No closing costs? No Problem. Or is it?

Are you in a state where an attorney normally does the real estate closing? Have you heard those radio or TV ads that promise no application costs, no points, no appraisal fees, and no closing costs including no attorney? Sure, you have. More importantly, have you taken one of those loans and closed on it?

You may be sitting in a house with no mortgage at all. A disturbing trend has recently emerged. In their efforts to cut costs to the bone in bare competition based solely on price, mortgage companies may have taken the ultimate risk. Those ‘professionals’ coming to your home to execute papers are not only ill-equipped to conduct a real esate mortgage closing, they may also have forgotten to record the mortgage at all! You may be paying on a loan that has no collateral.

How does this happen? When the mortgage closing occurs, the original documents are recorded in a centralized place showing that the mortgage company has a lien on your property. This may be the county courthouse or the Town Hall. Usually, the recording process occurs immediately after the closing. But mistakes are being made. The originals are sent back to the mortgage company and the staff there does not realize the documents are not recorded. In one case in Connecticut, not only was the mortgage not recorded, but it was the third mortgage in a row on that house where the documents had not been recorded. In another case, the mortgage is still not recorded now after several years!

Using the bankruptcy process, these debts are discharged as unsecured debt. Where the value of the house is entirely exempt in the Bankruptcy Court, the owner gets the property free and clear of the loan! If there is equity in the house that is not exempt, the owner has the opportunity to get a legitimate mortgage to borrow the money to buy the non-exempt equity back. Get a skilled bankruptcy lawyer who can do the appropriate research to determine if you have a valid mortgage.