Change in Mortgage Release Requirements After Satisfaction of Mortgage
Kegler Brown Creditors' Rights + Bankruptcy Alert July 9, 2015
Ohio House Bill 201 became effective on March 23, 2015. Its enactment amends provisions of Chapter 5301 of the Ohio Revised Code with regard to the formal release of paid-off mortgages. Prior to the enactment of HB 201, mortgagees including banks, lenders, credit unions and other finance entities were required to record a release of a mortgage evidencing consumer debt within 90 days after the date of the satisfaction pf the mortgage. Only the mortgagee could assert this requirement, meaning that subsequent property owners had no remedy if the mortgagor failed to record the release of a prior mortgage.
The amendment expands the scope of the affected mortgages from residential mortgages only to all mortgages, including commercial mortgages. The amendment also expands the entities permitted to assert the law to include current property owners rather than only mortgagors.
If a release is not recorded within 90 days after the mortgage has been satisfied, the current property owner must send written notice to the lender. The notice must notify the lender of (1) the duty to record a release, (2) the identity of the satisfied mortgage, (3) the mortgagee’s failure to record the release and (4) the consequences of failing to record the release within 15 days of receiving the notice. Within 15 days after delivery of the notice, the lender is required to record the satisfaction and release of mortgage in the county Recorder’s Office and pay any fees required for the recording.
If the mortgagee fails to comply with these requirements with regard to a residential mortgage, the mortgagor or property owner can bring a civil action for damages of $100.00 per day for each day of non-compliance, up to $5,000.00, plus reasonable attorney’s fees and costs. A mortgagee which fails to release a commercial mortgage can be liable for civil damages of $250.00. The mortgagee may be liable for additional damages if the failure to release the mortgage has caused additional harm such as needless complication of an attempted sale of the property.
The amendment is intended to help property owners when they attempt to sell their property. Unreleased mortgages from prior owners could cloud the title and cause delay and expense, complicating the transfer of the property to a subsequent purchaser. Under the Act, satisfaction means the obligation secured by the mortgage has been paid in full, and the underlining obligation has been terminated with no opportunities for future advancements.