RELEASES & PARTIAL RELEASES OF DEEDS OF TRUST

RELEASES &PARTIAL RELEASES OFDEEDS OF TRUST Presented by Carol Snyder Adams County Public Trustee for QUADRENNIAL TRAINING 2011

38-39-101 et seq. C.R.S. • The statutory provisions related to releasing Deeds of Trust are in Title 38, Article 39 of the Colorado Revised Statutes (CRS). • Any deed of trust that names any person other than the Public Trustee (PT) as “trustee” or that secures an obligation other than an evidence of debt (EOD) shall be deemed a MORTGAGE and foreclosed as a mortgage (through the courts). • Except any deed of trust that names a PT as “trustee” and secures an obligation other than an instrument evidencing a debt SHALL BE RELEASED as set forth in 38-39-102(5).

DEFINITIONS • Assuming Party – the person or entity that has officially assumed responsibility for payment of the loan – usually by an Assumption Agreement or similar documentation • Current Address of Original Grantor – If the borrower (grantor) has MOVED and the holder (lender) has a current address for that party it is to be provided or a check box is provided to indicate the current address is unknown • Current Owner – the original borrower may have sold or transferred title to the property without doing a formal Assumption of the loan – the current owner is the person/entity currently holding title/ownership of the property even though the DOT may have been signed by the previous owner of the property. NOTE: Request for Release form will show ORIGINAL borrower name(s) even if someone else currently owns the property and is asking for the Release – the lien needs to come off the Clerk’s records the same way it went onto the Clerk’s records

DEFINITIONS • Certified Copy – a copy of a recorded document certified to be true and correct by the Clerk & Recorder of the County where the document was recorded • Corporate Surety Bond – a bond issued by a person authorized to issue bonds in COLORADO with the PT as obligee conditioned against the delivery of an original evidence of debt to the damage of the PT • Deed of Trust (DOT) – does NOT convey title to real property but is a lien on real property to secure payment of an indebtedness and contains a grant of the property to the Public Trustee for the benefit of the Holder, and grants to the PT a power of sale (which allows PT foreclosures)

DEFINITIONS • Evidence of Debt (EOD) – a writing that evidences a promise to pay or a right to payment of a monetary obligation – promissory note, loan, credit or similar agreement or a monetary court judgment • HOLDER of an EOD – means the person: • In actual possession of, or • Entitled to enforce an EOD EXCEPT “holder” does NOT include a person acting as a nominee solely for the purpose of holding the EOD or DOT as an electronic registry without any authority to enforce the debt (Mortgage Electronic Registration Systems – MERS)

DEFINITIONS —Presumed to be the HOLDER: (a) person who is the obligee of EODand is in possession of an ORIGINAL EOD, (b) person in possession of original EOD with proper indorsement or assignment to such person (assignment does NOT need to be recorded per Colorado law), (c) person in possession of negotiable instrument evidencing a debt, which has been duly negotiated to such person or to bearer or indorsed in blank; or (d) person in possession of an EOD with authority to enforce EOD (authority may be granted by original EOD or DOT) as agent, nominee, trustee or similar capacity for the obligee of the EOD.

DEFINITIONS • Person – any individual, corporation, government or governmental subdivision or agency, business trust, estate, trust, LLC, partnership, association or other legal entity. • Qualified Holder – holder of EOD that is ALSO one of the following (see 38-38-100.3(20)): (a) a bank (b) an industrial bank (c) a federally chartered savings & loan doing business in Colorado, or a state -chartered savings & loan association per Title 11, Articles 40 – 46 CRS (d) a supervised lender licensed to make supervised loans, AND that is either:

DEFINITIONS (I)a public entity that has issued voting securities listed on a national security exchange registered under the Securities Exchange Act, or (II) an entity whose all outstanding voting securities are held, directly or indirectly, by a public entity (e) an entity in which ALL outstanding voting securities are held by a public entity that also owns all of the voting securities of a supervised lender, licensed to make supervised loans (f) an FHA approved mortgagee

DEFINITIONS (g) a federal or state chartered credit union doing business in Colorado (h) an agency or department of the federal government (i) an entity created or sponsored by the federal or state government that originates, insures, guarantees or purchases loans, or a person acting on behalf of such entity to enforce an EOD or the DOT, or (j) an entity listed in (a) to (i) above, acting as agent, nominee or trustee for another person EXCEPT as set forth in subsection (10) of this section.

REQUIREMENTS FOR RELEASE OR PARTIAL RELEASE OF A DEED OF TRUST • WRITTEN, duly executed and acknowledged request from the HOLDER of the EOD, holder’s agent or attorney, or a title insurance company providing an indemnification agreement and affidavit • Production of the ORIGINAL EOD (except if Qualified Holder or title company or if original EOD is lost a Surety Bond) • Receipt of the PT fee ($15) and recording fees ($11 for 1st page PLUS $5 per additional page) • Receipt of a current address of original grantor, assuming party or current owner (or notice that they have no such current address) – PT discretion to release without current address information • Original recorded DOT or a legible copy (copy of AT LEAST pages showing Clerk’s stamp of recording information, names of lender and borrowers, and signature pages of DOT)

REQUESTS FOR RELEASES BY “QUALIFIED HOLDERS” and TITLE COMPANIES • 38-39-102(3) allows Qualified Holders to request Releases without production of the original EOD because they provide indemnities to the PT • 38-39-102(3)(c) allows Colorado licensed title insurance companies to request a Release without production of the original EOD – they are deemed to have agreed to indemnify and defend PT against damage claims for processing the Release. Affidavit (in standard form) MUST be provided by title insurance company.

REQUESTS FOR RELEASES BY ANYONE WHO IS NOT A QUALIFIED HOLDER OR TITLE INSURANCE COMPANY • Anyone NOT a Qualified Holder or title insurance company requesting a Release without production of the original EOD must provide to the PT a corporate Surety Bond in an amount 1.5 times the ORIGINAL principal balance recited in the DOT. • Bond shall be effective for 6 years from date of recording of Release, or other time period required by Colorado statutes of limitations, whichever is less, OR • Until such time as any claim made against the PT within such time period is resolved, whichever is longer. • Surety Bond is retained by PT in safekeeping in event it is needed. • PT fees must include fees for recording BOND as well as the Release of DOT

PT May Request “Evidence” of Current Holder • You MAY request evidence satisfactory to you that the person/entity signing the Request for Release of Deed of Trust is the CURRENT HOLDER of the EOD. • “Evidence” might be copies of the indorsements, assignments or allonges to the EOD or might be a servicing agreement that allows the servicer to enforce the EOD and to release it • An “agent” or “nominee” is usually NOT the current HOLDER of the EOD • MERS is usually NOT the current HOLDER of the EOD unless the EOD is actually payable to MERS • CONSULT WITH YOUR COUNTY ATTORNEY (if knowledgeable and available) or HIRE AN ATTORNEY (the PTAC attorney Rich Krohn will work for individual PTs but YOU will be obligated to pay him) to ask legal questions!

FORMS • Forms for full and partial Releases are on the PT Association’s website and on many county PT websites – these forms are set forth in Colorado Statutes (38-39-107 and 38-39-108) • Forms received for Releases “may be in substantially the … form” set forth in law, but do NOT have to be exactly as shown in CRS • One form (without production of original EOD) is for use by QUALIFIED HOLDERS or title companies or by anyone else with production of a Surety Bond (Adams County RECORDS the Surety Bond as a separate document returned to US after recordation; REMEMBER to collect recording fees for the Surety Bond) • The other form is for use by ANYONE (with production of original EOD) – HOWEVER, we do not routinely reject a Request for Release on the WRONG “with production” form but we NOTE on the face of it that a Surety Bond was provided in lieu of the original EOD if that’s the case

REVIEW OF FORMS & DOCUMENTS • Check DOT first to make sure it is “granted or conveyed” to PT and that property is located in YOUR county • IF property isNOT located in YOUR county but DOT was recorded in your county IN ERROR, you may process the Release but notify submitter that it should ALSO be released and recorded in the county where the property is located • IF property IS located in YOUR county but DOT was recorded in another county IN ERROR, you should process the Release and notify submitter that it should also be released and recorded in the county where it was recorded in error • If NO LEGAL DESCRIPTION is provided on Request for Release form, it is “deemed to be a FULL Release” even if the “Partial” box is checked on the form. If it is to be a PARTIAL RELEASE, must have legal shown on form or in an attachment (exhibit).

REVIEW OF FORMS & DOCUMENTS • PT is to examine Request for Release and presented documents to assure information is correct – names, dates, recording information and, if a Partial Release, that legal description appears to be some portion of the total property encumbered by the DOT – same subdivision or Township/Section/Range • Appropriate box on form should be checked on Request for Release WITHOUT production of EOD to indicate whether a Qualified Holder or Title Insurance Company is submitting the Request or if Surety Bond is submitted.

Affidavit of Discrepancy • Some PTs accept a notarized Affidavit of Discrepancy from the submitter if there are “minor differences” between the EOD and the DOT relating to: • Dates • Amounts • Misspelled names (transposed letters) but NOT completely different names NOTE: The Affidavit of Discrepancy could be an exhibit to the Request for Release or it could be recorded as a separate document (PT preference)

REVIEW OF FORMS & DOCUMENTS • Be SURE you have an address for return of Release (once it is recorded by Clerk) and for return of other submitted documents (note and DOT). If unknown or not indicated on Request form, send back to submitter – MOST submitters provide a self-addressed postage paid envelope for document returns • If one of the “joint tenant” holders is DECEASED, the death certificate of that holder may be provided to PT – on Request for Release form (on or near signature line for holder) mark “death certificate exhibited”. • If one of the “tenants in common” holders is DECEASED, you may need Letters Testamentary for that decedent’s estate to show WHO can sign on decedent’s behalf, or a Small Estate Affidavit may show who can sign on decedent’s behalf

REJECTIONS • PT should reject Request for Release if ALL required documents and accurate fees are not submitted • PT should reject Request for Release if information on submission is NOT accurate and complete – PT may make minor corrections, such as an omitted middle initial shown on original DOT may be interlineated by PT in Request for Release in order to expedite Release and not reject for a minor error

TRACKING PROCESSED RELEASES • It is suggested that you keep a daily or weekly spreadsheet (or some other means) to track the Releases you have processed and sent to the Clerk’s office for recording. If a customer calls you can locate the borrower’s or submitter’s name on your spreadsheet and let them know WHEN you processed the Release and sent it for recording. • That may give the customer an idea of when the release of DOT may be recorded, the lien released and when they may expect to receive the original, recorded Release of DOT in the mail.

REJECTION FORM/LETTER • PT should reject and RETURN ENTIRE PACKAGE to submitter if there are problems • Include a form or letter indicating WHAT ALL OF THE PROBLEMS ARE so that submitter can remedy them for re-submission • Keep a copy of the reject form/letter with grantor/borrower’s name on it so you can respond to phone calls or questions as to why Release hasn’t been processed • Use reject form/letter to expedite processing of Release upon re-submission – what was wrong and has it been remedied?

FEE ALLOCATION & RECORDING • PT deposits ENTIRE payment into PT account • PT retains $15 fee for processing Release • PT transmits Release to Clerk and Recorder for recordation; many Clerks send recorded Releases directly to the person shown on the form, others return recorded Releases to PT • PT pays Clerk and Recorder appropriate Release recording fees: • $11.00 for one page • $5.00 for each additional page

IMPORTANCE OF TIMELY PROCESSING OF RELEASES OF DEEDS OF TRUST • Many homeowners are WAITING for release of one DOT in order to refinance property with a new loan • Colorado law says a Release must be processed by the Holder and recorded within 90 days after payment of the debt is made (CRS 38-35-124) so long as debtor pays appropriate fees for such Release – MANY Holders do NOT request releases in a timely manner – PT may get calls from borrowers asking WHY release hasn’t been done but PT has never received a Request for Release from the Holder – PT should refer borrower back to Holder • Homeowners want to KNOW the lien on their property has been released!

CAUTIONS! • Powers of Attorney (POA) – someone attempting to execute a Request for Release of DOT acting for the Holder under a Power of Attorney. The POA may NOT give them the authority to release a DOT or to execute a Request for release on behalf of the Holder • Lack of “Chain of Title” – Original holder was XYZ, but the signer alleging to be the CURRENT holder is ABC – does Note contain any indorsements from XYZ to ABC? • OLD loans (maturity date more than 15 years ago) – Holder of EOD may not be alive or no longer exist – homeowner can be referred to CRS 38-39-201 or can go to Court for Order declaring the Deed of Trust is Released.

CAUTIONS! • Signatures and notarizations of officers of entities should clearly INDICATE the title/position of that person with the entity, such as: • ABC Bank By _______________________________ Tom Smith, Vice President of ABC Bank The foregoing Request for Release was acknowledged before me on _________, 20__ by Tom Smith, as Vice President of ABC Bank. _________________________________ Notary Public

CAUTIONS! • Sometimes the EOD (promissory note etc.) is NOT to be cancelled or marked “paid in full” – it could be that the property is no longer under a lien for payment of the EOD but some OTHER obligations still exist under the EOD so the EOD will NOT be “extinguished” • Usually the submitter (lender) will indicate for the PT to leave the EOD “live” but to only release the DOT (the DOT is the “lien” on the property described)

CAUTIONS! • MANY submitters (lenders or servicing agents) ask that the Clerk & Recorder return the recorded Release and loan documents to them and they forward it to the borrowers. BUT frequently they do not forward those documents in a timely manner. If your Clerk’s records show the Release was recorded and sent back to the submitter, you may refer the customer to their former lender to ask that the release and “paid” loan documents be sent to the customer

ELECTRONIC RELEASES • Ingeo • Kuvera • Simplifile These 3 outside vendors and other in-house programs allow electronic submission, examination, processing and forwarding to Clerk for recording of Releases and Partial Releases of DOTs.

SAMPLE FORMSRelease Tracking Sheet/Accounting SheetReject Letter/FormReject Tracking Sheet

EXERCISE – Examine Some Requests for Release of DOT • Would you accept and process the Release? • Would you reject and return the Request for Release? • WHY?

RELEASES & PARTIAL RELEASES OF DEEDS OF TRUST