Lenders and servicers need to know this one.
Effective as of November 7, 2005, penalties for failure to timely issue a satisfaction of mortgage have been expanded and made more onerous. For those who want to review the statutes themselves, these amendments are to RPL 275 and RPAPL 1921(1). Here is the heart of the matter. Where a mortgage has been paid in full, that is, satisfied, a certificate of discharge (a satisfaction of mortgage) must be given to the mortgagor in recordable form. That of course is standard.
The signator then must arrange within thirty days to have the certificate of discharge presented for recording or given to the mortgagor for that purpose. Failure by a mortgagee to present the certificate for recording within thirty days results in liability of the lender (or servicer) to the borrower in the sum of $500.00. Should the lender or servicer fail to present the discharge within sixty days, then the penalty imposed – the liability – is increased to $1,000.00 and if the delay goes to ninety days, then the liability is $1,500.00.
Although the definition of a mortgagee excludes any person or entity which makes less than five mortgage loans in any calendar year, obviously any institutional organizations will be covered by this statute.
So the incentive to act with some dispatch in processing a mortgage satisfaction is now greater than ever.
Just to add confusion, there is already an existing statute [RPAPL 1921(4)] applying to a mortgage satisfaction upon a one to a six family owner occupied residential structure or condominium unit. There, should the lender neglect within ninety days to deliver the satisfaction and/or in the same period fail to deliver the note and mortgage, it will be liable to the person for $500.00 or the economic loss to such person, whichever is greater. The conflict between the two sections is apparent but the key is to avoid imposition of any penalties and issue mortgage satisfactions promptly.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.