Application to FDIC Needed to Clear Lien Held by Bankrupt Lending Instition in Order to Save a Sale

We recently represented a seller of a townhouse in upper Manhattan who had owned the property for close to 30 years. Over the course of our client’s ownership, they had refinanced the property several times. When we entered into contract, the title report revealed two mortgages, our client’s primary mortgage and a mortgage of record from 1985 which our client had paid-off. The satisfaction of mortgage was never recorded and, to make matters more difficult, the bank which had issued to mortgage in 1985 filed for bankruptcy in 1990. Our client then refinanced the property in 2005 and the title company held an escrow in the sum equivalent to the original principal amount of the mortgage. The escrow would not be released until our client was able to procure a satisfaction of mortgage. Our client was unable to do this prior to retaining our firm. We had to make an application to the FDIC, which assumed the paper of the bankrupted institution, and demonstrate that our client had fully satisfied this mortgage. The FDIC approved our application and we were able to convey free and clear title and obtain a full refund of the escrow that the title company had been holding for several years.

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