Release of Mortgage

[Patrick Liska]

Was wondering if i could get some help / advice. I invested some money in a flip and have first lien on the property. the investor has the house under contract and will be closing in two weeks. Their lawyers office contacted me and want me to sign a Release of Mortgage, yet i will not have a check until closing. talking with the lawyers help they said that the money will be held in escrow and released after the closing but is not spelled out like that on this form they want me to sign, i told them i would want that all spelled out in writing. this is the first time i have gone through this with a lawyer involved and all the legal papers. my question is, is it normal to sign this release before the closing or is that usually done after the closing ?

[Jeff Rabinowitz]

@Patrick Liska, in Michigan closings are usually handled by title agents, not lawyers. There is a wide variance on how different title companies handle private mortgages. Many want the private lender to sign a release/discharge of mortgage before the closing--some try to insist on this. It is safer for the title agent. This is very different than how they treat large lenders. Bank of America does not sign a discharge until good funds are received in their account. You don't have to either. If your payoff check bounces and your release has been filed you may have legal recourse (I am not a lawyer) but the hassle and expense of removing your release would be on you. I sometimes sign releases at closing--sometimes I do not. I base my decision on whether to do this based on my experience and level of trust with both the borrower and the title company. You are correct to be cautious here and would be well advised to seek legal counsel. There are pre-paid legal plans available that can give you access to legal counsel in your state for only a small monthly fee. It may be worth investigating some. Send me a pm if you want a link to the service I use.