Bulletin: MD000001

Dear Associates:

Frequently, the seller/borrower has a revolving line of credit loan secured by real estate.

The Problem: It is difficult to get a definite "final" payoff statement for this type of loan. This is particularly true if the loan is tied to use of a credit card or checks. Sometimes, the seller/borrower uses the credit card or checks after a payoff statement is issued and prior to the closing. Then, the payoff you receive is no longer correct.

To limit the risk, do the following if the seller/borrower has a prior revolving credit loan.

Send the "Request to Cancel Revolving Credit Loan" with your payoff request. The forms are available through the reference section at the end of this bulletin. Each seller/borrower must sign. If more than one person can make draws on the loan, all must sign. Verify if more than one person has a credit card from the lender. The Request tells the lender to cancel the revolving line of credit account. Your payoff request letter must state that a release or satisfaction will be required. Send the letter at least two (2) weeks before closing. Require each seller/borrower to send all credit cards and checks to lender before cancellation with Request. If the mortgage sets forth a procedure to cancel the advances, require compliance. Do not accept a payoff statement that is conditional (acceptable payoff is available through reference section also).

At closing, reconfirm payoff.

Remit payoff, (e.g., by wire, overnight mail, etc.) immediately after settlement unless Right of Recession.

Require that the seller/borrower complete attached Affidavit and retain in file.

If the lender will not give an unconditional payoff, require an escrow of the maximum credit line plus interest until the lender provides a legally sufficient Release or Satisfaction.

If you have any questions, please call me.