A mortgage release, also known as a satisfaction of mortgage, is one of the multiple, important processes that mortgage servicers perform post-closing. On average, mortgage releases can take anywhere from 30 to 60 minutes per release to manually execute, which includes preparation, signing, notarizing, recording, tracking, and mailing the letter.
But without a solid process in place, a lot can go wrong. Let’s explore some of the most common challenges mortgage servicers face when handling mortgage releases internally.
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1. Internal pressure
The biggest challenge for mortgage servicers who manage mortgage releases in-house is the cost. We’ll address the various aspects of the internal process that can lead to higher costs later, but three industry-wide factors are making internal mortgage releases more expensive for mortgage servicers.
According to the Mortgage Bankers Association, fully-loaded servicing costs have increased threefold from 2008 through 2021. Meanwhile, productivity has not exceeded 1,000 loans per employee since 2010 and productivity is down 11% in 2021 compared to 2020. More recently, the competition for human capital grew in 2021. Employee turnover reached a study-high 29% last year, despite higher overall compensation per employee. Loan servicers are having to do more with less, and it’s costing them.
2. Multiple, complex regional rules
There are more than 3,600 recording jurisdictions nationwide, with varying fees, forms, language, and compliance requirements. Depending on your institution’s footprint you probably don’t need to know all of them, but tracking the margin size across jurisdictions requires internal expertise.
Finding that expertise is made all the more difficult when employee turnover is high. Additionally, mergers and acquisitions mean that mortgage servicers are growing their footprint but not necessarily growing their internal expertise.
3. Limited scalability
For mortgage servicers to gain that expertise in handling mortgage releases across jurisdictions, they need to hire more. This leads to increased administrative costs in acquiring talent. And work isn’t always consistent: fluctuating volumes (refinances, rates, month-end) create backlogs—and a culture of consistently being over- or understaffed.
The personnel issue also applies to signers and notaries; mortgage servicers need a roster of qualified professionals who can help execute.
Additionally, manual processes (which we’ll cover in more detail next) prohibit scale with increased demand. As the organization grows, manual processes become harder to replicate.
4. Inefficient processes
Let’s dive into those manual processes that are costing mortgage servicers so much.
For example, sometimes you need to pull physical files for images of the mortgage or deed to get the information for the release. This is tough to do if you have multiple core image systems, multiple naming conventions, and/or a lack of images.
Using Microsoft Word or other outdated and cumbersome technologies to manually prepare mortgage releases is another challenge. Manual entry is more likely to lead to errors, which can result in more rejections and increased costs. Plus, you’ll need as many templates as there are jurisdictions serviced.
Once you’ve created the document, the right people need to sign it on time. Paper documents routed to multiple signers and notaries without tracking can lead to more confusion or error, which again wastes more time and money.
Finally, if you’re mailing documents, it requires coordination with the finance team to create checks, collate the document with the cover letter, and mail it for recording. Even if you can use e-record, you need to check that you have the right credentials for the jurisdiction and have a signed memorandum or understanding.
According to industry experts, over 10 million documents are rejected by over 3,600 county recorders across the US every year, creating over $500 million in closing cost losses that are absorbed by servicers. Industry experts estimate that between 12–13% of all mortgage releases are rejected and that it costs an average of $50 per rejection.
Every rejection requires more touches from employees who need to review and possibly redo the document, which means increased costs for the loan servicer.
6. Compliance timelines
Each state has a requirement that mortgage releases need to be recorded within a certain time frame within that payoff date. But if you don’t have a robust internal tracking system, you won’t know whether you’re still in compliance.
Some states are allowed to charge the servicer monetary fines, or the homeowner could claim a fee. The larger the institution, the more likely they are to be audited by the state.
7. MERS mortgage release compliance
Mortgage Electronic Registration Systems (MERS) acts as the mortgagee in the public land records and as nominee for the mortgage servicers and its successors and assigns.
When a MERS MOM (MERS as Original Mortgagee) security instrument is paid in full, the mortgagee is responsible for processing and recording a mortgage release.
MERS has specific language requirements when a MOM security instrument is paid in full, including, but not limited to:
MIN # reference on document
MERS phone number on the document
How MERS is referenced in the document
Who can sign on behalf of MERS
Specific state requirements for additional language (CO, IN, MS, NY, PA, LA, ME, MT, OR, WA)
MERS can and does audit servicers and assess fines for lack of compliance.
There’s a better way to tackle mortgage release challenges.
Mortgage servicers create processes for handling mortgage releases in-house because they believe it will save them money. Unfortunately, unless they’re able to execute perfectly on every release, internal processes will end up costing them.
Let Info-Pro help. Info-Pro is an end-to-end provider of fully outsourced mortgage release services. We help you create and sign mortgage releases, submit for e-recording where available, provide real-time status updates, index the recorded document, and mail it to the borrower.
Learn more about Info-Pro’s mortgage release services.