Bulletin: MA2016001

Dear Associates:

We frequently receive inquiries regarding insuring over prior owner undischarged home equity loans (HELOCs) which appear outstanding on the record title. It is important to note that these HELOC Mortgages are open lines of credit which permit the Borrower to continue to obtain draws against the HELOC until discharged of record. Accordingly, one should not assume that a HELOC is paid off and simply “undischarged” of record merely because it appears in the name of a prior owner of record. We have been made aware of numerous instances where a HELOC Mortgage that has in good faith been paid off and a “close out letter” has been issued, has subsequently been fully drawn against, in some instances, years after the Seller has sold the property.

This Bulletin is sent as a reminder to be mindful of verifying whether or not an outstanding Mortgage of record is a HELOC. If the Mortgage is a HELOC, you must have some form of satisfactory evidence that the line has been currently paid off in full and that a Discharge is currently forthcoming.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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