A common cloud seen on title is an open mortgage…but what exactly does that mean and how is it fixed?
An open mortgage simply refers to a mortgage that has not been fully paid off or one that was paid off but never cancelled in the record. This presents as a cloud on title because it represents a claim by the lender on the property. The lender has a legal right to the property until the mortgage is paid off in full. This can cause issues when trying to sell or transfer property without first satisfying the mortgage.
If the open mortgage is due to a mortgage not yet fully paid off, we will reach out for a payoff letter. This shows us how much money is still owed to the lender and what must be paid off to successfully transfer ownership. Once we have the amount needed, we take this amount from the seller proceeds and record the cancelled mortgage in the record.
If an open mortgage is the result of a paid-off mortgage that was not recorded as canceled, our process involves contacting the previous title company to acquire a letter that verifies that the loan has been paid off. Once we have obtained this letter, we then record the cancellation in the record and can move forward with closing.
This title cloud is a (usually) relatively easy process and can be fixed before closing to ensure no delays.