Who Can Request a Mortgage Payoff Amount? New Case Says Even Non-Borrowers are Eligible

A new case out of the Massachusetts bankruptcy court says that as long as someone is an owner of a parcel of real estate – even if they’re not on the mortgage or note – they are entitled to obtain a payoff pursuant to the Massachusetts Payoff Statute, G.L. c. 183, § 54D.

Under the Massachusetts Payoff Statute, an “obligor” may request a mortgage payoff, which must be provided within five business days. The penalty for failure to provide the payoff is the either $500 or actual damages, whichever is greater, plus attorney’s fees.

mortgage payoff

In this case, a father had taken out a loan and a mortgage on his home. He died, and his daughter inherited the property.

The daughter was not on the mortgage or the note. She requested a payoff statement so that she could refinance the property, pay off her deceased father’s loan, and live in the property herself. The bank, however, refuse to provide her with the payoff.

The daughter initiated a legal claim contending that the bank violated the Massachusetts Payoff Statute by refusing to give her the payoff figure.

The bank filed a motion to dismiss the daughter’s claim, arguing that because she was not on the mortgage or the note, she did not qualify as a “obligor” under the Payoff Statute.

The court rejected this argument. Reasoning that the daughter’s ownership of the property via inheritance created an obligation, the court held that she was an obligor within the ordinary meaning of the term obligor. After all, she owned the property, and if the mortgage were not paid then the bank would foreclose. As a practical matter, she had an obligation to pay it.

This case presents an interesting factual situation that may be somewhat unique. In fact, in our office’s our experience, when someone dies most banks will provide a payoff if provided with a copy of the death certificate. The bank’s position here was certainly unreasonable, especially in light of the fact that all the daughter wanted to do was pay money to the bank.

One thing this case highlights is the fact that many financial institutions routinely take unreasonable positions on issues, making it unnecessarily difficult to resolve what should be simple matters. This is certainly something that the court here took into consideration. There are few reported cases that address the payoff statute, and this decision wisely explains the language of the statute in a practical way.

Culik Law represents consumers and homeowners in all varieties of litigation with banks, mortgage servicers, and lenders. We have brought lawsuits in state, federal, and appellate courts, and we pride ourselves on both zealous and practical legal strategies. If you have an issue with your mortgage – whether a foreclosure, loan modification, or some other problem – call us 617-830-1795 or contact us to see if we can help.

Joe Culik

Joe Culik

Attorney Joe Culik has built his reputation on helping people and has dedicated his practice in Boston, Massachusetts to consumer protection, employee rights, and small business and franchise law.