Responding To A Payoff Letter Request


1 April, 2009


Mortgage Lender and Servicer Alerts

Well, this certainly seems like a non-issue.  If a borrower wants to satisfy the mortgage, lenders or servicers are typically delighted to receive the money.  And so the response to the request is usually certain and hopefully prompt B but not always.

For example, sometimes a servicer might become exasperated with a borrower=s repeated payoff letter requests never followed by a remittance.  Or the request can be misplaced.  One lender tried to impose a condition upon payoff relating to another loan.  But a new case reminds us that payoff requests really do need to be honored because peril lurks B as we would likely expect.  [Cassara v. Wynn, 55 A.D.3d 1356, 865 N.Y.S.2d 436 (4th Dept. 2008)].

First, there is a statute that plays a role here (RPL ‘274-a).  Where there is a written demand for a payoff letter in connection with a sale or refinancing of the mortgaged property, or some other event which creates a reasonable expectation that the mortgage is to be paid off or assigned, the payoff letter must be issued within thirty days.  Failure to timely deliver the letter exposes the mortgage holder to liability for actual damages incurred as a result of neglect to advise of the sum due.  There is considerably more to this which makes it much more formal, but something of this nature is not likely to be ignored by a lender or servicer.

Turning to perhaps a more casual inquiry, ignoring a request for a payoff letter can result in issuance of an order to compel a response.  In the new case mentioned, when the lender did not issue the payoff letter, the court found that the mortgage holder constructively rejected the defendant=s efforts to tender and satisfy the mortgage.  This, in turn, led to denial of plaintiff=s motion for summary judgment in a foreclosure action B a time-consuming and expensive result.

In short, what lenders and servicers always knew remains the case: there must be reasonably prompt response to a request for a payoff letter.

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.