Secured lenders in California must carefully track satisfaction of mortgages and file a certificate of discharge, or risk being liable for damages for failure to file a release. California Civil Code sets out the requirement and potential consequences in section 2941, as follows:
(a) Within 30 days after any mortgage has been satisfied, the mortgagee or the assignee of the mortgagee shall execute a certificate of the discharge thereof, as provided in Section 2939, and shall record or cause to be recorded in the office of the county recorder in which the mortgage is recorded.
(d) The violation of this section shall make the violator liable to the person affected by the violation for all damages which that person may sustain by reason of the violation, and shall require that the violator forfeit to that person the sum of five hundred dollars ($500).
As stated in the law above, actual damages are not limited, and the lender must add $500 on top of the actual damages. Nor does the law limit the cause of action to a borrower; a claim may be raised by any “person affected by the violation.”
Compliance with the requirement to file a certificate of discharge, or satisfaction of mortgage, is as important as the multitude of other regulatory requirements imposed by law on the financial industry. But lenders are not the only entities bound to the satisfaction filing requirement — mortgage servicers, private investors, and attorneys that perform such services on behalf of lenders must take care to comply as well.
One important but often overlooked aspect of the satisfaction filing requirement is that California law makes no distinction between consumer and commercial liens and mortgages. Whether the borrower is a consumer or a business, the clock starts ticking for the lender as soon as the loan is paid off.
If you are a financial institution, or servicer for a lender, be certain you have a plan in place to comply with mortgage satisfaction filing requirements under California law. The attorneys at Glass & Goldberg provide high quality and cost-effective legal services and advice for clients in all aspects of business litigation and transactional law. Call us at (818) 888-2220, email us at firstname.lastname@example.org, or visit us on the web at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.