Request for a payoff and reconveyance

[Jeff Ju]

Hi all - I did a search here but couldn't find a consistent answer. Hoping for one here. 

Situation: This is my first time lending money. It is a first position note for 12 months to a borrower who paid 6 months of interest in advance. The 6-month period is coming up and I received the following from a title company seems to be the escrow company handling the case. Is this normal and should I sign/send the original note as requested? 

Documents needing to be filled out copy/pasted (replaced borrower name with "Borrower, LLC"). 

A transaction has been opened with this company and we have been instructed to request a DEMAND FOR

FULL PAYOFF of the Loan identified below. Please complete and execute the "Demand for Full Payment"

attached hereto and return the original to us with the other documents specified in the Demand for

Full Payoff (including the original note).

Loan Information: Present Owners: Borrower, LLC

Original Trustor: Borrower, LLC., a California limited liability company

Deed of Trust Recorded: County: Los Angeles

Book: Page: Series No.:

For your convenience, and in an attempt to expedite the reconveyance of the Loan after full payoff in accordance

with the Payoff Demand, we have included a "Substitution of Trustee and Reconveyance" form.

IMPORTANT: The "Substitution of Trustee and Reconveyance" form must be executed in the presence of, and

notarized by, a Notary Public. Notary Public services are available in many of our offices. Please call if you

wish to make arrangements to execute this document at one of our offices.

CALIFORNIA CIVIL CODE 2943 PROVIDES FOR A SUBSTANTIAL FINE IF THE BENEFICIARY FAILS

TO PREPARE AND DELIVER THE PAYOFF STATEMENT AND DELIVER THE NECESSARY DOCUMENTS

WITHIN 21 DAYS AFTER RECEIPT OF THE WRITTEN REQUEST. PLEASE REFER TO THE LAW FOR

FURTHER DETAILS.

Civil Code Sections 2941 and 2943 provide for the following:

1. If the fee for the reconveyance is not included in the Payoff Demand, the fee cannot be charged to the

consumer. However, failure to include the fee does not excuse the lender from the obligation to

reconvey the deed of trust.

2. $45.00 is the maximum fee for a reconveyance conclusively presumed by California law to be reasonable.

3. $30.00 is the maximum fee for a payoff demand statement that can be charged under California law.

Page 2 of 5

To: Title Company ("Escrow Holder")

Estimated Closing Date: In two weeks

Re: Property address ("Property")

("Seller")

__________________________________________________________________________________________

DEMAND FOR FULL PAYMENT

PLEASE COMPLETE IN FULL

Enclosed are:

1) Original Note for $_________________________________

2) Deed of Trust (original preferred), and

3) Substitution of Trustee and Deed of Reconveyance executed by all beneficiaries. Signature must be notarized.

At the close of escrow, Escrow Holder is instructed to:

1. Pay the beneficiary the principal sum of $_______________________________ plus interest at

____________________% per annum from _________________________, 20_____ to the date of close

of escrow;

2. Record the Substitution of Trustee and Deed of Reconveyance;

3. Destroy the Original Note or mark said note as "Paid" and deliver as instructed by Seller/Borrower.

Escrow Holder is instructed to charge the borrower recording fees for the Substitution of Trustee and Deed of

Reconveyance.

__________ (Initial if applicable) Escrow Holder is instructed to charge the borrower $30.00 for the payoff

demand statement which is to be paid to the undersigned.

Additional Instructions: _________________________________________________________________________

____________________________________________________________________________________________

Disbursement shall be made by Escrow Holder's check and mailed to the address below, unless otherwise

instructed by the undersigned in writing.

Date: ___________________

______________________________________________ __________________________________________

Beneficiary Signature Beneficiary Signature

Address: ______________________________________ Telephone No.: _____________________________

______________________________________________

IF YOU DO NOT HAVE THE ORIGINAL NOTE AND DEED OF TRUST,

PLEASE CONTACT THE ESCROW OFFICER IMMEDIATELY

FOR FURTHER INFORMATION

Page 3 of 5

RECORDING REQUESTED BY

Title Company

AND WHEN RECORDED MAIL DOCUMENT TO:

Space Above This Line for Recorder’s Use Only

SUBSTITUTION OF TRUSTEE AND FULL RECONVEYANCE

The Undersigned, present Beneficiary under that certain Deed of Trust dated executed by Borrower,

LLC., a California limited liability company, as Trustor to as original Trustee and recorded on as

Instrument No. , in Book , Page(s) , Official Records of the County of Los Angeles, State of

California, HEREBY APPOINTS AND SUBSTITUTES THE UNDERSIGNED as the new and substituted

Trustee thereunder in accordance with the terms and provisions contained therein, whose address is .

As such duly appointed and substituted Trustee thereunder, the undersigned DOES HEREBY RECONVEY to the

person or persons legally entitled thereto, without warranty all the estate, title and interest acquired by the

original Trustee and by the undersigned as the said substituted Trustee under said Deed of Trust. Wherever the

text of this document so requires, the singular includes the plural.

Dated: _____________

_________________________________________ _________________________________________

A notary public or other officer completing this certificate

verifies only the identity of the individual who signed the

document to which this certificate is attached, and not the

truthfulness, accuracy, or validity of that document.

STATE OF )SS

COUNTY OF )

On before me, , Notary Public, personally appeared

who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within

instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by

his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the

instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature

This area for official notarial seal.

A notary public or other officer completing this certificate

verifies only the identity of the individual who signed the

document to which this certificate is attached, and not the

truthfulness, accuracy, or validity of that document.

STATE OF )SS

COUNTY OF )

On before me, , Notary Public, personally appeared

who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within

instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by

his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the

instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature

This area for official notarial

[Jeff S.]

Wow, what a heavy-handed and somewhat misleading request, @Jeff Ju . I can see how you would be intimidated for your first loan. I don't exactly understand the terms of your loan but it seems it's not due for another 6 months (???). Why are you receiving any of this now?

It's interesting they reference California Civil Code 2949 and then complete misstated it. Paragraph (b)(1) of this section require you to send copies of your note within 21 days of request. Not originals.

California Civil Code 2941 lists your payoff obligations and you should read them. You have 30 days after you receive full payment to send the original note and deed-of-trust to title. Nothing unusual about that @Jo-Ann Lapin .

In CA, there are generally five documents you should provide to close out a loan, Jeff.

Payoff Demand

This document simply lists all amounts owed the lender to satisfy the loan. Since you never know the exact date you will be paid off, it usually specifies the principal balance, any other charges, and the daily amount owed. Title does the math on the day they wire your funds. Our payoff demand letter specifically requests title call us to confirm the payoff amount and our wire instructions. Strangely, maybe 50% of them call.

Most escrow or title companies have a simple demand form you can request and fill out detailing the payoff. They are all different, and I never find that these forms fit our specific details, so I have a standard letter I write, which is clearer -- to me at least. Title and escrow don't care what you use as long as it's understandable and complies with the law.

Original Note

Title will require the original note.

Original Deed-of-Trust (DOT)

Some older DOT's have a page in the back that says the loan has been reconveyed (paid off or satisfied). Ignore this page if it exists, in favor of the sub & recon, below. Title will require this original document, as well.

Wire Instructions

When you funded the deal would title accept a check from you? No. You should require a wire from them and provide your wire instructions. Get this info from your bank.

Substitution of Trustee and Full Reconveyance (Sub & Recon)

Your DOT probably has the original Title company listed as the trustee on the face of the document. The sub & recon replaces their name with yours. As you'll read on it, your notarized signature also confirms that this loan has been reconveyed (i.e. paid off). Even though I have some blank sub & recon's, I never fill these out myself. I always ask the escrow company to do this, using their form, and then email it to me. This document gets recorded by title, which is why it must be notarized. It effectively wipes out your lien (i.e. the DOT) against the property.

We email our demand, along with copies of all the other documents above, to escrow. Our demand letter adds that we will send the originals once we receive full payment.

NEVER SEND ORIGINAL LOAN DOCUMENTS TO ESCROW UNTIL YOU HAVE BEEN PAID OFF IN FULL.

Some title and escrow companies are not used to dealing with private lenders and will occasionally hem and haw, but this is legal (and encouraged by my lawyer). Title makes mistakes and we've been paid an incorrect amount on rare occasions. Strangely, it's almost always been in our favor, except when we were once shorted $132k!!! We were made whole the next day but can you imagine if they had our notarized reconveyance and original docs and there was a dispute?

Once you've confirmed that the amount you received is correct, then send all of the original documents via certified mail to escrow. They will forward to title.

Now you can loan the money again, Jeff!! Good luck.