Question: I am a real estate closing attorney. Last week we closed a sale, and paid off the Seller’s mortgage lender exactly as stated in the payoff statement. A week later the Seller’s lender called, threatening to send back all payoff funds – because they discovered approximately $2,000 of additional fees. Can the lender do that?
Answer: Let me get this straight: The Seller’s lender sent you a written statement showing all funds required to satisfy the Seller’s debt….you closed and sent them all funds requested…then, a week later, the lender demands more money. Sounds crazy. But, they can actually do this.
What they cannot do: threaten to return all the payoff funds.
Massachusetts law allows banks to request additional funds after payoff is made. However, they must seek payment on a civil basis, like an unsecured creditor. The same law requires lenders to discharge their mortgage, upon payment of the amount quoted in a written payoff statement.
The lender’s threat is unlawful, and constitutes a likely title insurance claim. Here, the lender is threatening the good and marketable nature of the title. This potential harm to the new owner’s ownership, and new lender’s security rights, is often covered by the new title insurance policy. Seek assistance from the title insurance company, and write a letter demanding that the lender retain the payoff funds and discharge their mortgage.
Of course, the whole dispute may be extinguished if the Seller simply pays the additional sum demanded. (Good luck, there).
Attorney James Haroutunian practices real-estate law, estate planning and probate at 630 Boston Road, Billerica. He gladly invites questions at james@hlawoffice.com or by phone at 978-671-0711. His website blog is found at www.hlawoffice.com. This column is published for informational purposes only and not to be relied on as legal advice, in any manner
Answer: Let me get this straight: The Seller’s lender sent you a written statement showing all funds required to satisfy the Seller’s debt….you closed and sent them all funds requested…then, a week later, the lender demands more money. Sounds crazy. But, they can actually do this.
What they cannot do: threaten to return all the payoff funds.
Massachusetts law allows banks to request additional funds after payoff is made. However, they must seek payment on a civil basis, like an unsecured creditor. The same law requires lenders to discharge their mortgage, upon payment of the amount quoted in a written payoff statement.
The lender’s threat is unlawful, and constitutes a likely title insurance claim. Here, the lender is threatening the good and marketable nature of the title. This potential harm to the new owner’s ownership, and new lender’s security rights, is often covered by the new title insurance policy. Seek assistance from the title insurance company, and write a letter demanding that the lender retain the payoff funds and discharge their mortgage.
Of course, the whole dispute may be extinguished if the Seller simply pays the additional sum demanded. (Good luck, there).
Attorney James Haroutunian practices real-estate law, estate planning and probate at 630 Boston Road, Billerica. He gladly invites questions at james@hlawoffice.com or by phone at 978-671-0711. His website blog is found at www.hlawoffice.com. This column is published for informational purposes only and not to be relied on as legal advice, in any manner
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