A friend from university days was selling his home and asked me to help. When the deal came in, I looked at the title. It jogged my memory that I was in total awe when he bought it 49 years ago! There he was, married, going to school, buying a home and taking out a mortgage. He was way ahead of where I was in my personal life and development.

Something else on the title gave me pause - the CIBC mortgage from 49 years ago was still on it.

I said to my friend, "You have a CIBC mortgage on your title from when you bought your home. I'm pretty sure you must have paid that mortgage off long ago, but did you know it's still on title?".

Of course, it was paid off, and of course, my friend thought it had disappeared from his title, and of course, he was very upset.

What happened here and what frequently happens is that when someone pays off their mortgage, the lender sends them a letter saying, "Thanks for paying off your mortgage. Here is your discharge of mortgage. It is up to you to register the discharge of mortgage and get the mortgage off your title." 

People are so happy they paid off their mortgage that they don't get past the first sentence. The discharge of the mortgage gets thrown out, and here we are 49 years later.

This is a problem because as the seller's lawyer, I have to promise the buyer's lawyer that I will remove any financial encumbrances on the title. Usually, if a mortgage has NOT been paid off, I write to the lender's payout department, request the payout statement which arrives promptly and then I pay out the mortgage from sale proceeds. Easy-peasy.

When a mortgage has already been paid off, especially if it's an older mortgage, (and 10 years seems to be a number that gives the lenders trouble), I write to the payout department. They often say, "We have no record of this mortgage." And then the hunt starts. Does the seller have any records of the payout? When exactly did it occur? Did they go into their branch or pay out some other way, perhaps with their lawyer?

The bottom line is that it is challenging to get the solid proof we need to show that an old mortgage has been paid out. It takes a lot of time, and for this example, we had a very short five-day closing. I was working the phones with CIBC.  My friend was in his branch raising hell and asking questions.  It took right until the very last day before CIBC told us that the mortgage was paid off and they would give us a discharge. 

This situation can be very stressful for sellers who have post-sale plans, need their money and see a potential delayed closing. 

And this comes up more often than you'd think.

For seller's Realtors, when listing the property, check that title carefully. Ask the seller if their mortgage has been paid off? If they say yes, show them the title and tell them they have to speak to their lender who will have to prepare a new mortgage discharge. That can take substantial some time, especially if it's an older mortgage like our 49-year-old example.

Buyers Realtors - you won't normally need to worry about this. The seller's mortgage is the seller's problem. But, if it's an older mortgage, it wouldn't hurt to suggest to the seller's Realtor they check whether that older mortgage has already been paid off and, if so, why it is still on the title. Considering that your buyer client might have a delayed closing that isn't their fault, it's worth a mention to the seller's Realtor.

For both sellers and buyers Realtors, remember that when things go sideways, somehow there is always a tinge of "it's your fault" even when it isn't.

Protect yourself.

Cheers,

Barry

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