By Vernon D. Singer
Partner
Millsap & Singer LLC
Did You Dot Your I’s and Cross Your T’s? ou a r r
Brokers must understand how to prepare and file sound mortgage documents
Illustration: Dennis Wunsch
When errors in the preparation or processing of mortgage instruments occur, they can
have significant consequences.
Mistakes in preparing mortgages
can render them unenforceable. In
other words, if a loan defaults, the
lender couldn’t foreclose against what
it thought was its collateral for the loan.
Failing to bind the proper parties to
the terms of a mortgage or neglecting
to file a closed loan also could cause
problems.
Mortgage brokers must understand
how to define a property legally, who
should sign a mortgage and what
should occur after closing. When they
don’t and errors occur, trouble often
follows.
Depending on the error, liens placed
after mortgage origination might take
priority over the first lender’s mortgage.
For mortgage brokers, this can lead to a
demand for repurchase of the loan, a
claim for damages or costs associated
with fixing the error.
Description details
One example of this issue occurs when
brokers fail to insert or attach a legal
description of the property in the mortgage before it’s recorded. A common
practice for those preparing mortgage
documents is to attach the legal description as an exhibit with the intent
to record the legal description.
Failure to include the legal descrip-
tion in the mortgage calls into question
what real estate serves as collateral for
the loan. It is common to include the
tax identification number or to list the
property’s address. This information,
however, only is evidence of what the
parties intended to mortgage.
property. All owners must be named as
grantors or be identified in the mortgage as agreeing to the grant of the
mortgage. And all owners of the property must sign the mortgage.
The lender only can enforce a mortgage against those who granted and
signed it. Failure to ensure all owners
“The legal description crip … defines
the actual property subject to the mortgage
and the real estate boundaries.”
Errors in the legal description can
have similar effects. If an error exists, a
quiet-title action or reformation may be
necessary to correct it. As is the case
with missing legal descriptions, a third-party buyer may not be bound by the
pre-existing mortgage — or a subsequent lien-holder may take priority.
Corrections to typographical errors
and similar items could occur with an
affidavit of scrivener’s error. This action
depends on the nature or severity of
the error and on the title underwriter’s
willingness to accept the affidavit for
title-insurance purposes. For example,
a misspelling of a subdivision name
might be correctable, but listing an incorrect subdivision would not.
did so can create problems. Moreover,
in some states, failure to have one
spouse execute the mortgage conveyance may make the mortgage completely unenforceable.
In some situations, not all owners of
a property are obligated on the note.
For example, an individual may have
qualified and agreed to take out the
loan. But owners of the property that’s
collateral include someone else who
signed the note and another person
who didn’t.
continued on page 41 »
Multiple-owner issues
It’s also important to make sure all owners of a property agree to mortgage the
Vernon D. Singer is a partner at Millsap &
Singer LLC and can be reached at (636) 537-
0110. Millsap & Singer LLC provides comprehensive default-servicing representation
throughout Missouri and Kansas. For more
information on the firm, visit www.msfirm.com.
