Mortgage transactions are discussed from various aspects; however, an often undiscussed segment is worth understanding and that segment is the property title search.
Mortgage lenders and banks run title searches of the real property to make certain that there are no mortgages already registered on the debtor’s property which might have higher priority
Here is how it works:
STEP 1 - Title work is ordered by the processing team after the mortgage application has been signed.
Large banks routinely own their own title companies but for the most part, loan officers select a hometown title office which has proven itself with a record of good service.
STEP 2 - The title office then goes to the county records to “search” the title and a commitment is issued. The “commitment” shows who is “on” title and what encumberances are recorded. Typically there will be a lien holder (a bank or mortgage company) and often a 2nd lien holder, and sometimes a county or city will be encumbering for items such as past due taxes or some other bill which the homeowner may owe.
Sometimes the title will show that a deed has been recorded (on the title) such as when a husband or wife divorces and “quit claim deeds” themselves off the property.
STEP 3 - The new lender receives a copy of the “title comittment” and routinely makes the new mortgage conditional upon certain issues which are there on the title, i.e. 2nd mortgage must be paid from proceeds of new mortgage…etc.
STEP 4 - In most cases, the same company who issued the title committment will finalize the transaction. As the mortgage application is approved, an appointment is calendered at the title office for a closing.
STEP 5 - The title office then distributes the monies to the appropriate parties and forwards the proper instruments including the HUD settlement statement to the county.
STEP 6 - The County Registerer of Deeds then adds the new information to the title and the records become official (official county records).