(Originally published 07/24/12.)
Thousands of people are refinancing to take advantage of today’s record-low rates. Yet many borrowers are experiencing last-minute issues that can cause delays lasting weeks – all stemming from something most homeowners take for granted.
Many homes have seen improvements made over the decades, sometimes by the current homeowner, sometimes by the prior. Home improvements typically require a Certificate of Occupancy or a Certificate of Completion from the local municipality, to be considered legal. And its not just dormers or extensions that require C/O’s. Decks, pools, sheds, fences, converted garages, finished basements, even the addition of a skylight could require the issuance of a C/O. (Check with your local town or village building department to confirm their requirements.)
Prior to the 2008 banking implosion, many lenders did not ask for a “C/O Search” when reviewing the title search. If there were no violations on the house, many lenders looked no further. And a great many homes were sold over the past few decades without all the required C/O’s in proper order.
But today, it’s a different world. Lenders are no longer looking the other way.
Before you proceed with your refinance, ask yourself (and your loan originator should be asking you as well):
- “Have any modifications been made to the house or property?”
- “Do I have all of the Certificates of Occupancy or Certificates of Completion required by my municipality?”
If you’re not 100% sure the answer is “YES,” then you had better discuss this with a competent mortgage originator or Mortgage Planner to determine the best course of action.
Sometimes, even when all of your C/O’s are in order, you still can’t win. As part of the title search process, the abstract company will contact your local town or village building department to obtain copies of all of the property records, including the C/O’s. Although most municipalities honor these requests within a few short weeks, some towns have experienced delays of up to ten weeks!
Every homeowner should own a filing cabinet for storing important papers. Amongst the documents you should have are your property papers, including your deed, mortgage, note, title search, and all of the C/O’s. These can usually be found in the envelope you received at the closing when you purchased your home. If your town is experiencing these huge delays, providing copies of the C/O’s to your new abstract company might help avoid some downtime.
Probably the biggest title issue I’m seeing these days stems from improperly filed mortgage satisfactions. Over the past decade or two, it was common in the mortgage industry for lenders to simply push things along and get loans closed – regardless of whether files were accurate or documents correct. Profits and volume trumped diligence. As a result, many people refinanced their homes – often more than once – without the banks and abstract companies properly filing satisfactions on the mortgages just paid off. Since many of these lenders and abstract companies are no longer in business, resolving these problems are now more difficult.
By keeping diligent records, along with copies of all papers from your prior closings, you can help reconstruct the chain of mortgages to help ensure prior mortgage satisfactions are filed properly.
Most borrowers don’t realize how complex the mortgage industry has become. The streets are littered with shell-shocked borrowers who thought they could shop for their mortgage by comparing advertisements in the newspaper.
Do you really want some slick-talking bank salesman working on your mortgage? Or would you rather work with a competent and qualified Certified Mortgage Planning Specialist with 20+ years of industry knowledge and experience? Working together, we can ensure your transaction goes smoothly and stress-free.
Warren Goldberg is a Certified Mortgage Planning Specialist and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.