How does the holder of a second get paid in a refinance?

September 29, 2015 9:48 AM

YANML, and YANMBroker. I need a reality check. I tried to google this but I'm not sure what terms I should be searching for. Let's say you've loaned money to a business in exchange for a second mortgage. Now said business wants to refinance both their first and second, and needs you to sign a deed of reconveyance to satisfy the new lienholder. In this circumstance, is it normal to sign off on the deed before you're actually paid off?

The business is strapped and does not have the funds to pay you off until the refinancing is consummated.

What assurance, if any, would you have of getting paid, once you'd provided the signed deed? Would you typically send the deed to the business owners, to a title company, or...? Who would typically approach you for the deed—the business owners, the title company, the new lender?

posted by bricoleur to Law & Government (3 answers total)

This is usually done with the lawyer holding the funds in trust and releasing your letter of reconveyance when the funds have been transferred to your lawyer. Don't do this without your own lawyer (whose legal fees can be paid by the person currently owing you money, depending on your contract).
posted by saucysault at 9:54 AM on September 29, 2015 [5 favorites]

This is the purpose of escrow companies.
posted by uncaken at 11:59 AM on September 29, 2015

Whoever handles the closing - lawyer, realtor, or title agent - should make sure everyone is properly paid.
posted by yclipse at 1:54 PM on September 29, 2015