
UCC § 3-203 Official Comment (Cont’d)
4. The operation of Section 3-203 is illustrated by the
following cases. In each case Payee, by fraud, induced
Maker to issue a note to Payee. The fraud is a defense to
the obligation of Maker to pay the note under Section 3305(a)(2).
Case #1. Payee negotiated the note to X who took
as a holder in due course. After the instrument
became overdue X negotiated the note to Y who
had notice of the fraud. Y succeeds to X's rights
as a holder in due course and takes free of
Maker's defense of fraud.
In other words, an originator of a subprime note and mortgage
may have engaged in consumer fraud. The originator can
transfer the note to someone who takes as a HDC. That
HDC can sell its right to HDC status even to someone who
buys with notice of the originator’s fraud.
15
Donald J. Weidner
UCC § 3-203 Official Comment (Cont’d)
There is an exception in the case of a
fraudulent originator who subsequently
reacquires the note:
Case #2. Payee (who induced the maker by fraud)
negotiated the note to X who took as a holder in
due course. Payee then repurchased the note
from X. Payee does not succeed to X's rights as
a holder in due course and is subject to Maker's
defense of fraud.
16
Donald J. Weidner
Giorgi v. Pioneer Title Insurance Co.
(Text p. 437)
• Two couples (“Makers”) executed a Note and D/T.
Note was payable to payeees H, W.
– Payees recorded D/T.
• Note was delivered to Pioneer, Trustee under the
D/T, to hold note in escrow for collection.
– The D/T (as usual) directed the Trustee to collect
on the note, disburse the proceeds to the payee
named in the note and reconvey the property to
the maker.
• Payee H died, his interest passed to Payee W
• Payee W assigned all her interest in the note and
D/T to Giorgi before the note became due.
17
Donald J. Weidner
Giorgi v. Pioneer Title Insurance Co. (cont’d)
• However, Payee W did not physically transfer the
note or the D/T to her assignee, Giorgi, telling Giorgi
that she had lost both.
• Georgi recorded the Assignment to him of the Note
and D/T with the mortgages (and Ds/T)
• Nevada statute said that recordation of an
assignment of a beneficial interest under a D/T is
constructive notice to all persons.
• Giorgi gave Makers of the note notice that he was
the assignee
• However, neither Giorgi nor the Makers gave the
Trustee actual notice of the assignment.
18
Donald J. Weidner
Giorgi v. Pioneer Title Insurance Co. (cont’d)
• Makers continued to make Note
payments to the Trustee
– Even though Giorgi had told Makers he
was the assignee of the note
• Trustee continued to follow the trust
instructions and:
1. disbursed the money to original payee W
(who accepted the money even though she
had assigned the note to Giorgi!) and
2. reconveyed the property to Makers after
the note payments were completed.
19
Donald J. Weidner
Giorgi v. Pioneer Title Insurance Co. (cont’d)
• Giorgi sued both original Payee-Assignor W [a clear
wrongdoer] and the Trustee [who never had actual
notice of the assignment (but not the Makers, who made
all the payments required of them although they
continued to pay the Trustee rather than to the Payee’s
assignee)]
– The suit against original Payee-Assignor W was
successful.
– But the suit against the Trustee was NOT successful.
20
Donald J. Weidner
Giorgi v. Pioneer Title Insurance Co. (cont’d)
• Giorgi Argued: the Nevada statute says a recorded
assignment of a D/T is constructive notice to the world,
and the Trustee is part of the world. Court Rejected
this argument.
• #1. General Rule: When there is a negotiable
instrument secured by a D/T (or mortgage), the law of
negotiable instruments prevails over mortgage law.
• #2. Rule: The Maker is supposed to pay the Holder
– Assignee Giorgi never got physical possession of
the note—never became its “holder”
21
Donald J. Weidner
Giorgi v. Pioneer Title Insurance Co. (cont’d)
– In other words:
• “[T]he maker of a negotiable note secured by a
mortgage or deed of trust cannot discharge his
liability by payment to one not the holder or one not
authorized by the holder to receive payment.”
• Stated differently: “And a debtor is not justified as
against an assignee of the security in making
payments to a mortgagee or a beneficiary named in
a deed of trust who does not have possession of the
instrument.”
– Many F/C proceedings have been halted when
the debtor challenged the party seeking
foreclosure to produce the note.
22
Donald J. Weidner
Giorgi v. Pioneer Title Insurance Co. (cont’d)
• Rule # 3. Decisions in this area should be informed by
the strong policy in favor of a market in debt instruments.
– Granted, it is hard to rationalize the law of notes with
the law of mortgages. The law of mortgages should
not be applied to interfere with “the mobility of the
debt” and the mortgage is “a mere incident of the
debt.”
• Point #4. As a practical matter, Trustees (or title
companies) should not be required to keep searching the
title before disbursing the payments they receive on the
notes they hold for collection
– Trustees can continue to pass along the maker’s
payments to the trust beneficiary
23
Donald J. Weidner
Doyle v. Resolution Trust Corp.
(Text p. 439)
• Doyle, maker of the note, sued Trinity S & L for breach of
contract and for fraud in connection with an adjustable rate
note he signed.
– Resolution Trust (The “RTC”) in 1990 became the
receiver that got Trinity’s interest
• par for the course in the “S & L crisis”
• Doyle later added assignee FNMA, who purchased the
note and mortgage, as a defendant.
• The “gist” of Doyle’s complaint was that Trinity, without his
consent, increased the interest rate on his note from 11%
to 15% and forged his initials on the change.
24
Donald J. Weidner
Doyle v. Resolution Trust Corp. (cont’d)
• At trial, Doyle initially recovered both [1] actual and
punitive damages against wrongdoer Trinity S & L
and [2] cancellation of the note and mortgage held by
FNMA.
• The case has a long and tortured history. In short,
this appeal is about whether FNMA qualifies as a
holder in due course (who takes free from the
maker’s “real” defenses).
• Court initially concluded that this particular note was
not a negotiable instrument (and that therefore FNMA
could not qualify as a HDC).
25
Donald J. Weidner
Doyle v. Resolution Trust Corp. (cont’d)
• An Oklahoma intermediate appellate court had said that the
note was not a negotiable instrument: It was not for a “sum
certain” because an external index, rather than the instrument
itself, had to be consulted to determine the precise amount
payable.
• The Oklahoma S. Ct. reversed. Its reversal reflects current
law of the U.C.C.:
– The old “sum certain” requirement has been replaced by
the “fixed amount” requirement
• And external indices may be consulted to determine the
fixed amount.
• Therefore, because the note was negotiable, a subsequent
holder could be a HDC if it took the note for value, in good
faith with no notice of its defect (the unauthorized and
admittedly significant alteration).
26
Donald J. Weidner
Doyle v. Resolution Trust Corp. (cont’d)
The question then became whether FNMA had notice of
the defect.
• Under the U.C.C., one has notice of a fact when one
has;
• a) actual knowledge of it;
• b) received a notification of it; or
• c) reason to know it exists.
• Unless there was a finding FNMA had notice of an
unauthorized alteration, FNMA “could enforce the note,
as originally executed, free from any claims or
defenses Doyle might have against Trinity.”
27
Donald J. Weidner
Doyle v. Resolution Trust Corp. (cont’d)
• FNMA had knowledge that the interest rate was altered.
• However, it had no knowledge that the alteration was
unauthorized.
• FNMA frequently purchased notes with altered interest
rates, provided the maker’s initials appeared alongside
the alteration.
• FNMA was not required to dig further unless other
factors called the alteration to FNMA’s attention (Trinity
“had a fine reputation”)
28
Donald J. Weidner
Doyle v. Resolution Trust Corp. (cont’d)
• Doyle also reflects the strong policy in favor of the
marketability of debt instruments.
• Court focused on U.C.C. 3-304(1):
– “The purchaser has notice of a claim or defense if
(a) the instrument is so incomplete, bears such
visible evidence of forgery or alteration, or is
otherwise so irregular as to call into question its
validity, terms or ownership or to create an
ambiguity as to the party to pay.”
29
Donald J. Weidner
Doyle v. Resolution Trust Corp. (cont’d)
• 10th Circuit upheld the District Court determination that
FNMA took without notice (reason to know):
---Whereas there is a subjective test to determine
whether a holder takes in “good faith”
---There is an objective test to determine whether a
holder has “notice of defenses”—the question is
what a reasonable person in the holder’s position
would know
---The District Court’s finding that FNMA took
without notice is not clearly erroneous.
• As a result: FNMA was a HDC of Doyle’s note “and
could enforce [it], as originally executed, free from any
claims or defenses Doyle might have against Trinity.”
30
Donald J. Weidner
Doyle v. Resolution Trust Corp. (cont’d)
• The lower court also said
– The originating lender was not FNMA’s agent (and
therefore FNMA was not bound as a principal for an
agent’s bad acts); and
– There was no other “close connectedness” between
assignee FNMA and the assignor/originating lender
that would have put FNMA on notice of any bad
practices of the originating lender .
• See the apparent split in the cases (text p. 447) about
whether the holder’s notice of the transferor’s shoddy
business practices constitutes reason to know with
respect to the transferred note.
31
Donald J. Weidner
Note on Mortgage Electronic Recording
System
(Text p. 445)
• The federal government helped private sector
mortgage lenders and others to create
“Mortgage Electronic Registration System, Inc.”
• Lenders, banks, insurance companies and title
companies become members of MERS and pay
an annual fee.
• They appoint MERS as their agent to act on all
mortgages that they register on the new
electronic system.
32
Donald J. Weidner
MERS (cont’d)
• A MERS mortgage is recorded with the county land
records with the MERS Corporation named “as the
lender’s nominee or mortgagee of record” on the
mortgage.
• The MERS member owning the beneficial interest may
assign the ownership rights or the servicing rights to
another MERS member.
• The assignments are not part of the public record.
• Rather, they are tracked electronically on MERS’s
private records.
– One objection was that MERS makes it more difficult
for borrowers to identify a lender with whom to
negotiate?
– Another one was: the MERS system makes it harder
to study the operation of markets.
33
Donald J. Weidner
MERS (cont’d)
• Mortgagors are notified of transfers of servicing rights
• But were not notified of transfers of beneficial ownership.
• Text discusses the facilitation of “an efficient secondary
market in mortgages”
– bemoaning pesky judicial decisions questioning
MERS
– while noting “legitimate concern if unrecorded
mortgage assignments in secondary market
transactions are not placed on the public record.”
• New Federal Reserve rule responds to the initial concern
and requires the assignee of a loan to notify the
borrower within 30 days of note assignment (not just of
change in servicer) (Text 449).
34
Donald J. Weidner
Associates Home Equity Services, Inc. v. Troup
(Text p. 390)
• Classic type of civil rights case. This in N.J. in 2001.
• Elderly, minority, inner-city resident Troup, signed
contract to pay for repairs on their home.
• Home improvement company steered her to defendant
originating lender to finance their contract.
• In 1996, originating lender provide her a loan:
– $46,500 amount
– 11.6% interest (plus 4 points at closing)
– 15 yr. length
– $41,600 balloon (due at end of 15 years)
• Originating lender sold her note and mortgage to
defendant Associates Home Equity, who paid a premium
for it because of its high interest rate.
35
Donald J. Weidner
Associates Home Equity (cont’d)
• Borrower defaulted on the note.
• Notepurchaser Associates (assignee of note and
mortgage) filed an action to foreclose
• Borrower asserted defenses against the foreclosure and
counterclaimed on the basis of various statutes,
including:
– CFA, the Consumer Fraud Act
– TILA, the Truth in Lending Act
– FHA, the Fair Housing Act
– CRA, the Civil Rights Act Sec. 1982
– LAD, the Law Against Discrimination (New Jersey)
36
Donald J. Weidner
Associates Home Equity (cont’d)
• In short, the court allowed the case to move
forward to the discovery stage.
• Borrower is permitted to raise overlapping
defenses to establish “equitable recoupment” in
the foreclosure proceeding even if its claims
would be time-barred as an independent matter.
• Borrower asserted a. predatory lending, b.
discriminatory lending and c. unconscionability.
• Borrower asserted that notepurchaser either
acted in concert with the originating lender or
controlled its conduct.
37
Donald J. Weidner
Associates Home Equity (cont’d)
• Predatory lending was defined in terms of loans that are
not suitable for the borrowers:
– “In essence, the loan does not fit the borrower, either
because [1] the borrower’s underlying needs for the
loan are not being met or [2] the terms of the loan are
so disadvantageous to that particular borrower that
there is little likelihood that the borrower has the
capacity to repay the loan.”
38
Donald J. Weidner
Associates Home Equity (cont’d)
• The allegation of discriminatory lending was essentially
that the loan originator and notepurchaser engaged in
“reverse redlining”:
– Recall that “redlining” refers to withholding financing
from neighborhoods a lender disfavors
• “Reverse redlining is the practice of extending credit
on unfair terms” to specific geographic areas due to
the income, race or ethnicity of the residents.
– The focus is on communities that lack access to
traditional lending institutions.
• Reverse redlining has been held to violate the FHA
(Federal Housing Act), the CRA (Civil Rights Act) and
the LAD (New Jersey law against discrimination).
39
Donald J. Weidner
Associates Home Equity (cont’d)
• Disparate impact may be sufficient to establish a claim
of in reverse redlining:
– A plaintiff may establish a colorable claim of reverse
redlining by demonstrating that “defendants’ lending
practices and loan terms were ‘unfair’ and
‘predatory,’ and that the defendants either
intentionally targeted on the basis or race or that
there is a disparate impact on the basis of race.”
• Further discovery in this case may reveal that
notepurchaser’s guidelines are discriminatory.
• Noting a study that emphasizes home improvement
loans and that in predominately minority areas
subprime lenders control nearly two thirds of the home
improvement market.
40
Donald J. Weidner
Associates Home Equity (cont’d)
• Court rejected notepurchaser’s argument that
recoupment is inapplicable because the foreclosure
proceeding is not one to collect a debt.
• A foreclosure action “is a quasi in rem procedure to
determine not only the right to foreclose, but also the
amount due on the mortgage.”
– Borrower seeks to reduce the amount due to the
assignee on foreclosure, said the court
– First, on the theory that the assignee was a wrongdoer
– Next, on the theory that, under the FTC’s “holder rule,” the
assignee took subject to the defenses the borrower had
against the originator.
• Held: facts needed to be developed to determine
whether the FTC’s “holder rule” applies.
41
Donald J. Weidner
Associates Home Equity (cont’d)
• The FTC says that sellers who receive proceeds of any
“purchase money loan” under any “consumer credit
contract” must include the following language in the
contract:
“Notice
– ANY HOLDER OF THIS CONSUMER CREDIT
CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR COULD ASSERT
AGAINST THE SELLER . . . .”
• This holder rule “strips the ultimate holder of the paper of its
traditional status as a holder-in-due-course and subjects it to
any potential defenses which the purchaser might have
against the seller.”
• A business may not so structure a consumer credit
transaction to separate the consumer’s duty to pay from the
seller’s duty to perform.
42
Donald J. Weidner
Associates Home Equity (cont’d)
• There was an issue whether the originator’s loan
was a purchase money loan.
• Under the FTC rule, a purchase money loan is a
cash advance received be a consumer to
purchase goods or services from a seller who:
– 1. refers consumers to the creditor or
– 2. is affiliated with the creditor by common
control, contract or business arrangement.
• There was also an issue whether the
notepurchaser was affiliated with the originating
lender or designated from the outset to be the
notepurchaser.
43
Donald J. Weidner
Associates Home Equity (cont’d)
• The borrow also argued that the note was
unconsciouable.
• As to “unconscionability,” the court seems to say the
test is the UCC test for good faith in the case of a
merchant (honesty in fact plus the observance of fair
dealing in the trade), applied with particular scrutiny
“for those most subject to exploitation.”
44
Donald J. Weidner
Note 1 to Associates Home Equity
• Nelson and Whitman, Real Estate Finance Law Sec.
5.30 (5th ed. 2007):
– The FTC’s rule makes it an unfair trade practice for a
seller of goods or services to finance a sale without
including language that makes the lender subject to
the consumer’s claims and defenses.
– In the case of third-party financing, “the loan must
have been made in connection with a sale of goods or
services and a type of ‘close connectedness’ criterion
must be satisfied”
• “but it is much simpler and looser than the UCC’s.”
45
Donald J. Weidner
Note 1 to Associates Home Equity (cont’d)
• “The lender is brought within the rule’s ambit if
the seller of the goods or services [1] refers
consumers to the lender or [2] is affiliated with
the creditor by [any] business arrangement.”
• The FTC rule does not apply to financings or
sales of interests in real estate—it only applies
to sales of goods and services.
• As of 2007, it only applied to purchases of
$25,000 or less.
• If the seller does not include the FTC notice in a
note, its purchaser may qualify as a HDC.
– Although Associates suggests that an assignee may
be liable for a failure to include the required language.
46
Donald J. Weidner
Note 4 to Associates Home Equity
• TILA, the Truth in Lending Act, subjects creditors to
liability for violating its disclosure standards.
• In certain loan transactions, debtors have a right of
rescission.
• Debtors may rescind by midnight of the third business
day after the transaction for any reason.
• The three-day “cooling off” period is extended if the
creditor does not give the required disclosures.
47
Donald J. Weidner
Inroads into rights of holders (cont’d) (p. 447)
• The Home Ownership and Equity Protection Act of 1994
amended TILA to address “high cost” home equity mortgage
loans (ex., more than 10% above a Treasury obligation of the
same length.
– Defenses that could be raised against the originator can be
raised against the assignee of these high cost mortgages
– Special disclosures must be given
– Certain terms are prohibited (negative amortization, certain
balloons, etc.)
– Certain conditions must be met to have a valid prepayment
penalty
• Act does not apply to “residential mortgage transaction,” that
is, a purchase money loan that enables a consumer to
purchase a residence.
• This is also an area of concern for the new Consumer
Financial Protection Bureau.
48
Donald J. Weidner
West’s F.S.A. § 701.04. Cancellation
of mortgages, liens, and
judgments Effective: October 1, 2007
(1) Within 14 days after receipt of the written request of a
mortgagor, the holder of a mortgage shall deliver to the
mortgagor… an estoppel letter setting forth the unpaid balance of
the loan secured by the mortgage, including principal, interest,
and any other charges properly due under or secured by the
mortgage . . . . Whenever the amount of money due on any
mortgage, lien, or judgment shall be fully paid to the person or
party entitled to the payment thereof, the mortgagee, creditor, or
assignee… to whom such payment shall have been made, shall
execute in writing an instrument acknowledging satisfaction of
said mortgage, lien, or judgment and have the same . . . duly
entered of record in the… proper county. Within 60 days of the
date of receipt of the full payment of the mortgage, lien, or
judgment, the person required to acknowledge satisfaction of the
mortgage . . . shall send . . . the recorded satisfaction to the
person who has made the full payment.