What happens to mistakenly unreleased liens in foreclosure?

Question

Scenario:

First position lien from 1998 is unreleased per county records.

Property has been sold 4 times (and those owners received and released mortgages) since this time.

Most recent mortgage has a title policy showing it is in first. Court judicial report shows it is in first and does not mention the 1998 lien in any way.

If the foreclosure sale occurs and new title is issued, what happens to the old unreleased lien?

Tom Gimer · Answer

@Daniel E. The property has since changed hands four times. If there was ever a lender and title company involved, this issue was reviewed and cleared each time. This is a perfect example of why owners title insurance exists.

If you truly think the mortgage is open and unpaid because of the nature of the transfers in the chain, don't touch the deal.

Daniel E. · Answer

Thank you.

Out of curiosity, has anyone had success in pursuing previous owners via warranty deed claims?

Tom Gimer · Answer

@Daniel E. Happens all the time with proof of payoff or a letter of indemnity from the prior title insurer.

Lenders lose files, go out of business, etc. It’s not always possible to obtain a release.

Daniel E. · Answer

Honestly, that is the weird part. There was always a lender and title insurance (chase bank, local banks, etc.). Would a title company clear the issue but not require a release be filed?

Daniel E. · Answer

Thanks.

Agreed it is okay if there is really no balance. But what if there is and the lender is just not pursuing the debt (statue of limitations has passed)?

If they were never named in the foreclosure or any of the three first lien title policies, and therefore the sale goes through and the foreclosure is confirmed, what happens to the old lien? Does it just remain and they can reopen the foreclosure and cloud title forever?

I have searched in every way I can (names, even all releases filed by the lender from xx date to xx date) and also confirmed the mortgage is outstanding via O&E report.

No question it is out there (in my mind). But I seem to be the only one who knows and sheriff sale is next week.

Tom Gimer · Answer

The answer depends upon whether the 1998 lien is simply unreleased or is also unpaid.

The land records are full of unreleased liens. If there is a zero balance on the obligation, an unreleased lien is a non-issue.

What happens to mistakenly unreleased liens in foreclosure?

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