What goes up must come down. Nothing epitomizes that sentiment more than the economy and the housing market. Currently, we are seeing the pendulum swing toward a robust housing market favoring sellers while unemployment rates continue to take record dips. No doubt the economy is booming right now. For title companies, real estate law firms, and their employees, that means that closing tasks have been piling up, and it can be challenging to keep up with some critical pieces of due diligence as a result.
Tracking the releases of mortgage satisfactions, Home Equity Line of Credits, judgments, and other instruments listed in a title commitment ends up being one of the neglected tasks. Understandably so, as the closing agent’s job is technically done once they have sent the payoff letter to the lender of the previous mortgage. Under pressure from the new lender, most agents will issue the new title insurance policy before waiting for the statutory time and verifying the recordation of the previous mortgage’s release.
What is release tracking?
Release Tracking is a search of official records to confirm that instruments identified in the Title Commitment that require subsequent releases have been properly recorded within a given statutory or contractual time. For example, mortgages, HELOCs, judgment liens, lis pendens, or financing statements require documents such as satisfactions, releases, terminations, cancellations, or subordinations after a real estate transaction.
Even though third-party vendors provide this service to settlement agents and underwriters, there are stark differences in the services. The first is the required documents to start the process. To get started with PropLogix Release Tracking, we only require one document, the title commitment. Second, we track ALL instruments listed in the title commitment. There is no hidden cost for a title commitment with more than the usual mortgage and Home Equity Line of Credits. All documents that require a payoff for a release, satisfaction, reconveyance, etc., are tracked for one fee. That includes judgments, lis pendens, financing statements, or anything else listed in the title commitment. Finally, there is no charge for post-closing resolution services.
Jim Davis has been in the title industry for over 25 years. He’s been working in escrow doing closings on residential and commercial properties for 21 of those 25 years for various title companies. He’s seen the booms and the busts of the market over that time. Jim is a new client of PropLogix, so I wanted to ask him why he uses a service like release tracking.
Three Reasons Title Professionals Outsource Release Tracking
During my conversation with Jim, three clear motivations emerged for choosing PropLogix Release Tracking Services.
1. No more crossing your fingers during audits
“It takes something off of your plate. Some title companies don’t even bother [to follow up with instrument releases.] But once their underwriters’ auditors come and ask ‘How do you know the satisfaction has been recorded?’ They have to take the time when the auditors are there, look it up. Lo and behold, it’s not there. Now, they have to promise they’ll reach out to the lender and get it cured in 30 to 35 days. Sometimes it may show up and you’re off the hook… other times, it doesn’t.”
Worrying about one less thing means you have time to devote to your current clients and their closing. This means you and your company will have time to improve the workflow efficiencies that matter most. It’s time and manpower that can be reinvested into other aspects of your company.
“Post-closing was one of my jobs back in the early ’90s,” Jim explains, “satisfaction follow up, was part of my post-closing tasks. Every company that I’ve been with since then, you pretty much have to do it yourself. Your post-closing department would post-close, get the packages out, get the payoffs out, request the policy, but they didn’t necessarily go back and look for the SAT.”
2. Maintaining good relationships with your underwriter
Humans make mistakes. Sometimes, simple tasks are overlooked, so audits are important in the title and real estate industry to ensure that all the best practices are being exercised in every transaction.
Jim talked about the anxiety associated with audits of tracking releases. “You hoped it was recorded. We have to focus on clearing title, returning emails, answering questions. We don’t have time, especially after the file closes.”
Despite the duty of a mortgage holder to release it once it has been paid, the documents aren’t always recorded. This could be due to various parties associated with the process of recording the satisfaction failing to meet their obligations, like the lender or servicer failing to provide all the required documentation to the county recorders. Additionally, the growing number of private lenders and private creditors means that many of those involved in the process of recording the satisfaction simply aren’t aware of the requirements. They may send the requests for release, but those lien release requests are rejected.
According to Ernst Information Services, over 10 million documents are rejected by over 3,600 county recorders across the US every year.
Another potential reason for a missing satisfaction is the lender may have properly prepared the required documents, but the recorder has yet to process the recording. According to Walt Wilemann, an advisor to the URMSA Drafting Committee, a few county recorders are sometimes more than 6 months behind in processing recorded instruments. Thankfully, eRecording technology is helping to alleviate this bottleneck, but many municipalities are slow to adopt these changes.
This means it falls to the title agent or real estate attorney to confirm that all required documents are properly recorded anywhere from 30-90 days after closing on the property, depending on your state’s regulations. It also means that if a mortgage lien from a previous closing is left unresolved, the settlement agent assisting in a new closing on the property will be open to non-compliance with the unreleased mortgage and face potential claims. This has led to a vague but customary expectation that the title agents will cure these issues to maintain good relationships with underwriters and lenders.
3. Avoid “Clean-Up” Duty
Nearly 1 out of 10 closings will have a post-closing issue stemming from lien that was most likely satisfied but never recorded. Even though it may have been the lender or the county that failed to record the release, satisfaction, or other instruments correctly, it ends up being the responsibility of the agent with the new closing to clean up the paper trail if the previous agent didn’t track the release or satisfaction.
“That 10% takes up 30% of your time,” Jim explains. “You have to go back, and it’s always at the end of the month. It always happens when you’ve got 3 or 4 closings coming up. Or another title company realizes you were the last one to do the closing, and they want you to drop what you’re doing because there was a payoff that didn’t get followed up. They will nag you every half hour. I’ve been on both ends, the nagger and the nagee.”
Outsourcing Release Tracking is a great solution
“You ask for only two things: The payoff letter and the commitment. That’s all I’ve ever sent [PropLogix]. That’s what I love about you. Two things, and boom. And I even forget about it until I get the email. That’s the magic of it.”
“There was a period of time where things were going so fast and furious that no one had time and bothered. The 2000s were pretty wild. As a result of what happened later in the 2000s, we’re a little more cautious now.”
Now, the housing market is going strong, much like it was in the early 2000s. More and more renters still want to pursue that American Dream of owning their own home. If you’re worried about slipping into old, bad habits of putting those files in a drawer and not going back to them until the auditor comes, unloading the follow-up work to a qualified third party will help.
Working with a third party specializing in resolving post-closing issues means overworked and stressed title professionals have more opportunities to expand their closing services. It also means less stress during your audits, a guarantee that your title company meets compliance, and preserving your reputation as a reliable title professional.
Jim also spoke about his experience with other release tracking companies. “I’ve worked with one other company,” he tells me, “To use one of Donald Trump’s favorite words, they were a disaster. I literally had one file that I pulled five or six times in a year. I gave them everything, the estoppels, the commitment, the canceled checks, correspondence… everything… and a year later, they were still asking for stuff… my assistant and I finally ended up getting what we needed ourselves.”
“It was very cumbersome. I felt like I was doing the work myself, which between me and my assistant, we were. Three or four people tried handling it, and I finally got tired and told them I would take care of it.”
With Release Tracking, there is only one fee for all instruments associated with your title commitment. There are no hidden fees for additional instruments beyond the typical mortgage and HELOCs associated with a residential transaction. If the statutory time for recordation elapses without a release or satisfaction filed, we will reach out to the appropriate parties to resolve any post-closing issues at no additional cost and with limited documentation required from you. Typically, with just the payoff letter and the title commitment, this final piece of due diligence will be guaranteed.
“You ask for only two things: The payoff letter and the commitment. That’s all I’ve ever sent [PropLogix]. That’s what I love about you: two things and boom! And I even forget about it until I get the email. That’s the magic of it.”