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Title search came up with an old loan that's incorrect -- what's the fastest way to correct it?

Two days before we (buyers) were supposed to close and the sellers' attorneys did a title search that came up with an old loan that has long since been paid off by the sellers.  Our bank is the same one that did that loan, and the loan is so old they don't have a record of it anymore.  The sellers requested a Letter of Satisfaction, but it will take 72 hours to come through and could delay our closing past our moving date...which is a problem.  What can we or they do, if anything, other than wait for the 72 hours to pass?
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September 26 2012 - US
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Answers (6)

If the bank doesn't have a record of the loan, how would they be able to say there is a balance owing? Have you explained your situation to the bank and asked (okay pleaded with) them to expedite the Letter of Satisfaction?

I am a realtor and perhaps you may need an attorney to contact the bank on your behalf. Perhaps your attorney could convince the banks attorney to speed thing up so you can close and move in. Sounds like it is the banks fault due to poor record keeping!

Good Luck!
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September 26 2012
Sorry about what is happening.  This is a legal issue, you may want to have a word with legal counsel.
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September 26 2012

Not sure where you are from.  Illinois is an attorney state.  So the attorney would take care of this.  I have underwritten and closed only in Illinois, but in Illinois how it works is normally a title company can waive the exception (the lien on the title search) with proof that the loan is paid.  So, if you cannot get the "Letter of Satisfaction" timely, then how you get it waived is 1)  If the current owner refinanced at some point and paid off the old loan, then there will be a HUD-1 from the closing.  The HUD has a name of a title company on it.  Contact that title company and ask them to provide a letter that will satisfy the new title company; 2) If the sellers simply paid off, then the seller needs to get a payoff letter from the bank saying that the balance is zero and that payoff letter will satisfy the title company.

Hope this helps

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September 26 2012
It is possible for the title company to bend their own policies and insure the seller if they are convinced that the loan has been paid off.

The entity that you need to be working with is the title company that originally insured the sellers when they purchased the home or the company who is about to insure them.  It is their responsibility to make things right.  Will they bend for the 72 hour period and insure around the issue?
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September 26 2012
Your question is really a legal one and is best answered by an attorney. You really have to ask your attorney and go with their recommendation. If there is an encumbrance to passing clear title I can't see how you can close but your attorney is the one to solve this one for you. Sorry you've run into this problem and good luck.
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September 26 2012
If you are concerned about the rate, I would go back to your loan agent and ask them for an extension due to the reason.  They usually can do this for a few days.

Secondly, have escrow contact the title company and see what they might do.  You could bond around it but that will take just as long as the 72 hours or longer.
Kathy
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September 26 2012
 
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