STREET LAW SCHOOL: My mortgage company is out of business and it never released its lien, now what?

Title Insurance and Closing Company settlement agents bear the bulk of responsibility when it comes down to closing a real estate transaction. After all, they are the ones who need to verify a clear title and facilitate resolution of any outstanding issues.

Unfortunately, this process is typically opaque, and can take a lot of time and resources, particularly when it comes to locating appropriate documentation to resolve outstanding mortgage liens. Even more difficult is knowing what to do when an original lender has disappeared or is now defunct. Luckily, there is a resource that can help smooth the difficult process of finding lenders who no longer exist.

Contact the FDIC

The Federal Deposit Insurance Corporation (FDIC) was designed to help protect consumers from failures of banking institutions. In the case when a mortgage lender has failed or closed down, the FDIC can issue a release of the mortgage lien, given it meets the following criteria:

  • The lending institution is in FDIC receivership
  • The mortgage was satisfied before the lender closed, or
  • The satisfying payment was made to the FDIC after the lender closed

In order to obtain a release from the FDIC, a request must be made in writing. It can take a month or more to get a response from the FDIC to a request for release, adding significant delays to a closing time line. Here is the FDIC link: https://www.fdic.gov/bank/individual/failed/lien/

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