After a mortgage debt is satisfied in full, the mortgagor is entitled to a document known as a ‘Release of mortgage’ which is filed at the registry of deeds and thereby clears the title of a property of the mortgagee’s lien over the property.

Without the release being registered the title will continue to display this defect, and serve to operate as a formal instance of adverse ownership unless legal proceedings are instituted.

Clearly the mortgagor has rights under this regime of clear inequitable conduct, and a mortgagee has to supply a release of mortgage within a 90- day period. If this does not occur an equitable cause of action will arise in favor of the mortgagor.

Given the simultaneous transferring of interests that are present on the particular settlement date of a property transaction, a release of mortgage is generally advisable to be arranged for receipt on settlement to prevent clouding of the property title. The title insurer will no doubt ensure the needful is complied with.

Generally the vendor will have covenanted to transfer a title free of defects and it would be considered a clear breach of covenant for the vendor to transfer the title in any other condition.

If the vendor has been tardy in regard to arranging the discharge of the mortgage, this will most often be due to the mortgagee not having confirmation of cleared funds in order to provide the release of mortgage. Herein lays the risk to the purchaser of the property.

Without title insurance, the purchaser risk the mortgagee’s lien remaining in the title with the delinquent vendor absconding with the balance of the proceeds of the sale, if any.

However, the prudent purchaser would have sought the device of title insurance and would then be able to transfer the burden of this contingency onto the insurer, a service requiring
expertise, in consideration of which a premium has been paid in full.

Possession of Title Deeds

Here too the advantages of title insurance remain obvious and the intricate idiosyncrasies of the commercial realities surrounding property transactions emerge.

Again, the mortgagor of property has provided finance for good value and has usually acquired a legal interest in the property. In jurisdictions that issue a certificate of title to a property, the title deeds are usually held by the mortgagor and show the preeminence of its claim on the property as security.

Even for a subsequent purchaser for good value, this kind of interest will not be dissolved, and so the title insurer will devote vigor toward delivering to the new purchaser a clear title along with the appropriate release of mortgage to signify a clear title.

From the purchaser’s point of view, the insurance premium is a sensible allocation of resources which appears negligible in comparison to the dire predicament a purchaser untrained in the art of conveyancing would find themselves in.

Clearly advantage of title insurance abound her also, as a mortgagees lien on property, to the exclusion of all other interests that may attach to property, is not only in receipt of statutory protection, but considering that mortgagees invariable require deposit of the title deeds, it is only through fraud that its interest could be subverted.

Resources:

http://www.equitabletitle.net/

http://www.in.gov/legislative/ic/code/title32/ar29/ch6.html

http://www.cga.ct.gov/2008/rpt/2008-R-0072.htm