Thursday, October 27, 2016

Recission of Satisfaction of Mortgage

An email from a national title company based in Florida arrived the other day asking if we would record a Rescission of Discharge of Mortgage or a Rescission of Assignment of Mortgage.

I don't think we would or should record them. To me, rescission is part of contract law, as in you rescind a contract or an agreement. I don't see it as part of real estate law. Both a discharge of mortgage and an assignment of mortgage are conveyances of an interest in real estate. Under Massachusetts law, a mortgage is a deed because the homeowner conveys an interest in the real estate to the lender. That interest is the right to foreclose if the terms of the associated promissory note are violated. An assignment of mortgage transfers that interest in real estate from the lender to a third party. With a discharge of mortgage, the holder of the mortgage releases or gives back its interest in the property to the homeowner.

Once that interest in the mortgage has been assigned or released, I don't think the mortgagee can say "never mind" and undo that conveyance with a document labeled "rescission." If a mistake was made, I think the mortgagee would have to get either an assignment back or re-execute and confirm the mortgage. Either that or initiate a lawsuit and ask a judge to order either of those things to happen.

The concern isn't just to the homeowner. It's to the entire real estate system. If a potential buyer of property does a title exam and sees that a mortgage has been discharged, that potential buyer should be able to act upon that information without fear that the lender on that mortgage will suddenly yank back the discharge and thereby reinstate the mortgage.

I assume these rescission documents are used in other states. I'm curious to find out how they are used and the legal theory that allows their use. It is another example of how much real estate law can vary from state to state and a cautionary message to anyone handling real estate matters in more than one state to not assume that the law in one jurisdiction carries over to another.

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