Understanding the Problem
The narrow question is whether a title company can contact mortgage lenders and obtain payoff statements for one or more deeds of trust on a house, or whether the property owner must personally request the payoff information. This comes up most often when a closing is pending and the title search shows more than one mortgage, including an unexpected second deed of trust from a lender the owner does not recognize.
Apply the Law
North Carolina law allows payoff and short-pay statements to be requested by an entitled person or an agent authorized by an entitled person. The agent must identify itself in the request and state that it is acting with the entitled person’s authority. The secured creditor may rely on that representation unless it knows the requester lacks authority.
Key Requirements
- Authorized agent status: The title company or closing attorney must be authorized to request the payoff or short-pay statement. An authorization form can document that authority for the lender and closing file.
- Signed notification: The payoff or short-pay request must be signed by the person providing the required information.
- Required information: The request must include the entitled person’s name; the agent’s name and statement of authority, when applicable; where to send the statement; enough information to identify the loan and property; and the type of statement requested.
- Payoff request: A payoff request must specify a payoff date no more than 30 days after the request is given.
- Short-pay request: A short-pay request must specify a date no more than 30 days after the request is given, state whether release is sought for all or only part of the property, and describe the specific property if only a partial release is requested.
- Creditor’s response: After a compliant request becomes effective, the secured creditor generally must issue and send the statement within 10 days.
What the Statutes Say
- N.C. Gen. Stat. § 45-36.4(8) defines a “notification” as a document containing the information required by the applicable statute and signed by the person required to provide that information.
- N.C. Gen. Stat. § 45-36.7 allows an entitled person or authorized agent to request a payoff or short-pay statement, specifies the required contents of the request and statement, and generally requires the secured creditor to respond within 10 days after the request becomes effective.
Analysis
Apply the Rule to the Facts: Here, a North Carolina title company has found two mortgages of record and is sending the owner an authorization form. Once the owner signs and returns that form, the title company can document its authority and request payoff statements directly from the secured creditors. Because the owner does not recognize the second lender, having the title company or closing attorney handle the requests is usually the most efficient approach.
Process & Timing
- The owner signs and returns the authorization requested for the closing.
- The title company or closing attorney prepares and signs a request identifying the entitled person, agent, loan, property, statement type, delivery address, and requested payoff or short-pay date. A short-pay request must also identify whether release of all or part of the property is sought and describe the property if a partial release is requested.
- The secured creditor generally has 10 days after the compliant request becomes effective to issue and send the statement. The request should be submitted early enough to account for this period and the closing schedule.
- A payoff statement should provide the payoff amount, applicable fees and charges, information needed to calculate the amount through the requested date, per diem interest, payment cutoff time, payment address, and any restrictions on the payment method.
- The title company or closing attorney uses the statement to prepare the settlement figures and send the required payoff funds after closing.
Exceptions & Pitfalls
- An incomplete, unsigned, or unclear request may fail to satisfy the statutory requirements or may cause the lender to question the title company’s authority.
- An incorrect loan number or inadequate property information may prevent the secured creditor from identifying the correct account.
- A request that omits the required payoff or short-pay date, or specifies a date more than 30 days after the request is given, does not satisfy the statutory requirements.
- A short-pay request is incomplete if it does not state whether release is requested for all or only part of the property or, when requesting a partial release, does not describe the property to be released.
- If the recipient previously held the secured obligation but assigned it, the recipient may provide notice of the assignment instead of a payoff or short-pay statement.
- An old or unfamiliar deed of trust should not be assumed satisfied merely because the owner does not recognize it. An unresolved recorded lien can delay a sale or refinance.
Conclusion
North Carolina law permits an entitled person or that person’s authorized agent to request a payoff or short-pay statement, so a title company or closing attorney can usually handle the request. The key threshold is a signed, compliant notification identifying the parties, loan, property, statement type, and applicable date, plus the required property-release details for a short-pay request. Sign the requested authorization promptly and ask the closing professional to submit the complete request early enough for the 10-day response period.
Talk to a Real Estate Attorney
If a North Carolina title search reveals an unexpected mortgage or payoff problem, call 919-341-7055 to request a free case evaluation with a real estate attorney.
