The Alabama Residential Mortgage Satisfaction Act
The Alabama Residential Mortgage Satisfaction Act (the “Act”) was signed into law on May 3, 2012, and amends Alabama Code §§ 35-10- 26 and 35-10-30. The Act, among other requirements, establishes the procedure by which a borrower may obtain a payoff statement on a residential mortgage, requires that a secured creditor record a mortgage satisfaction within 30 days after receipt of full payment and performance of the obligation, and creates a process for enforcing the recording requirement. The purpose of the Act is to provide mortgagors with an easy way to request a payoff statement for their mortgage, and to make the process of clearing title for residential real estate more efficient. The law became effective March 1, 2013.
In order to be in compliance with the Act, banks, lenders and mortgage servicers will need to ensure appropriate procedures are in place to provide a payoff statement to the borrower within 14 days of receiving a proper written request and to record a satisfaction of mortgage within 30 days of receiving a full payoff of a loan. In order to better help you understand the requirements of the Act, I have briefly summarized the new requirements regarding sending payoff letters and recording satisfactions.
PAYOFF LETTER REQUIREMENTS
The Act requires that, within 14 days of receiving a proper written request, a secured creditor must provide a payoff statement to the entitled person.
The payoff statement must include either:
1. A statement of the fact that the secured obligation cannot be prepaid
2. All of the following:
• the date on which the statement was prepared and the payout amount of that date, including the amount of unpaid principal, interest and fees, or other charges included in the payoff amount
• the information reasonably necessary to calculate the payoff amount as of the requested payoff date, including the per diem interest amount
• the payment cutoff time, if any
• the address or place where payment may be made
• any limitation as to the authorized method of payment.
A secured creditor may qualify a payoff amount or state that it is subject to change before the payoff date and provide in the payoff statement information sufficient to permit the entitled person to request an updated payoff amount and to obtain that updated amount during the secured creditor's normal business hours on the stated payoff date or the immediately preceding business day.
SATISFACTION REQUIREMENTS AND SAFE HARBOR
The Act requires that a secured creditor submit for recording a satisfaction of a security instrument within 30 days after the creditor receives full payment and performance of the secured obligation. If the secured creditor fails to submit the satisfaction document within 30 days, and the mortgagor makes a second written request to the creditor, and the creditor fails to submit the document within 21 days after receipt of the second written request, then the creditor is liable to the mortgagor for $500. A secured creditor is not liable to the mortgagors for any penalty other than the above as well as any actual economic damages caused by the failure to comply with this Act.
The Act includes a safe harbor provision which states that a secured creditor will not be liable under the Act if it:
• establishes a reasonable procedure for compliance
• complies with that procedure in good faith, and
• any failure is due to circumstances beyond its reasonable control or as a result of a bona fide error, despite good faith compliance with the reasonable procedure.
If you have any questions about the Act or how your business can ensure it is compliance with the Act, please do not hesitate to contact us.