Hello and welcome to Your Law, a place for non-lawyers to get down-to-earth answers about the law and how it works. I'll start with a few of the questions I frequently hear in my law practice, and we'll go from there.
Keep in mind that the answers are geared toward North Carolina law, and may have some variations from state to state. Also, none of the answers will be direct legal advice to the person asking the question or anyone else. If you have a personal legal question, I encourage you to talk to a lawyer near you.
Okay, let's go.
A question I've heard recently is, "I paid off my mortgage, but I didn't get my deed back. Why not?"
The fact that a mortgage document is often called a 'Deed of Trust' causes a lot of confusion. The real proof that you own your real estate is the Deed you got when you bought the property. That Deed should have been recorded at your local register of deeds, or similar governmental recording place (that I'll call the Registry) so that there is a public record of your ownership. After it was recorded, the original Deed should have been returned to you for safekeeping, but a copy remains on public record.
A Deed of Trust, on the other hand, is a mortgage document that puts your real estate up as collateral for a loan. It may have even been the loan you took out to buy the property. It gives you no ownership rights in the property--your original Deed already did that. It does give some rights to the bank or person who loaned you the money, especially the right to have the property sold if you don't pay. (One of the best short descriptions I've heard from a client is, "If you pay you stay: If you don't, you won't.") The mortgage is one form of lien that can be placed on your property. We'll talk more about liens in a later post.
Once you pay off your mortgage, the bank is obliged to cancel the Deed of Trust, which means they have to send some kind of notice to the Registry to tell the public that you've paid your mortgage off and they no longer have an interest in the property. This is called cancelling the lien or cancelling the mortgage.
Traditionally, the bank sent the cancelled note (your written promise to pay them) and the Deed of Trust back to the borrower, but that may or may not happen any more. You've probably read about the problem some big banks and mortgage brokers are having trying to find original documents. The important thing for you is that they record the cancellation at the Registry. You still should insist on getting your original papers back, though, to be on the safe side.
If this answer still doesn't help, or if it raises more questions, let me know. I'll be happy to answer any other general questions you may have about the inner workings of the law.
