Protect yourself from unreleased trusts
An unreleased trust is a prior Deed of Trust on a property that has yet to be released from the property at the Land Records Office. This does not mean that it is still an active loan or that there is a balance owed.
In fact, the loan has usually been paid off years ago. However, even though a mortgage has been paid in full, it still needs to have the lien released. When a Deed of Trust is taken out either at the time of a purchase or as part of a refinance, it is recorded at the courthouse as a lien on the property. This lien needs to be released in order for a seller to provide clear title to the purchaser.
Sometimes a title search will reveal that even though the Deed of Trust was paid, it was not released. Since this is a cloud on title and the Regional Sales Contract requires that the seller provide a property free of all existing liens, the unreleased trust must be released prior to settlement.
I was told that the title search revealed an unreleased trust, what can I do about it now?
Hopefully you have records of the loan having been paid off. If the unreleased trust was paid off as part of a refinance, you can contact the prior title company for information in regards to the payoff and release. Most likely you paid the prior title company a lien release/release procurement fee, and they did not finish doing the job. If you paid off the mortgage on your own and not as part of a refinance, you can contact the bank that was paid off and request a lien release directly from them.
How can I protect myself better so that this will not happen again in the future?
Whenever you pay off a mortgage (and this includes a home equity line of credit), make sure to keep proof of payoff. If you use a title company, make sure to keep a copy of the HUD-1 Settlement Statement showing the payoff. If you pay it off yourself, make a copy of the payoff check. In either scenario, keep copies of your monthly statements, so you will always have a record of the account information.