How do you find out if an old loan has been paid off when a reconveyance has not been recorded?


#1

I paid for a title search on a property that is heading for auction. The title search showed an existing loan that would be senior to the foreclosing lender. One could make a logical assumption that the loan had been refinanced and the lender just neglected to record the reconveyance. But for obvious financial reasons, this is a pretty big risk to take. Any thoughts on how to research further are greatly appreciated.


#2

The good news is that the prelim caught the loan. the bad news is that it could very well be the senior loan. It is not uncommon. I would assume it is a senior unless I could determine otherwise. I do my own title searches at the county recorder so I would go at the documents to get more information. I would even look for a reconveyance that may have been missed. You paid for the prelim, so ask the title company about the loan. They can do research on it. If you are a beginner, I would recommend you move on and find another property.


#3

You can use some logic. Eg. If the property was worth $300K at the time the loan was made and the loan is $240K or even was a 100% loan of $300K, it was a first. A lender wasn’t going to go behind an old loan with those amounts.
If the old loan was missed by the original title company, they would have started their own fcl. long ago.
This assumes the old loan was a conventional loan and not a 2nd like a HELOC.

…mike