What do I do when my account closes? Do I have title? Is there something that needs to be recorded? Is that my responsibility? Where do I get the paperwork? What am I asking for? Help!!
These are all common questions after a loan is paid in full. Hopefully this little sheet will help keep your blood pressure intact. If you have a True Escrow account with INCS then the answer to all of your questions is, Forget about it, we’ve got you covered! If the lender established a True Escrow at some point during the account, we are holding all your original documents and any necessary release documents. We will collect your recording/reconveyance fee with your final payoff and get everything to the appropriate party. You just need to sit back and enjoy the fact that your obligation is over. Congratulations!
If a True Escrow account has not been established and we are holding only some or none of the original documents, don’t panic. We can still help you through the process. When a payoff quote is provided, please read it carefully. It will give you valuable information as to what happens next.
First step, lets determine what kind of documents were used for your loan. There are two main types of contracts. The first, and what seems to be the most common is the Note and Deed of Trust. The Note is the instrument that defines all the terms of your loan. It is not a recorded document but will refer to whatever document is recorded. In most cases, this would be a Deed of Trust. The Deed of Trust is the security instrument that places a lien on the property until the time the loan is satisfied. With this kind of contract, a Statutory Warranty Deed is recorded at the time of closing to transfer title to the borrower. When the loan is paid in full, the lender will need to sign a Request for Full Reconveyance. In the state of Washington a trustee must be appointed at the time that the original contract is executed. This trustee, usually the title company that handled the closing, is responsible for preparing a Full Reconveyance and having it recorded with the county to remove the lien.
It is the borrower’s responsibility to process the paperwork that will remove the lien or transfer title. It is the lender’s responsibility to make sure the borrower has the correct documentation.
After the loan is paid in full, the lender will need to make sure the borrower has the original Note, Deed of Trust, and an original Request for Full Reconveyance. This will often appear on the last page of the Deed of Trust and just require a signature. If not, it will need to be a separate document. These documents will need to be taken or mailed to the Trustee along with their Reconveyance Fee. The Trustee will then prepare the Full Reconveyance and have it recorded. As the trustee they will retain the original documents in their file. The borrower will not receive these documents. They are null and void as soon as the loan is paid in full. After some time, the borrower will receive a recorded copy of the Full Reconveyance. This is the borrower’s documentation that the lien has been satisfied. If that document is not received, please check on the county’s website. These days more and more documents are recorded electronically and to cut down on expenses, the counties may not mail a hard copy. There is no need to have the original, it’s all a matter of public record. The Lender will not receive confirmation that the lien has been removed. If interested, they can also follow up through the county website.
Remember, with a Note and Deed of Trust, the Statutory Warranty Deed transferred title to the borrower at the beginning of the loan. All that needs to be done upon it’s completion is to remove the lien.
The other common type of loan documentation used in Washington State is the Real Estate Contract (REC). Unlike the Note and Deed of Trust, the Real Estate Contract is a single document that lists the terms of the loan and is recorded with the county. When you have a REC, title does not transfer to the borrower until the time the loan is paid in full. Therefore, there is no lien because there is no ownership. When the loan is paid in full, a Statutory Warranty Fulfillment Deed is issued and recorded with the county to transfer title. That’s it. There doesn’t need to be a trustee involved, this document can be sent to the county with their recording fee.
If a True Escrow account was established with INCS, we would obtain the Statutory Warranty Fulfillment Deed from the lender with the establishment of the account and have it recorded at the end of the loan. Otherwise, it is very common that the lender will have to have this document prepared upon payoff. The lender will need to deliver this signed document to the borrower and they will need to get it to the county. Once this document is recorded, it will be returned to the borrower indicating the title has been transferred. Again, more county’s are filing documents electronically so if you do not receive a copy of the recorded Fulfillment Deed, please check with counties website for a copy. There is no need to have the original, it’s all a matter of public record.
Notice to lenders:
If you have a True Escrow Account established, your final payoff funds will be disbursed without delay. When a payoff quote is given on your account you will receive a copy of the quote and a authorization certificate that will need to be returned before we can release your documents to the appropriate party for recording or reconveyance.
If you do not have a True Escrow Account, the authorization certificate will need to be signed and returned to our office BEFORE we will release your final payoff funds.
Notice to borrowers:
At INCS we strongly encourage lenders to establish a True Escrow account so we can ensure that documents are handled correctly throughout the entire loan process. Ultimately, original documents belong to the lender until the time that they need to be released. If your lender did not have us hold the original documents, don’t worry. We can still walk you through the process. The payoff quote you receive will indicate if we will be handling the process or if you will need to obtain the original documents from your lender. If we are not holding originals, we will provide you with your lender’s contact information.
If your lender has not established a True Escrow but you would like us to obtain the original documents after payoff and complete the Reconveyance or Recording process, please let us know when you request the payoff quote. This service can be added for an additional fee.
If you have any questions, please do not hesitate to call us. INCS cannot provide legal advice or create documents but we are more than happy to help answer anything we can about the process and what comes next.
Reserve Account Procedure
The intention of a Reserve Account is to offer peace of mind, to both parties, that property taxes and insurance premiums are being paid on time and remain in good standing.
In order to successfully collect and disburse impound payments, for the borrower, it is vital that they provide us with the necessary remit information. When a Reserve Account is established a letter is generated and mailed to the borrowing party, explaining our requirements. We ask that billing statements and tax forms are forwarded to our office, in a timely manner. Without these statements, payments will not be released on time or possibly at all. INCS is not responsible for late charges or reinstatement fees associated with late payments due to incomplete or inaccurate information.
It is also the borrower’s responsibility to update INCS with information when a change has occurred. If a change is made to an insurance policy that will significantly increase the premium, we need to be informed as soon as possible, so we can adjust the monthly amount collected. If the borrower cancels a policy and establishes a new one, we will need the new policy number, billing address, due date, etc. Please keep in mind that most insurance companies will only refund the borrower, regardless of who is making a payment. If a refund is issued, while INCS is paying your premium, please contact us immediately. In most cases that money needs to be returned to your Reserve Account.
INCS sends out a Reserve Analysis every spring, usually between March and April, after the county Property Tax Statements are released. The Analysis, we produce, is based on 1/12th of the total yearly impound amount due. The projections for the following year are based on the current year totals. Therefore, the payment amount often includes a 5% to 10% adjustment in anticipation that premiums and tax payments will increase annually. These calculations are determined on a case by case basis and often depend on borrower’s pay dates and payment schedules. If there is less than twelve monthly payments scheduled before the first premium or tax payment is due, the amount will be adjusted accordingly.
If there is a shortage in the reserve account, we will notify the borrower and request the necessary funds. It is INCS’ intention to allow as much time for notification as possible. However, if statements are not received in a timely manner, our window is greatly reduced. If the borrower’s monthly payments are delinquent, or there is a delinquency in the reserve account, INCS will not be able to make the impound payments on the borrower’s behalf. We do not advance reserve funds to cover delinquencies. Ultimately, these payments are the borrower’s responsibility. If we are unable to make the property tax payment or insurance premium payment when due, we will notify both parties as soon as possible.
If INCS determines there is an overage in the reserve account, we will contact the borrower to see how they would like us to process the refund.
A Reserve Account can be established by the lender as part of their agreed contract or can be established by the borrower, for their benefit, as a convenience. If the service is ever discontinued, we will require written instructions from the establishing party.
Reserve Accounts are typically established to pay Property Taxes and/or Insurance Premiums but can also be used to pay Homeowner’s Dues or other obligations that bill on an Annual, Semi Annual or Quarterly basis. We do not make monthly payments on the borrower’s behalf. If you have a special circumstance or need a short term exception to this policy, please call the office to discuss further options.
Important Information about monthly payments:
If a monthly installment payment is received from the borrower, and it is less than the total payment amount due, the reserve portion will be shorted to ensure the full required principal and interest amount is posted to the account.
For example: A total payment of $1500 is due monthly. This payment includes $1100 for Principal and Interest (P&I), $10 for INCS’ fee, and $390 to be held in reserves for the semi-annual payment of property taxes.
If the borrower sends a payment of $1475, the payment will be credited to the account as follows:
$1100 to P&I
$ 10 to INCS’ fee
$ 365 to Reserve Account
The above scenario is the most common reason that Tax and/or Insurance payments are not made on time. Please note, we do not initiate a separate notice when this situation occurs. The email notices, sent when a payment is received, show how that payment was applied to the account. You are also able to monitor the loan and the reserve account by logging onto our website at www.INCSNoteServices.com and clicking on “View Account”. If you do not have a password established, please contact our office.
As the lender, if you wish to have the Reserve amount posted before the P&I, please send us your written instructions so we can flag the account accordingly.
Posted in our Terms of Service Agreement:
Reserves – At the payee’s or payor’s option, INCS will collect monthly reserve payments to disburse or hold as requested. Impounds will be paid but ONLY if current statements are received and adequate funds are being held at the time. We will not “front” money to meet your obligations. The parties involved are responsible for providing INCS with current billing information and directions for disbursement.
NSF PROCEDURE – If a payment is returned from the bank, such as Non-Sufficient Funds (NSF), the payor/borrower will be required to replace the funds, along with our posted fee, by Certified Check, Postal Money Order or Wire Transfer. If the payor does not replace the funds within seven days of posting notice, Regular US Mail, the lender becomes responsible for the return of disbursed funds and the related fee. Lender agrees to return such funds to INCS within seven days of posting demand, Regular US Mail. Failure to timely return funds to INCS may result in legal action to recover such funds and Payee/Lender agrees to pay INCS attorney’s fees and court costs for such action. If there is a recurring problem with NSF payments, or if Borrower fails to replace funds on an NSF, then INCS reserves the right to require future payments by certified check or Postal money order. Posting to, and disbursing from accounts may be delayed until we are certain the payments have cleared our bank. If agreed to by Borrower or Lender, alternate notice by email shall be subject to the same time constraints.
The above paragraph is from our Terms of Service Agreement that is given to all clients when an account is established. To support the above policy, INCS has instituted the following procedures. These procedures are subject to change, with notice, as management deems necessary.
1. If a borrower incurs MORE than two returned items in a twelve month period, INCS will require future payments be certified. Acceptable forms of “certified” payment for NSF are: Cashier’s Check, Post Office issued Money Orders or wire transfer. ACH, personal checks and webpay will not be accepted for a period of 12 months following the third returned item.
2. If a borrower fails to replace their payment that was returned by the bank, resulting in the funds being returned by the lender, INCS will require future payments be certified for the period of 12 months. This is automatic after the first occurrence.
ALL REPLACEMENT FUNDS NEED TO BE CERTIFIED. WE WILL NOT RE-RUN A CHECK OR ATTEMPT ANOTHER ACH TRANSACTION OF RETURNED ITEMS.
3. If a borrower has an ACH established for their monthly payment and a payment is returned, the ACH will be turned off. If the borrower sends a replacement, per the conditions in item #1, during the allotted time frame, the ACH will be re-established for the next agreed date. If the borrower does not return the funds before the next scheduled ACH date then they will need to send a certified replacement payment and a payment for the missed payment date. The recurring ACH will not be turned back on until the matter of the returned item has been cleared with INCS. If the account is in good standing and funds are replaced, the ACH will be turned on automatically. If the borrower does not replace the returned item and the lender sends the money back then refer to item #2. ACH will be turned off for the period of 12 months. If the borrower would like to re-establish their ACH payments after the 12 month waiting period, they will need to send the proper authorization paperwork to INCS.
4. INCS retains the right to refuse personal checks and turn off ACH payments at their discretion. Notice will be sent to the borrowers, in advance, if this restriction is placed on the account.
Make Checks Payable:
Checks must be made out to INCS or Independent Note and Contract Services. Any check made payable to the lender or other entity, will be returned to the borrower, unprocessed. Cash payments are not accepted under any circumstance.
Cut off Times:
Payments received will be deposited to our trust account on the business day received. The term “business day” refers to the processing time outlined in our Terms of Service Agreement. Currently, payments must be received by 1:00 pm PST to be posted for the current day. If a payment arrives after our daily processing time, but before the 1:00 pm deadline, it will be processed the following business day, but backdated for the date received. If a payment is received after 1:00 pm PST, the payment will be processed and posted for the following business date. This includes wires, payoffs, and payments accepted over our website. These terms are subject to change with notice.
Large Payments/Payoff Funds:
Funds over $10,000 &/or ANY payoff above the usual installment amount (even if it’s under $10,000) must be submitted by wire to allow immediate credit. Contrary to popular belief, cashier’s checks are not the same as Certified Checks (which banks no longer issue). Cashier’s Checks will not be accepted as “Certified Funds” for payments over $10,000 or for ANY payoff amount. Cashier’s Checks may, however, be submitted as payment, but will be held for three days or allowed by law, to ensure the payment clears the issuing bank. Funds will not be credited to the account until the waiting period is over, which will result in additional interest charges. Wire transactions and Cashier’s Checks are the only permitted method of payoff, if over the regular installment amount. When ordering a payoff quote, please specify how you will be paying the loan. If additional interest applies, it can be included in the total amount due.
If you remit a payment that is larger than your normal payment amount, please specify how the funds are to be credited to the loan. We need to know if you are making a principal payment, paying delinquent monthly payments, paying additional to your reserve account, paying several months of payments in advance, or paying an outstanding late charge balance. If your instructions are not marked, we will use our best judgement; however, it is not always possible to second guess intentions. If we need to audit the account because instructions were not given ahead of time, a fee will be charged. Please be aware that your contract may outline how payments are posted to the account. If this is the case, the Promissory Note will take precedence over your instructions.
If you have any questions regarding the acceptance or posting of payments, please call our office, prior to remitting funds. See our Terms of Service Agreement for more information.
Satisfying a loan entails more than sending a check for the outstanding principal balance. When making a final payment on a loan, you owe the principal balance, interest to the date of payment, and possibly late charges and/or service fees. Whether you are submitting a balloon payment or your loan is paying off as the result of a natural amortization, a payoff quote needs to be prepared prior to receiving funds.
If you are paying off your loan, as an individual, you can request a payoff quote via phone, email, mail or fax. You will need to reference your INCS account number, how you wish to pay the loan and what date you anticipate the funds being in our office. We will also need your email address or fax number. If either of these are not provided, the quote will be mailed to the address of record. Verbal payoff quotes will not be given.
If you are refinancing or paying off your loan through the closing of an escrow, please do not request the quote yourself. Give your escrow officer our name, contact information, and your account number. They will send us a written request. This is very important as it will eliminate duplicate efforts and allow us the opportunity to work directly with your escrow company. Chances are they will want to know if we are holding documents and how they will be handled after closing. It is also quite likely that they will need us to update the quote throughout the closing process. For these reasons, it will be easier for all parties involved, if we work with them from the beginning.
When a payoff quote is requested a letter is sent to the lien holder with a copy of the quote. This letter will instruct them that they need to locate the original documents, in anticipation of payoff. If INCS is holding the documents in a True Escrow, the letter serves as a notification that the loan may be paid in full. These letters are in no way a guarantee that the loan will be paid. We are only passing on information that we receive.
As the borrower, you are welcome to call the office at any time and ask for an “estimated payoff amount”. This information can be given over the phone and is often used at the beginning of the sale process or for personal use. If an actual payoff quote is given, your lender will be notified. Please call us if you are unclear of which you need.
If INCS is holding the original Note, Deed of Trust, and Request for Reconveyance in a True Escrow, we will include your trustee’s Reconveyance Fee in our payoff quote. Upon receipt of the payoff, INCS will send the original documents to the trustee along with their fee, and they will prepare the Full Reconveyance and have it recorded to remove the lien from the property.
If we are not holding original documents, we will notify the borrower and/or escrow agent, on the quote as to what needs to be done. As the borrower, if you are paying off the loan without the aid of an escrow agent and would like assistance in handling the reconveyance process, please contact our office for assistance. We can simply offer our guidance, or for a fee, we can collect the documents on your behalf and complete the procedure.
INCS has a posted Closing Fee of $100. This fee is included in the payoff quote as it is considered the responsibility of the borrower, regardless of which party pays our monthly administration fee. For further explanation, see the Terms of Service Agreement that was provided when your account was established. A copy is also available under the “forms” tab on our website.
Payoffs should be submitted by wire to allow immediate credit. If a payoff is received by Cashier’s Check, additional interest will need to be included to cover the processing days. (See “Deposit of Funds” on our Terms of Service Agreement for full explanation.) Any outstanding fees, to close the account, will be added to the quote or deducted from the final payoff proceeds.
If you have questions regarding payoff quotes or our payoff procedure, please give us a call.
Defaults and Foreclosure Procedures
It’s not a pleasant topic, but unfortunately delinquencies do happen. This section is to provide you with some general information and let you know what INCS can and cannot do to aid in the solution.
Our number one piece of advice, is Monitor Your Account. At INCS, we offer internet inquiry through this website by clicking on the “View my Account” button. You just need to establish a password through our office to start the process. We also send notices via email, every time a payment is received. We strongly urge you to take advantage of both of these free services. Using these tools, you will be able to monitor not only how a payment was credited to the loan, but track payment dates, possible shortages and reserve totals.
INCS is not a bad debt collection service, so we do not call or harass clients about their payments. However, we do mail “Reminder Notices” to borrowers when their payments become 15, 30, 60 and 90 days late.
Often times our notices will prompt the borrower to contact us with payment or with a proposed payment arrangement. These arrangements will be given to the lender as we are not authorized to make any decisions on the lender’s behalf.
As a lender, you have the authority to modify the original agreement, whether it be on a permanent or temporary basis. Sometimes these adjustments can make the difference between a fulfilled contract and a foreclosure. How you choose to handle the situation is entirely at your discretion. If you choose to modify the terms of the loan, INCS will need a Modification Agreement, signed by both parties. Upon receipt, we will update our system to reflect the new terms. Please be aware, that INCS is not allowed to give legal advice and we are not authorized to prepare legal documents. You may wish to discuss your options with an attorney, prior to making an agreement.
If legal proceedings do become necessary, please provide your attorney with our contact information. INCS offers a Foreclosure Service, for your convenience. Currently, INCS charges a $100 onetime fee for this service. We will provide payment histories, copies of documents, reinstatement figures and whatever else is requested, directly to your attorney or trustee agent. Payoff quotes and reinstatement figures will need to be updated throughout the Foreclosure process, all of this is included in our service. If the loan is reinstated, our Foreclosure fee should be included with your attorney’s fees and billed to the borrower.
Often times “Default Interest” is outlined in your contractual documents. Due to the changing laws and codes, INCS will not automatically initiate the default interest rate as specified. We require written instruction from either you, as the lender, or the attorney working on your behalf, before making changes to the account.
If you have questions regarding delinquent payments or starting a Foreclosure proceeding, please call our office.
Incapacitation and/or Death of the Lender
If the Lienholder has become incapacitated and a Power of Attorney is now in place, INCS will need a copy of the POA agreement and the Attorney-in-fact’s contact information to make adjustments to the account. Please deliver these items, via mail, email or fax, along with the written request to update the account. Please be aware that the Power of Attorney Agreement must be recorded in order for the Attorney-in-fact to legally make changes to the loan and/or sign on the Lienholder’s behalf. Upon the death of the Lienholder, the Power of Attorney Agreement is no longer valid.
In the case of the Lienholder’s death, the Personal Representative for the Estate will need to provide our office with the following documentation:
Copy of the Letters Testamentary
Copy of the Certified Death Certificate
W-9 with the Estate’s Tax ID number (This can be sent at a later date.)
Banking Information for the Estate
Personal Rep’s contact information
Once the Estate is settled, more than likely, an Assignment of Deed of Trust will need to be recorded, transferring the security to the new owner. Once this takes place, we will need a copy of the recorded Deed of Trust to make the changes in our system. If the new beneficiary is someone other than the Personal Representative, they will also need to complete our Service Agreement, our Terms of Service, and fill out a W-9 with their Tax ID number.
If you have any further questions, please contact our office.