With the latest news that towns, cities, counties and in some places entire states are shutting down as a precautionary measure to prevent the spread of COVID-19, concern is rising that the inability to record notices of settlement, deeds, mortgages and mortgage satisfactions will upend the closing industry.
In order to successfully conclude the closing of a mortgage transaction several important things must occur. Loan documents must be executed and in some cases notarized. Prior liens must be extinguished and discharged of record. New ownership instruments (deeds and leases) must be properly recorded. In addition, the new mortgage instruments must also be recorded. The timing of recordings is also critical to the proper structure of legal rights in and against a property.
In most places in the United States today these key transfer and lien documents must be submitted manually and then converted to digital files allowing for property history records to be catalogued and then reported publicly. If an office is closed for business due to the health crisis this may mean that these recordings will not take place or may be significantly delayed.
Lender’s rely on these public records, as do title agents and their title insurer partners, to provide an accurate report of the ownership and debt condition of a property in the mortgage evaluation and closing process. Lenders also rely upon title insurance policies to issue within a reasonable time following closing (in some states at the closing table) in order to complete the loan file and prepare it for sale into the secondary market.
Potential chaos in recording also raises the level of risk from closing and title fraud, as the inability of lenders, and title agents to know the current status of a property invites criminals to hide liens, manipulate ownership records, and potentially close more than one loan on the same property through multiple transactions.
Diligence throughout the mortgage process has become customary today, with more lenders than ever adopting comprehensive closing fraud processes backed by effective technology tools to root out potential criminals. As this health crisis extends throughout the United States diligence in financial transactions must increase, especially in the face of rising refinance volume due to low rates and the emerging Spring purchase market.
If you would like to know how Secure Insight can assist you in managing closing table risk, please give us a call for a free demo.