the doctrine of merger of title

I saw this question posted online:


The mortgage crisis has brought with it a record number of foreclosures.  Not surprisingly, deeds in lieu of foreclosure have also become much more common.  Generally, the doctrine of merger of title holds that when a greater and lesser estate coincide and meet in the same person, the lesser estate is merged with the greater. The question then becomes, does the deed in lieu have the effect of extinguishing the lender’s mortgage lien? 


I asked Phil Noce of Elite Title what he thought.  He answered this way:

I remember researching this issue in my younger days at Chicago Title.  If the deed makes a specific reference that it is for the purpose of satisfying the existing mortgage, nothing further will be required.  If it is just a deed to the lender without such a reference the question of intent  comes into play and the title companies have always taken the position that the mortgage must be cancelled of record.  I have seen deeds which stated that the mortgage is to remain open.


The main problem with a deed in lieu of foreclosure is junior liens.  In a foreclosure junior liens can be cut off, but if the lender accepts a deed in lieu of foreclosure that lender takes subject to all outstanding liens.  That is why it is necessary to do a search to make sure the are no other liens before such a deed is accepted.



Posted via email from Title Insurance
Continuing Ed for Title Agents

Leave a Reply

Your email address will not be published. Required fields are marked *