• Pennsylvania's New Mortgage Satisfaction Law Protects Mortgagees
  • February 3, 2004
  • Law Firm: Blank Rome LLP - Philadelphia Office
  • Since 1715, Pennsylvania has required any mortgagee receiving full payment of sums due on the mortgage to mark the judgment satisfied upon the mortgagor's request. Prior to February 8, 2003, the law simply provided that the mortgagee was obliged to honor such a request within forty-five days. The old law did not require the request to be in writing, so a mortgagor could sue a mortgagee for failing to record a satisfaction based upon an alleged verbal request made to any bank employee. According to the old law, penalties for violation of the statute were to be awarded regardless of whether the mortgagor proved actual damages at trial. The statute did not specify the amount of the penalty, except to limit it to the amount of the mortgage. Subject to that restriction, the courts held that the amount of the penalty was to be determined by the jury based upon an instruction that the penalty should bear a proper relationship to the circumstances surrounding the neglect to satisfy.

    The New Act: Satisfaction Requests

    Pennsylvania recently passed a new Mortgage Satisfaction Act ("new Act"), now in effect, which provides a greater degree of protection to mortgagees who receive requests to satisfy mortgages that have been paid in full. Under the new Act, a mortgagor requesting a satisfaction must (1) make the request in writing; (2) make the request in the form prescribed in the statute; (3) send the written request to the mortgagee by certified or registered mail, return receipt requested; and (4) give the mortgagee sixty days, rather than forty-five days, to file the mortgage satisfaction.

    The New Act: Penalties

    The new Act still leaves the jury with great discretion to determine the amount of the penalty to be imposed for violations of the Act, but it overrules a line of cases that had allowed the jury to penalize each request for satisfaction that the mortgagee had not honored. Despite creating an opportunity for successful plaintiffs to claim attorney's fees, the new Act limits mortgagee exposure to damages by providing an exclusive remedy, thereby eliminating claims for "pain and suffering," punitive, or other tort-type damages. The new Act also limits a mortgagee's liability for multiple claims, as the delivery of a mortgagor's second or subsequent written request for satisfaction does not support any additional cause of action under the statute.

    The New Act: Procedures

    The new Act allows a settlement officer to record a mortgage satisfaction under certain circumstances. Under this new provision, if the mortgagee of a residential mortgage does not file a satisfaction within ninety days after being fully paid, a settlement officer may send the mortgagee a Notice of Intent to Record Settlement Officer Satisfaction Within Sixty Days. Within sixty days of delivery of that notice, the mortgagee must either record the satisfaction or send a response detailing why the mortgage should not be satisfied. If the mortgagee fails to do so, then the settlement officer may file a Settlement Officer Satisfaction in the form provided in the statute. The mortgagee may then file an Objection to Settlement Officer Satisfaction.

    Other provisions of the new Act include ending the practice of "satisfaction on the margin." Filing a satisfaction is now simpler, because the original mortgage no longer needs to be filed with it.

    While the new statute is more complex, it is also more specific and definite than the former statute. The new Act should relieve uncertainty with regard to the process of requesting and recording satisfactions of mortgages, provide protection to mortgagees against damages claims for inadvertent oversights, and facilitate refinancings of mortgages with new mortgage loans.