Saturday, January 24, 2009

Obtain Payoff and Secure Release Fee (Seller Charge)

For years title companies and lenders have been accused of adding "junk fees" to HUDs to enhance revenue. I can't speak for lenders, and certainly cannot speak for all title companies, but can and will explain a particular fee that we charge to sellers that can cause some confusion (or worse, anger and resentment) on real estate purchase transactions.

It is called an "Obtain Payoff and Secure Release Fee," and for this we charge $155.00 to the seller for -- as the name suggests -- obtaining a payoff and getting a release signed and recorded.

First, some history:

Sellers used to have a mortgage with a local bank. Not a mortgage company or national lender with offices in every major city and a processing department in Florida. No, they banked with and borrowed from a local bank. The seller could physically walk in, ask for a payoff statement, and walk out with one. Shortly after closing, the payoff check could be hand-delivered or mailed to said local bank, and the release would be prepared within 24 hours. Once signed and recorded, the mortgage or deed of trust is released, and we likely never deal with that instrument again.

Times have changed. For this formerly simple process, here is what we do today for the $155.00:

  1. Solicit payoff information from seller. This can of course take several attempts, along with some "encouragement" from helpful listing agents.

  2. Obtain written authorization from seller so lender can release payoff information.

  3. Order the payoff from lender via phone call or fax (depending on lender's requirement). This often times takes several attempts.

  4. Prepare a payoff letter and a "Certificate of Satisfaction" which is a document the lender signs releasing the mortgage or deed of trust. They either sign this one or prepare one themselves.

  5. Cut payoff check.

  6. After the settlement, send the payoff check, payoff letter, and Certificate of Satisfaction to the lender.

  7. Monitor and confirm receipt of the "payoff package" by the lender.

  8. Receive the Release or Certificate of Satisfaction from the lender, and forward it to the courthouse along with $30 recording fee.

  9. Sixty (60) days after the settlement, check our own tracking system as well as the Maryland Land Records to see if the release has indeed been recorded.

  10. If it has not (and many times it has not), we call the lender to follow up.

  11. Continue steps 9 and 10 until the release is recorded, in many cases escalating the matter to a specialist dealing with recordings and releases.

This is not a plea for sympathy, this is our job. However, as the job has become progressively more complex since the proliferation of the secondary market and national servicers, hard costs and labor time need to be recouped.

I hope this explanation is helpful. If you are an agent reviewing a HUD with your seller, and see this fee or some variation of it, perhaps this will help you explain the charge. In the meantime, if you have any questions feel free to comment below, email me at Derek[dot]Massey[at]MASettlement[dot]com, or find me on Twitter.

NOTE: Although we perform closings in virtually all Maryland counties, Northern Virginia and DC, for ease of explanation I specifically addressed settlements conducted in the Greater Baltimore region of Maryland. Some fees and procedures may be different in areas like Maryland's Eastern Shore or Northern Virginia.