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Q & A
Finding a Surprise Mortgage Recorded Against a Property

By JAY ROMANO
June 12, 2007

Q. My husband and I just found out that there is a $115,000 mortgage recorded against our property. The mortgage is from a refinance we closed on in 2001, but which we canceled within the three-day rescission period. The lender acknowledged receipt of the rescission notice, and we thought that was the end of it. Can a lender in New York record a mortgage before the end of the rescission period?

A. Brian D. Tormey, a vice president of TitleVest, a title agency in Manhattan, said that a lender may record a properly executed mortgage before the expiration of the three-day rescission period (the time during which a borrower can cancel a refinance without incurring any fees), as long as the required mortgage recording taxes are paid. And it is that requirement that prompts most lenders to wait until the rescission period has ended before recording a mortgage.

Mr. Tormey said that the mortgage recording tax in New York varies depending on the amount of the mortgage and the location and type of property. “For a residential transaction in New York City, the mortgage tax can be as high as 2.175 percent of the amount of the loan,” he said, adding that the majority of the tax is payable by the borrower and is generally nonrefundable.

Since the borrower has three days to cancel the deal, a lender who records a mortgage before the rescission period ends must advance the entire recording tax and then deduct from the proceeds of the loan the amount due from the borrower. If a borrower cancels the transaction, the lender cannot charge the borrower for the money advanced for the recording tax. So, Mr. Tormey said, most lenders wait until the end of the rescission period to record the mortgage.

He said that under the Federal Truth in Lending Law, a lender must return any fees and remove any liens it has recorded if a borrower cancels a transaction within the three-day period. So the questioner should contact the lender and demand that the necessary "Satisfaction of Mortgage" be prepared and filed at the lender's expense.

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