Ancient Mortgages and Title Insurance

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There is not a week that goes by that we do not have a client that wants us to omit an old mortgage that was inevitably paid off and satisfied, although the satisfaction is not of record.

Providing title insurance and insuring over the “ancient mortgage” really comes down to a state by state practice and there are several issues to consider:

New Jersey Title Insurance

Statute of Limitations: The case of Security National Partners v. Mahler, 336 N.J.Super 101 (App.Div. 2000) held that a 20 year limitation period governs mortgage foreclosures. The 20 year period begins to run from the date the mortgagor fails to make payments.

In 2009, NJSA 2A:50-56.1 was enacted which establishes a statutory limitation period for residential mortgages. That statute states that an action to foreclose a residential mortgage may not be started after the first of the following events occurs:

• 6 years expires from the maturity date stated in the mortgage;
• 36 years expires from the date of the recording of the mortgage (as long as the mortgage itself does not provide for a longer repayment term)
• 20 years expires from the date the borrower defaulted.

We emphasize that the Statute only applies to residential mortgages; if the mortgage is not residential, the 6 year limitation period does not apply at all. Remember the 6 year period runs from the maturity date of the residential mortgage and is applicable only if it is the first of the limitation periods to expire.

Mortgagor: Where the borrower on the mortgage in question is a prior owner, the best practice is to obtain a copy of their owners policy to determine if the mortgage may be omitted under the inter-underwriter indemnification treaty or in the alternative with a letter of indemnity from the present owner’s underwriter. Absent that, proof of payment should be obtained if available. If proof of payment is not available, we may still be willing to omit the mortgage based upon the statute of limitations discussed above but only as a last resort.  Mortgages where the maturity date is less than 20 years ago will have to be looked at on a case by case basis.

Where the borrower on the mortgage in question is the present owner, we are unlikely to omit based upon the fact that the statute of limitations may have expired. New Jersey Title Insurance underwriters will need to see some proof of payment and will most likely demand that we utilize a release tracking company in order to obtain some form of release from the prior creditor.

Pennsylvania Title Insurance

When issuing PA Title Insurance, the Commonwealth does not have a specific statute that addresses the assumption of a payment on an “ancient mortgage”.  The Underwriting Guidelines we use to assess the risk is to ascertain the final payment date of the mortgage in question and if there is no activity for a period of 20 years after the final due date. If such is the case we will be authorized to remove the mortgage from the title insurance commitment.

New York Title Insurance

When issuing New York Title Insurance there is an “Ancient Mortgage” title standard, but it differs somewhat from the one in New Jersey.  In New York, the standard is as follows:

A. A mortgage held of record by an institutional lender in the face amount of $50,000 or less which matured more than 12 years ago and which is not recited in the chain of title for 12 years or more, may be disregarded upon an affidavit that there has been no payment or demand for payment of principal or interest for 12 years, provided that the present owner or his or her ancestor was not the mortgagor and there has been one or more transfers of title for value.

B. A mortgage held of record by an institutional lender in the face amount of $50,000 or less which contains no stated maturity date, which has been recorded for more than 30 years, and which is not recited in the chain of title for 12 years or more, may be disregarded upon an affidavit there has been no payment or demand for payment of principal or interest for 12 years, provided that the present owner or his or her ancestor was not the mortgagor and there has been one or more transfers of title for value.

Applicable to mortgages held of record by other than an institutional lender.

C. A mortgage held of record by other than an institutional lender in the face amount of $25,000 or less which matured more than 12 years ago and which is not recited in the chain of title for 12 years or more, may be disregarded upon an affidavit that there has been no payment or demand for payment of principal or interest for 12 years, provided that the present owner or his or her ancestor was not the mortgagor and there has been one or more transfers of title for value.

D. A mortgage held of record by other than an institutional lender in the face amount of $25,000 or less which contains no stated maturity date, which has been recorded for more than 30 years, and which is not recited in the chain of title for 12 years or more, may be disregarded upon an affidavit there has been no payment or demand for payment of principal or interest for 12 years, provided that the present owner or his or her ancestor was not the mortgagor and there has been one or more transfers of title for value.