VI News Staff 5 months ago

Senate Committee Backs Bill to Simplify Clearance of Paid Mortgages

Members of the Senate Committee on Budget, Appropriations and Finance met on Monday to approve legislation that would, according to sponsor Senator Marise James, “aid in discharging mortgages which have been paid or presumed paid, but for which documentation of payment does not exist at the recorder of deeds.”

During her introduction of Bill 35-0099, Sen. James relied on her experience as a real estate attorney, explaining that “often, property owners believe that old mortgages that they have paid, or other instruments creating a security interest in real property to secure a debt, they think that it simply goes away with time.”

That is not the case, however. “When they purchase a property and they secure a loan, the lender places a mortgage on their property so that property has a lien on it and it exists until the mortgage is discharged. During a property sales transaction, any outstanding mortgages must be paid and recorded as satisfied. If they are not satisfied at closing, the buyer risks the newly purchased property being foreclosed by a pre-existing mortgage,” Sen. James said. Complicating matters further, “A title insurer may refuse to insure a property with an outstanding mortgage which cannot be recorded as satisfied or discharged,” the senator noted.

The bill would establish a time limit of five years, after which certain mortgages and other security interests would expire, thus releasing property that would otherwise be encumbered. This is not debt relief, Sen. James clarified, noting “this legislation is not intended to relieve mortgagors or borrowers from their obligation to repay the loan.” She then urged her colleagues to support the legislation, arguing that “it will help the sale of property to go smoothly in the Virgin Islands.”

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