Your mortgage is paid off but the satisfaction was never recorded: what can you do in New York?

This page explains New York law. An old mortgage that was paid but never discharged can surface in a title search, when the owner tries to sell or refinance and the buyer's or lender's title report shows a lien that should be gone. KOR Law LLP's real estate litigation practice handles title and recording disputes of this kind, including recording errors that affect enforcement rights.

Was the mortgage actually satisfied, or was it assigned?

Check this first. Under Real Property Law 275(2), a mortgage is not treated as paid while it still secures a real debt, which happens when it is sold on the secondary market, when a construction loan is replaced by permanent financing, when a refinance is done by having the old lender assign the mortgage to the new lender and consolidating it with the new mortgage, when the loan is modified to avoid foreclosure, and in some sales where the buyer's lender takes an assignment. In those cases the mortgage is not considered paid, so no discharge is due, and where the mortgage was assigned the record should show the assignment. If a modification is how the old loan ended up looking "open," our page on getting a loan modification after a New York foreclosure starts explains how those agreements work.

The assignment itself carries clues. To record most assignments, the document must include a sworn statement that the assignee is not acting as the borrower's nominee and that the mortgage still secures a real obligation; an assignment on the secondary market must instead state that it "is not subject to the requirements of section two hundred seventy-five" (Real Property Law 275(3)). For property in Manhattan, Brooklyn, Queens and the Bronx, recorded mortgages, assignments and satisfactions can be searched from 1966 to the present in ACRIS, the New York City Department of Finance's property records system.

What must the lender do after payoff, and what does it owe if it is late?

The dollar liability does not apply to a lender that makes fewer than five mortgage loans in a calendar year, and the Real Property Law 275 version does not apply to mortgages made to or by the state or its agencies or political subdivisions. A lender also may not refuse a payment made under the terms of its own payoff letter, even if the payment turns out to be short, but it is not required to issue a satisfaction until the full amount is paid (RPAPL 1921(1)(b)).

Who signs matters too. If the record shows no assignment, the discharge is signed by the original lender; if the mortgage was assigned, it must be signed by the last assignee of record (Real Property Law 321(1)(a), (b)). The certificate must list each assignment in the signer's chain of title, or state that there was none (Real Property Law 321(3)). An agent may sign under a power of attorney only if that power is recorded where the mortgage is recorded (Real Property Law 321(1)(f)). Tracing that chain is the same exercise as in a foreclosure standing defense: who holds the mortgage today.

How does the attorney affidavit route work?

For an owner-occupied one-to-six family home or residential condominium unit, if the lender has not delivered the satisfaction, note and mortgage within 90 days after receiving payment, any attorney may file an affidavit of satisfaction with the county recording officer on behalf of the owner (RPAPL 1921(5)). The affidavit has to show, with copies attached:

• that a proper request for the satisfaction was made;
• the payoff statement, and proof that the lender received payment under it, such as the endorsed check;
• that the attorney gave the lender written notice with a copy of the proposed affidavit, by certified or registered mail, at least 30 days after the lender received payment; and
• that the lender did not respond, or that all of its payment requests were met, at least 15 days before the affidavit is signed.

Within five days after the filing, the county clerk or register mails the lender a notice that the mortgage will be discharged unless it objects. If no verified objection arrives within 35 days of the filing, the affidavit is recorded and the mortgage is marked canceled and discharged, with the same effect as a recorded satisfaction. A bank that issued the payoff check must provide a copy of both sides within 60 days of a written request, for use in the affidavit (RPAPL 1921(5)). Because false information in the affidavit creates liability for the attorney and anyone who supplied it, the payment proof has to be solid.

When does it take a court order?

If the lender fails or refuses to comply, anyone with an interest in the mortgage, the debt or the property may petition the Supreme Court or County Court in the county where the property is located for an order to show cause why the mortgage should not be canceled and discharged of record (RPAPL 1921(2)). The same route is available when payment cannot be tendered in New York with due diligence (RPAPL 1921(3)). The petition must be verified, and the lender of record gets at least eight days' notice unless the court shortens it (RPAPL 1921(6)). For a Brooklyn property, the Supreme Court in Kings County is one such court; see what to expect at Kings County Supreme Court.

On the return date, the court looks into the facts. If the debt was paid or tendered, it can direct that any sums tendered be deposited with the officer who holds court funds, cancel the debt, and direct the county clerk or register to mark the mortgage canceled and discharged. The certified order and the deposit receipt are then recorded and indexed like a discharge, and the lender can collect the deposited money only on a further court order (RPAPL 1921(7)). Where the lender had no valid reason for refusing, the court may award costs and reasonable attorney fees to the person who applied (RPAPL 1921(7)).

What if the mortgage was never paid, but it is very old?

That is a different problem. If the time to foreclose under the statute of limitations has run out, an owner may sue to have the mortgage canceled and discharged of record under RPAPL 1501(4), unless the lender or its successor is in possession of the property. How the six-year clock works, and how the Foreclosure Abuse Prevention Act changed it, is explained in how long a lender has to foreclose in New York. The lawsuit itself is covered in what a quiet title action is in New York.

What changes the answer for your mortgage?

• Whether the full amount was paid. A payment under a payoff letter that falls short does not trigger a satisfaction (RPAPL 1921(1)(b); Real Property Law 275(2)(b)).
• Whether it was a credit line. For a credit line mortgage, the satisfaction duty starts on the borrower's written request (RPAPL 1921(1)(a)).
• The type of property. The affidavit route and the 90-day liability in RPAPL 1921(4) and (5) apply only to an owner-occupied one-to-six family home or residential condominium unit.
• The lender. The $500 to $1,500 liability does not apply to a lender making fewer than five mortgage loans a year (RPAPL 1921(1)(a)), and Real Property Law 275 does not apply to mortgages made to or by the state or its agencies.
• The assignment history. A mortgage assigned on the secondary market or in a refinance is not treated as paid (Real Property Law 275(2)(a)), and a discharge must come from the last assignee of record (Real Property Law 321(1)(b)).
• Where the lender can be reached. If payment cannot be tendered in New York with due diligence, the court petition in RPAPL 1921(3) is the route.

For example: a satisfaction that never arrives

Common mistakes with an unrecorded satisfaction

• Paying slightly short. The lender must accept a payment made under its payoff letter, but it does not have to issue a satisfaction until the full amount is paid (RPAPL 1921(1)(b)). Ask for an updated payoff figure if the closing slips.
• Treating an assignment as an error. An assignment in a refinance or a secondary-market sale means the mortgage is not considered paid (Real Property Law 275(2)).
• Accepting a discharge from the wrong party. If the record shows an assignment, the discharge must be signed by the last assignee of record (Real Property Law 321(1)(b)).
• Losing the payment proof. The affidavit route needs the payoff statement and evidence the lender received the money; a bank must supply a copy of the check within 60 days of a written request (RPAPL 1921(5)(h)).
• Moving too early. The attorney's notice cannot go out until at least 30 days after the lender received payment, and the affidavit route opens only after 90 days (RPAPL 1921(5)).

What to do this week

1. Find the payoff letter and proof of payment: the cancelled check (both sides), wire confirmation or closing statement.
2. Search ACRIS, or the county records outside New York City, for the mortgage, every assignment and any satisfaction.
3. Identify the last assignee of record and its current address for notices.
4. Send the lender a written request for the satisfaction, and for a credit line, a written request to close it.
5. Write down the payoff date and mark the 30, 60 and 90 day dates on a calendar. For a Brooklyn property, our Brooklyn (Kings County) page lists the court and county clerk offices that handle these filings.
6. Check for other liens that could also hold up a closing; for money judgments, see whether you can sell or refinance with a judgment lien on the property.
7. Bring the papers on our foreclosure defense consultation checklist that apply, including loan documents and payment records, to a meeting with a lawyer.

Frequently asked questions

Does this apply to a home equity line of credit?

Yes, with one extra step. For a credit line mortgage, the lender's duty to sign and arrange recording of a satisfaction applies on the borrower's written request (RPAPL 1921(1)(a)), so send that request once the line is paid.

What if the lender went out of business or merged?

A discharge can be signed by someone holding the mortgage in a fiduciary capacity under a court order, including a receiver or trustee in bankruptcy (Real Property Law 321(1)(f)). If no one will act, the court petition under RPAPL 1921(2) covers a lender's failure or refusal to comply, and RPAPL 1921(3) covers payment that cannot be tendered in New York with due diligence. A quiet title lawsuit under RPAPL 1501(4) turns on a different question: whether the time to foreclose has run out.

Does the attorney affidavit route work for an investment property?

No. It is limited to an owner-occupied one-to-six family home or residential condominium unit (RPAPL 1921(5)(a)). For other property, the court petition under RPAPL 1921(2) is the route.

What happens if the lender objects to the affidavit?

If a verified objection reaches the clerk or register within 35 days of filing, the affidavit and the objection go back to the attorney and the mortgage is not marked discharged. The clerk also sends copies to the Appellate Division's committee on professional standards (RPAPL 1921(5)(e)). The court petition remains available.

Can I file the affidavit myself, or use it after I bought the house?

The statute lets "any attorney-at-law" sign it, on behalf of the borrower or anyone who has since acquired title to the property (RPAPL 1921(5)(a), (b)(i)). An owner without a lawyer can instead use the court petition, which is open to any person with an interest in the property (RPAPL 1921(2)).