Releases of Deeds of Trust Thomas S. Mowle El Paso County Public Trustee
Release of Deed of Trust
• Principles behind release process
• Required and supplemental elements
• Processing and rejection
Release Principles
• Deed of Trust
– Property owner GRANTS a lien to the lender
– Lender BENEFITS from that lien
– Trustee takes to foreclosure upon Election & Demand
• Release
– Required within 90 days of satisfaction (38-35-124)
– Holder of evidence of debt GRANTS the release
– Trustee validates the request for release
• Unlike foreclosure, release is consensual
Release Review Goals
• Does release comply with statutory requirements? – Legal requirements are very few, and mostly implicit
• Request must be signed/notarized
• Production of original note, or indemnification
• Payment
• Production of a copy of the recorded Deed of Trust
– No explicit requirement to review/compare documents submitted • The deed of trust SHALL be released upon receipt of documents
• The release SHALL be caused to be recorded IMMEDIATELY upon execution
• Contrast with 38-38-102 requirement to review foreclosure filing
• At the same time, don’t do holder’s work – Don’t retrieve the Deed of Trust or POA yourself
– Don’t “fix” errors in the release form
Release Review Goals
• So why not just rubberstamp and move on?
• Will release be effective? – Will release index to the correct Deed of Trust in County records?
– Will release remove lien from the desired property (and no other)?
– Could release be later questioned and rejected, leaving lien in place?
• However: – Excessive scrutiny harms the borrower
– Lender has little incentive to fix errors quickly (legal penalty weak)
Release Documents
• 4 Required Items – Request for Release of Deed of Trust
– Copy of Recorded Deed of Trust
– Payment: $15 for release (+ recording costs)
– Original Evidence of Debt, or substitute
• Supplemental Items – Power of Attorney/Agency
– Estate Paperwork
– Platting Information
– Re-recording/Modification of Deed of Trust
– Affidavit of Discrepancy
Release Form
• 38-38-107/108: – “written request…may be in substantially the following form.”
– “May” is very permissive
– “Substantially” is vague
• How El Paso does it – For release WITH production, we are very flexible, including old forms
– Release WITHOUT production must cite current statutes and language • Current indemnification is 38-39-102(3)(a)/(b)/(c)
• Old forms reference 38-39-102(3.5) which no longer exists
– Request may omit unused options (a/b/c, full/partial, fully/partially)
Release Form
• Release “should” include address of borrower, for recorder – (1)(a)(IV): For release with production, PT must have
• Current address of original grantor, assuming party, or current owner OR
• Written statement that they have no record different than the property address
– (1)(a)(IV): … EXCEPT we may release even without that information
– Subs to (3) suggest no exemption to address rqmt if w/o production • Recommended Guidelines say to apply the same discretion as above
• Release “should” mark full or partial – If unmarked, recorder will index as full
– Reject if partial described but box not marked • Recorder won’t check, will just assume full
• Modifying other people’s signed/notarized documents is not within our authority
• Release “should” be addressed to you in your county
Release Review
• How closely must identification lines match the Deed of Trust? – Reception info (number, or book/page) absolutely MUST match
• This indexes release to Deed of Trust in the public records
• If handwritten, make sure it is very legible
– Names of Parties • Close enough to assure you have the correct Deed of Trust
• 38-35-116 allows for certain variances in names
• Accepting errors in names is a judgment call
• MERS is almost never the original lender
– Dates of Deed of Trust and recording • Close enough to assure you have the correct Deed of Trust
• Accepting errors in dates is a judgment call
– Date of release request – we ignore (notary provides actual date)
Full/Partial Release
• Listing of legal description – If release marked “full”
• Legal description should be blank, or match the legal from the Deed of Trust
• Reject release if partial legal described – will index as a full release
– If release marked “partial” • Legal description should be a portion of legal on Deed of Trust (not letter-perfect)
• Reject release if full legal shown – will index as only a partial release
• Reject release if description is left blank, or “negative” (release everything except X)
• Partial release of lot from metes and bounds – Use platting information to verify that lot probably was encumbered
• Partial release of property added via modification of DoT – Release is from original DoT; request modification to verify addition
• Partial release of unencumbered property is meaningless
Indemnified Releases
• (3)(a) Qualified Holder covers damages if note later presented – Qualified Holders defined in 38-38-100.3(20); include:
• State/National Bank (except credit-card banks) or Federal/Colorado Savings & Loan – Lists at http://www.occ.gov/topics/licensing/national-bank-lists/index-active-bank-lists.html
• Supervised Lender that is publicly held or a subsidiary/parent – ensure not expired! – List at http://www.coloradoattorneygeneral.gov/departments/consumer_protection/uccc_car/uccc
• Federal Housing Administration approved mortgagee – Search at http://www.hud.gov/ll/code/llslcrit.cfm
• Colorado/Federal Credit Union – Search at http://researchcu.ncua.gov/Views/FindCreditUnions.aspx
• Agency or Department of the Federal Government (HUD, VA)
• Loan-oriented entity created/sponsored by state/federal govt (Fannie Mae, CHAFA)
• Currently-certified Community Development Financial Institution – Search at http://www.cdfifund.gov/awardees/db/index.asp
• Any of the above, acting as agent/nominee/trustee for someone else
– QH not required to specify type, but can ask for evidence of it
– MERS Can’t Indemnify
Indemnified Releases
• (3)(b) Holder buys insurance to cover damages, signs release – Corporate Surety Bond, aka Lost Instrument Bond must include
• Parties and recording information for the Deed of Trust being released
• Signed by (alleged) holder of the note as principal
• Signed by insurance agent, accompanied by Power of Attorney from insurer
• Be valued at 1.5 times the original principal shown on the Deed of Trust
• Must be valid for at least 6 years
– Bonding agent has evaluated risk; premium fixed by state (0.9%)
– If evidence of debt appears • Usually Public Trustee must file claim through insurer, and pass through to holder
• Some Bonds grant 3rd party right of action, so holder can claim directly
– What to do with bond • We keep original for 7 years (not sure this is necessary)
• We record copy of bond with release
Indemnified Releases
• (3)(c) Colorado Title Insurance Company signs release – In this case, actual current holder is not shown on release form
– Search for title insurance companies at https://www.sircon.com/ComplianceExpress/Inquiry/consumerInquiry.do
Signature of Holder
• Signature of requestor – ALL holders if private party – Top line is name/address of holder, or of title company
– 2nd line is name/title of officer of holder/title company
– Or 2nd line is name/title/affiliation of holder’s agent or attorney
• Proof of authority? Not required by law – We require copy of POA and review for actual authority
• POA either must be recorded, with reception number on DoT OR
• We record POA with the release
– We require bar number of a “real” attorney
– We require authority to sign for estate, and record with release
– We require proof if borrower claims to be officer of holder or trust
• If some holders are dead, we record death certificate
Signature of Holder
• What if “we can’t find the holder”? – Not an option for borrower to sign release, even with bond
– Borrower may • Try harder to find holder
• Find a title company to sign off under (3)(c) – possible if refinanced
• File a quiet title action in the courts
• Wait until 15 years after final payment is/was due – 38-39-201
• What if “the holder won’t sign”? – Borrower may remind holder of obligation under 38-35-124
• Holder must request release within 90 days of satisfaction
• If borrower goes to court to compel, court will force holder to cover losses
Notary Block
• Must show name and title as shown in signature block – Notary should be verifying authority to sign
– In practice, we accept as long as title shown in notary or signature
• Notary not required for Colorado attorney with bar number
• California notary – Separate paper showing that person signed something sometime
– We require supplemental information linking signature to release
Copy of Deed of Trust
• Need a copy of enough to match it to the release – Verify names match release
– Verify grant to a public trustee • OK if blank, or wrong county, or names public trustee by name
• Reject if names another person, company, or organization as trustee – Per 38-39-101, must release as mortgage under 38-36-161
– Changing this would require approval of private trustee
– Verify property is in your county • Only if no legal description, use address for location
• If no address nor legal… DoT is void, might as well release
• Can only release Deeds of Trust – Release of original covers modifications, re-recordings
– Cannot release assignment of rents, modification
– Can release hybrid documents if include grant to public trustee
Copy of Deed of Trust
• Must be recorded in your county, for property in your county – Copy must show recorder’s notation, not just servicer stamp
– If not recorded in your county, under (8.5) holder: • Records Deed of Trust in your county
• Requests release of that Deed of Trust from you
• May re-record that release in the other county without going to that PT
– If recorded in your county but property in another, holder: • Records Deed of Trust in the correct county
• Requests release of that Deed of Trust from the other county
• May re-record that release in your county without going to you
Evidence of Debt
• Unless indemnified, must have original document – Usually, but not always a “promissory note”
– Deeds of Trust may cover any kind of obligation
• Reviewing evidence of debt – Verify original as best you can – not clearly a copy
– Verify that document matches what is described in Deed of Trust
– Does not need to be marked in any way: (2) contradicts (1)(a)(II)
– If current holder not the original holder • Verify chain of assignments from original to current
• Law now says just “holding” a note doesn’t make you the “holder”
• Exception: non-monetary obligation – Deed of Trust may require completion of an action (developers, often)
– Release with modified form under (5)
Evidence of Debt
• What if “there never was a promissory note”? – Verify that not a non-monetary obligation
– Show requestor the part of the Deed of Trust that describes the evidence of debt
– Very unlikely that a Deed of Trust would not state the borrower’s obligation
• What if “we can’t find the original note”? – Borrower/lender may:
• Try harder to find it
• Buy a lost instrument bond
• Seek release through the courts – court should release, not tell you to break law
• Find a title company willing to sign off on release – possible if refinanced
• What if note doesn’t match the Deed of Trust – Assuming Deed of Trust does not describe a non-matching note
• Small discrepancies may be covered by holder’s affidavit recorded with release
• Major discrepancies probably mean note provided is not the right one
“Non-documents”
• Items sometimes used by some counties in the past
Affidavit of Multiple Deeds of Trust securing a note
Affidavit of Multiple Notes secured by a Deed of Trust
Affidavit of Release without Cancellation of Note
• None of these are necessary under current law and form
Payment
• $15 for release, plus recording fee ($11 + $5/additional page) – Cash, check, credit card, or contract agreement with servicer
– If self-recording, only $15 – have releaser sign copy of release
• Refund any excess payment to party providing the release
Processing
• Review releases in order received – Different queues for paper, Simplifile, Kuvera/Ingeo OK
– Best to handle private party walk-ins immediately
• Secure live notes with partial releases – log-in system
• If approving release, either PT or deputy may sign/stamp/date – No reason to mark the Deed of Trust or Evidence of Debt
– Send releases to recorder, along with payment
• If rejecting release, return all documents and payment – Useful to have a standard form of rejection reasons
– Link rejection form to release, check, and deputy sending it
• Also return all original documents to submitter – Return other documents if have stamped envelope