As with any transaction, receiving payoff demands is a necessary step in the title and settlement process. With reverse mortgage transactions, obtaining these demands can be complicated because many of the borrowers have resided in their homes for decades. Whether it’s the IRS or a private beneficiary, a line of credit or a foreclosure with a fast-approaching sale date, each entity can be as diverse as the borrowers themselves. Each lender or institution has its own process to request and also receive payoff demands. After more than 15 years of navigating lenders and lien holders, PRC has compiled a roadmap to better navigate the process.
National Lending Institutions and Banks
-Some have automated systems where you can place the payoff request via telephone or Internet and obtain it within minutes. Others require faxed requests with the borrower’s authorization. The method of requesting is often different depending on whether it is a first mortgage versus a second mortgage or HELOC, even with the same lender.
-Many lenders require a borrower’s signed authorization to provide a payoff demand. Some even require the borrower’s authorization to be PRC specific.
-Turnaround times can vary from within 24 hours to as many as 10 business days.
-The good-through dates are often 30 days for conventional or first loans, but can be as little as one day for HELOCs.
-Obtaining an updated demand can be fairly simple and quick with some lenders, but can take up to 10 business days (like the original request) with other lenders.
Reverse Mortgages
-Let your title company know at the onset if the borrower has an open line of credit or is receiving monthly draws.
-Usually a faxed request in writing with borrower’s authorization is required. Turnaround times can vary but are typically 24 to 72 hours.
-The payoffs are often good to the end of the current month.
-Obtaining an updated demand can be a problem toward the end of the month, because some lenders will not allow you to request an updated payoff until the first day of the following month.
Loans in Foreclosure
-Ask the borrower if they are aware of a sale date and relay that information to your title agent.
-Your title company typically has to go through the lender’s foreclosure attorney to obtain a payoff demand.
-Turnaround times for foreclosures are usually longer than other loans.
-Payoff demands for loans in foreclosure often expire quicker than they do for loans not in foreclosure.
-Additional fees (of significant amounts) often accrue and are added to the total amount due.
Private Beneficiary
-Your title company may send a request in writing after speaking with the beneficiary. Turnaround times can vary.
-The payoffs are usually good until the loan funds, because it gives instructions to collect per diem.
-Title companies may require the original note, original deed of trust/mortgage, and the recordable release from the beneficiary at the time of the demand. If any of these can’t be located, let your title agent know right away because the situation will need to be brought before the underwriter.
IRS Liens
-Before requesting a demand, your title company will need a completed and signed Form 8821 from the borrower (all applicable tax periods must be listed separately on
this form). The IRS will not allow anyone to request a demand without this form.
-Turnaround time is approximately 15 business days.
-The payoffs are usually good for 30 days.
Judgments
-Title companies usually request in writing via fax or email after speaking with the attorney. Turnaround times and good-through dates can vary.
FHA Loans
-Interest is due all the way to the end of the calendar month when the payoff is made. If the payoff date could be near the end of the month, an additional month’s worth of interest must be collected.
VA Loans
-If the VA is still in title, a deed is needed from them and there is normally an up-front fee.
