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Mortgage
Discharge Bill Enacted!
The
Legislature has enacted P.L. 1999, c.40, off. Ca. June 10, 1999, which
provides for the discharge of certain mortgages by affidavit. The law,
which will be codified at N.J.S.A. 46:1811.5 91 seq. is intended to assist
homeowners, attorneys and title companies by providing a relatively simple
and expeditious means of removing mortgages from the record, where the
lender has failed to cause the same to be cancelled or discharged in a
timely fashion. Consistent with the foregoing objectives, the Act also
permits the servicer of a mortgage to execute a discharge and addresses
the problem unrecorded assignments. Originally introduced at the request
of the Now Jersey Land Title Association, ["NJLTA"], the final version
of the Act represents a collaborative effort by the title insurance and
lending communities. In addition, the bill also enjoyed the support of
the Now Jersey State Bar Association. [See "Title Talk' No. 41 (Summer,
1998) .1 Some have suggested that the procedures outlined below may be
abused by unscrupulous or dishonest persons. However, a party seeking
to defraud others may currently do so simply by fabricating and recording
a "discharge" with a forged execution and acknowledgement. In contrast,
the statutory requirement of an affidavit (discussed below) should serve
as a deterrent to such conduct, because an attorney or licensed title
insurance producer is unlikely to put his or her license at risk by knowingly
filing a false affidavit in violation of NJSA 41:3-1. Statutory Procedure
The Act permits an attorney-at-law or licensed title insurance producer
who has caused a "residential mortgage" (as explained below) to be paid
to secure its discharge by submitting a detailed affidavit which sets
forth the steps taken to obtain a discharge from the lender. Specifically,
the person signing the affidavit, the form of which is set forth in ¤3a
of the Act [N.J.A.S.A. 46:18-11.7a], must aver as follows: (a) payment
was made to lender in accordance with a current, written pay-off letter,
as defined in ¤1 of the Act [N.J.S.A. 46:1811.51]; (b) the affiant knows
that the lender received the payment; (c) a notice was sent to the lender
by certified mail at least 30 days after payment was received, advising
it of the affiant's intention to cause the mortgage to be discharged by
affidavit; (d) a second not" was sent to lender at least 30 days after
the first notice was received; and (a) at least 15 days have elapsed since
the lender received the second notice. The affidavit is to be attached
to a discharge prepared by the aff iant, and then recorded. Section 3b
of the Act [N.J.S.A. 46:1811.7b] appoints the affiant as the lender's
agent or attorney-in-fact for the purpose of executing the discharge.
Upon receipt of the discharge and affidavit, the county clerk or register
is directed to record the same in an appropriate book and to cause the
marginal notation "Discharge Recorded In Book Page_" to be made on the
recorded mortgage. Note that the Act is intended to supplement, rather
than supersede, the existing statutory scheme regarding mortgage cancellations.
Existing sections N.J.S.A. 46:18-11.2 at seg have not been repealed by
the Act. (in fact, the aff idavh specifically Refers to that statute.)
Thus, a mortgagee is still required to cause a mortgage to be cancelled
in a timely fashion after receiving payment, and may be responsible for
fines and attorneys' fees if it fails to do so. Furthermore, an action
may still be commenced under N.J.S.A. 2A:51-1 et sea to secure a cancellation
by court order. Discharge by Servicer Section 2a of the Act [N.J.S.A.
46:18-11.6a] permits a servicer who receives a mortgage pay-off to execute
a discharge, release, subordination or postponement on behalf of the actual
owner of the mortgage, provided that the document contains the following
recital: is authorized to execute this Instrument pursuant to the terms
of a written agreement dated between , as owner or holder of the mortgage,
and . as servicer thereof. Unrecorded Assignments Section 2b of the Act
[N.J.S.A. 46:18-11.6b] deals with the problem of unrecorded assignments,
by allowing an assignee to execute a discharge, release, subordination
or postponement where there is a break in the chain of recorded assignments.
The discharge, etc., must contain a recital setting forth the particulars
of all assignments, whether or not recorded. However, this provision does
not apply if the party executing the discharge claims to hold the mortgage
by an unrecorded assignment; It may only be used if a prior assignment
is unrecorded. Applicability; Effective Date It is important to bear in
mind that the legislation only applies to "residential mortgages", as
defined by ¤1 of the Act [N.J.S.A. 46:18-11.5.]; i.e., those in which
the loan is secured by a lion upon a one-to-four family dwelling (including
a condominium unit) which is or was occupied by the mortgagor (or a member
of his or her immediate family) as a residence. While this definition
is arguably broad enough to include certain mortgages on residential property
given as collateral for business loans, it clearly excludes most commercial
loans. Furthermore, a mortgage placed upon a cooperative unit is apparently
excluded. Furthermore, the discharge-by-affidavft provisions of the statute
may only be utilized where payment is made pursuant to a current payoff
letter obtained from the lender, which is defined as: "a ... document
prepared by the holder or servicer of the mortgage .... which is dated
not more than 60 days prior to the date the mortgage is being paid, and
which contains a statement of ail the sums due to satisfy the mortgage
debt..." [etc.]. [N.J.S.A. 46:1811.5.] As previously discussed, the Act
does not apply to commercial mortgages. Nor may it be used where the person
seeking the discharge cannot otherwise meet the criteria set forth in
the statutory affidavit. Thus, it will still be necessary an occasion
to commence actions under N.J.S.A. 2A:51-1 et seq. secure discharges by
court order. As noted above, the Act becomes effective on or about June
10, 1999. However, it applies to all mortgages which meet the definition
set forth in the preceding paragraph 'Whenever made". Thus, a mortgage
recorded prior to the effective date of the Act may still be discharged
using the procedures set forth in ¤¤2 and 3 thereof [N.J.S.A. 46:18-11.6
& -11.71. In the latter case, it is unclear what steps outlined in the
statutory affidavit may be taken prior to the effective date of the Act:
However, a reasonable interpretation suggests that one may perform all
tasks necessary to secure the discharge prior to June 10, provided that
the discharge and aff idavit are not prepared and submitted for recording
until after that date. Reliance on the Act A mortgage which has been discharged
under the provisions of ¤2 or ¤3 of the Act [N.J.S.A. 46:18-11.6 or 11.71
should be treated by attorneys and title insurers in the same fashion
as any other mortgage which has been discharged. In other words, if it
appears from the record that the statutory procedures have been complied
with, and one has no other reason to believe that the discharge should
not be relied upon, the mortgage should be omitted as an exception to
title. As previously suggested, the Act does riot repeal or supersede
the existing statutory scheme. Every effort should therefore be made to
compel lenders to comply with N.J.S.A. 46:18-11.2 21 seq. The discharge-by-affidavit
procedure should be reserved for those cases where it appears that the
lender will simply not obey its statutory duty. Summary of Procedure The
following summary of the-discharge-by-affidavit procedure may prove helpful:
1. Obtain current pay-off letter and pay all sums due to the lender under
the pay-off letter. 2. Obtain advice from bank that the lender received
and deposited the check or that wire transfer was credited to its account.
3. After at least 30 days have passed from the date the lender received
the pay-off, send the "first notice" to lender by certified mail, return
receipt requested. 4. When [another] 30 days have passed from the date
the lender received the 'first notice", send the 'second notice' to the
lender by certified mail. 5. Once [another] 15 days have passed from the
date the lender received the "second notice", prepare statutory affidavit
and discharge and send the same to the County Clerk or Register for recording.
Sample Forms Samples of the affidavit and 'discharge are provided below
for the convenience of our readers. Note that the text of the aff Idavit
(but not the discharge) is set forth in the statute. Thus, affidavits
submitted for recording must be substantially similar in form to the sample
set forth below. Note that a licensed title Insurance producer may also
execute the affidavit of payment and discharge, If he or she was responsible
for paying off the mortgage.
AFFIDAVIT
OF PAYMENT TO DISCHARGE MORTGAGE Pursuant to P.L. 1999, c.40, ¤3 (N.J.S.A.
46:18-11.7) State of New Jersey, County of as.: The undersigned, being
duly sworn upon the undersigned's oath, avers as follows: 1. 1 am: (a)
an attorney-at-law duly admitted to practice before the Courts of this
State; or (b) duly licensed as an insurance producer in the line of title
insurance. 2. On , 1 g- I caused to be sent to located at_, the sum of
$_, in full payment of a certain mortgage dated_,19_ in face amount of
$ -between (mortgagor) and (mortgagee), which mortgage was recorded On-in
the Office of the Clerk / Register of the County of in Mortgage Book _
page (and which mortgage was subsequently assignedto by assignment of
mortgage dated 19 , recorded-, 19_ in Assignment of mortgage Book__page
3. Said payment was made by check or electronic wire trans fer, in accordance
with a pay-off letter received from I dated _; and I have received advice
that (a) the check-has been negotiated and canceled on ; or (b) the wire
trans fer was received and credited to the recipient's account on_ 4.
On .. at least thirty (30) days having elapsed since the date the payment
was received, I caused a notice to be sent to , located at (the address
designated for receipt of payment in the pay-off letter, or, if no ad
dress is designated, the address given on the letter head of the payoff
letter), by registered or certified mail, return receipt requested, pursuant
to section 2 of P.L. 1975, c. 137 (N.J.S.A. 46:18-11.3 21 IQ" S. On at
least 30 days having elapsed, since the date the notice as set forth in
paragraph 4 of this aff clavit was received, I caused a notice to be sent
to . located at (the address designated for receipt of pay ment in the
pay-off letter, or If no address is designated, the address given on the
letter head of the pay-off letter), by registered or certified mail, return
receipt requested, of my intention to cause the mortgage to be discharged
by affidavit, pursuant to Section 3 of P.L. 1999, c. 40 (N.J.S.A. 46:18-11.7).
it the mortgage remains uncancelled 15 days after the notice is received.
6. At least fifteen (15) days have now elapsed since the notice described
in paragraph 5 of this affidavit was received. To the best of my knowledge
and belief, no letter or other written communica tion has been received
from to the effect that it denies or disputes that the mortgage has been
paid in full and ought to be discharged of record at this time. 7. Wherefore,
the undersigned directs the county clerk or register of deeds of the County
of to cause to be re corded the discharge or satisfaction-piece accompanying
this affi davit, and further directs the county clerk or register of deeds
to cause a marginal notation of discharge to be made upon the record of
the mortgage described in paragraph 2 of this affidavit. -Sworn and subscribed
before me This day of_,_. DISCHARGE OF MORTGAGE BY AFFIDAVIT OF PAYMENT
Pursuant to P.L. 1999, c.40, ¤3 (NA.S.A. 46:18-11.7) To the Clerk/Register
of the County of Middlesex: A certain Mortgaged dated January 2, 1998,
made by John Smith and Mary Smith, husband and wife [mortgagor] to ABC
Mortgage Company [mortgagee] in the face amount of $100,000.00, plus interest,
and recorded January 20, 1998 in the Office of the Clerk/Register of the
County of Middlesex in Mortgage Book 1234, pg. 567 land thereafter assigned
to XYZ Mortgage Company by Assignment of Mortgage dated February 2, 1998,
recorded February 21, 1998 in Assignment Book 432, pg. 678] has been paid
in full or otherwise satisfied, and the same is to be discharged of record,
in accordance with the annexed aff idavit, which is submitted pursuant
to P.L. 1999, c. 40, ¤3 (N.J.S.A. 46:18-11.7). In witness whereof, the
undersigned has executed this Dis charge on -1999 XYZ MORTGAGE COMPANY
By: Richard Roo, An Attorney-at-Law of Now Jersey, its Agent or Attorneyin-Fact,
appointed pursuant to N.J.S.A. 46:18-11.7 State of Now Jersey, County
of Middlesex, ss.: Be It remembered that on _1999, there personally appeared
before me, the' undersigned authority, Richard Roo, an Attownsy-at-Law
of New Jersey, who acknowledged under oath to my satisfaction that he
is the person who executed the within instrument, and that he did so as
agent or attorney-infact for XYZ Mortgage Company, pursuant to P.L. 1999,
c. 40, ¤3 (N.J.S.A. 46:18-11.7).
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Subdivision
Endorsement Approved; Zoning Endorsements Revised
The
Now Jersey Land Title Insurance Rating Bureau ["NJLTIRB"] has recently
obtained the approval of the Commissioner of Banking & Insurance for the
use of the Subdivision Endorsement, effective April 12, 1999. The endorsement
modifies the zoning / land use exclusion found in all ALTA policies by
providing the insured with coverage against loss by reason of ... the
entry of a final and unappealable judgment or order by a court of competent
jur isdiction setting aside or Invalidating the estate or Interest Insured
for failure to obtain final subdivision approval. Thus, approval of the
endorsement by the Commissioner was necessary under the provisions of
N.J.S.A. 17:46B- 54. Furthermore, the Commissioner has approved a five
(5%) percent premium surcharge (with a minimum charge of $100.00) for
its issuance. For example, if the premium in a given case is $5,000.00,
the charge for the endorsement would be $250.00, or 50% of $5,000.00.
The endorsement may be issued with loan or owners' policies, whether the
land insured is commercial, industrial or residential in nature.. Although
this is not an ALTA form, it is noteworthy that some type of subdivision
coverage is available in many states, whether through this or another
endorsement. Furthermore, the "Castle" Enhanced Coverage Owners' and Loan
policies provide some protection against subdivision-related loss. (See
"Title Talk" No. 39 (Winter 1997-98).] When a request is received for
issuance of the endorsement, Chicago and Ticor Title agents and branch
office personnel may insert the following requirement in Schedule B, Section
I of the title commitment: The Company has been requested to Issue a subdivision
encdorsement In connection with this transaction. A subdivision certificate
must therefore be obtained from the [Township] of [Edison], pursuant to
N.J.S.A. 40:55D-56, or other satisfactory evidence that the land constitutes
a properlysubdivided parcel, and submitted to the Company for review.
At the same time, the Commissioner approved changes to the ALTA Nos. 3
("Zoning") and 3.1 ("Zoning- Completed Structure") Endorsements, reflecting
revisions adopted by ALTA in October of 1998. The coverage afforded by
the revised versions remains largely unchanged from the original forms,
with one significant exception: 12 (b)(v), which refers to parking spaces,
has been added to ALTA No. 3. 1. The wording of the now forms is negative,
rather than positive; Le., the endorsement insures against loss in the
event the land is not classified, etc., as set forth therein. The pricing
of each endorsement remains the same: a 15% premium surcharge for No.
3 and a 20% premium surcharge for No. 3. 1. Unlike other surcharges, however,
these are calculated as percentages of the "base Yale premium. in other
words, even if the premium in a given transaction is based on a reissue,
refinance or modification rate, the surcharge is 15% or 20% of the premium
if calculated at the "basic" rate, ALTA Nos. 3 and 3.1 have been in use
in New Jersey for several years. The underwriting requirements for issuance
of same remain unchanged. However, when an opinion letter or other documentation
which will be used to support the issuance of ALTA No. 3.1 should address
the issue of parking in addition to the other matters discussed in the
endorsement.
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Support
Pediatric Cancer Research
Cindy
Peterson, Asst. V.P/Sales of the Hackensack office, raised $8,768.00 in
1998 for Pediatric Cancer Research at Memorial Sloan-Kettering Cancer
Center in New York City. Cindy received donations from follow employees
at Chicago Title, agents, customers and friends by running in the "Rock'n
Roll Marathon" in San Diego and the Dublin Marathon in Ireland. This year,
she has made a commitment to raise $10,000.00! On January 1, 2000, Cindy
will run in the New Millenium Marathon in Now Zealand for Pediatric Cancer
Research. Not only will this be the 14th marathon race she has entered
in the past 5 years, she will also be celebrating her 60th birthday! Please
help funds for this noble cause by helping to sponsor Cindy Peterson's
run in the New Millenium Marathon.
For more information, contact her at
2 University Plaza, Hackensack, N.J. 07601; 201/489-50000; Fax 201/489-
531316.
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Revival
of Liens Revisited: Mooney v. Provident
Savings
Bank Affirmed The Appellate Division has affirmed Judge McGann's decision
in Mooney v. Provident Savings Bank, 308 N.J. Super. 195 (Ch. Div. 195
(Ch. Div. 1997), In a brief per curiam opinion, "substantially for the
reasons expressed in Judge McGann's well-reasoned opinion.. É" ". 318
N.J. Super. 257, 268 (App. Div. 1992). The case arose when mortgagors
filed suit to cancel of record four mortgages which clouded the title
to their residence. The mortgagees argued that the equitable "revival
of liens" doctrine, enunciated by Judge Boyle in Old Republic Ins. Co.
v. Currie, 284 N.J. Super. 571 (Ch. Div. 1995), barred the court from
ordering cancellation of the mortgages. The principle of revival may be
invoked by a junior lienor, whose lion was divested through a foreclosure
sale, it the mortgagor subsequently re-acquires title to the realty. It
is intended to permit unjust enrichment of the mortgagor. But for the
application of the doctrine, the mortgagor, upon re-acquisition of title,
would hold free of junior lions divested by the foreclosure, and would
thus be placed in a better position than he was prior thereto. [See "Title
Talk" No. 32 (Winter, 1996)]. Judge McGann distinguished Old Republic
on the grounds that the mortgagors had reacquired title following their
discharge in bankruptcy. Thus, he reasoned, the realty should be treated
as after-acquired property, to which a lien based upon a debt discharged
in bankruptcy should not attach. Furthermore, although he acknowledged
Its existence, Judge McGann held, based upon certain specific facts of
the case, that application of the revival doctrine would be inequitable.
See "Title Talk" No. 40 (Spring, 1998). Despite the decision in Mooney,
the revival of liens doctrine remains enshrined as part of the law of
New Jersey; however, its application is far from automatic. It appears
that each case will turn on its own facts, with the court balancing the
equities in order to determine If Its use in a given situation is appropriate.
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ALTA
Endorsement No. 9 Revised; Nos. 9.1 and 9.2
Approved
The New Jersey Land Title Insurance Rating Bureau ["NJLTIRB"] has received
the approval of the Commissioner of Banking & Insurance for the issuance
of ALTA Endorsement No. 9 (Restrictions, Encroachments and Minerals) for
loan policies, as revised by ALTA in October of 1998. At the same time,
the Commissioner approved the use of new ALTA, Endorsements Nos. 9.1 (Owner's
- Unimproved Land) and 9.2 (Owner's - Improved Land). Nos. 9.1 and 9.2
thus replace the [owner's policy] R.E.M. Endorsement, which has been withdrawn.
The coverage provided by these forms is substantially similar to that
which was afforded under the older version of the ALTA No. 9 and the R.E.M.
The pricing remains the same: ALTA No. 9 is $25.00; while ALTA Nos. 9.1
and 9.2 each require a ten (10%) per cent premium surcharge. Consistent
with the practice adopted in connection with the [former] R.E.M. Endorsement,
ALTA Nos. 9.1 and 9.2 may only be issued in connection with owners' policies
insuring realty other than a one-to four family residence. Note also that
the relevant section of the NJLTIRB Rate Manual also states "[ALTA Nos.
9.1 and 9.2] may not be given unless survey coverage is also given". Thus,
a survey must be available for "reading-in" when these forms are to be
issued.
"Title
Talk" is published periodically by Chicago Title and Ticor Title Insurance
Companies, and is distributed free of charge to their customers and friends.
Steven G. Day, Esq., Area Manager, Publisher Lawrence J. Fineberg, Esq.,
State Counsel, Editor Chicago Title Insurance Company Ticor Title Insurance
Company 111 Wood Avenue South Iselin (Woodbridge Twp.), New Jersey 08830
(732) 205 - 0055 Fax (732) 205 - 0330
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