October 17th, 2019 8:04 AM by Jackie A. Graves, President
If you take advantage of historically
low mortgage rates by refinancing your mortgage, how do you
know your title company will really pay off your old mortgage at the closing
Customers at the PLM Title Company outside Chicago trusted their
title company to pay off their current mortgage as they closed on a new
mortgage with a lower interest rate.
But instead of paying off the existing mortgage, two title
officials used the money to vacation, pay for a wedding and remodel the
kitchen, the Chicago Tribune reports.
The title company owners ended up going to prison for 10 years,
but some of the homeowners they scammed between 2005 and 2008 say they’re still
paying the old mortgage and the new mortgage.
What happened in Chicago is rare, says David Townsend, president
and CEO of Missouri-based Agents National Title Insurance Company, which sells
title insurance to local title companies.
Since the national title insurance company is the one paying out
the claims when local title companies run off with other people’s money, it
constantly audits the local company’s bank accounts to make sure what’s in the
files and records matches what’s in the bank, he says.
And yet, title company crooks sometimes get away with embezzling
funds by making monthly payments on the old mortgages instead of paying them
If you’re the one whose old loan doesn’t get paid off, it’s
going to be a huge headache.
There are two ways to make sure your old note gets paid off:
Going with the phone call?
Wait 10 to 20 days after the closing for the paperwork to clear.
Use a speaker phone because you could be on hold awhile. Have your loan number
at hand (it’s on your monthly statement). Write down the name of the person you
spoke to and note the time and day you called.
Even if you verify by phone, you should still get a statement of
mortgage satisfaction in the mail. That’s a letter from the old lender saying
you paid off the mortgage.
File that somewhere you’ll be able to find it later, just in
case you need to prove you paid off the old mortgage when you go to sell or refinance your house in the
For $25 to $30, you can buy a closing protection policy that
covers you. Lenders already have this coverage, so you’re really buying
The lender’s coverage says that if the payoff funds are misused,
the title company will cover the loss.
“The standard closing protection letter also contains language
that covers the borrower. There might be a little deviation by some states, but
you get a two-for, you both get coverage,” Townsend explains.
If you had a
loan with Bank of America and you refinanced with Wells Fargo but Bank of
America isn’t paid off and goes to foreclose, Wells Fargo would collect on the
title insurance policy.
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